Children'S Clothing Goes Out To Sea

The annual reports of A-share listed companies in 2020 were released one after another. On the evening of April 12, SEMAR clothing also disclosed the report card of 2020 annual report. According to the data disclosed, in 2020, the revenue and net profit of SEMA clothing will drop, and the net profit of SEMA clothing in 2020 will be almost "cut back".

According to the financial report of SEMA clothing, the company's operating revenue in 2020 is about 15.205 billion yuan, a year-on-year decrease of 21.37%; the corresponding attributable net profit is about 806 million yuan, a year-on-year decrease of 48%. During the reporting period, the net profit after deducting non-profit of SEMA clothing was about 757 million yuan, down 49.01% year-on-year.

On the main reasons for the company's performance decline in 2020 and other related issues, a reporter from Beijing Commercial Daily called the Securities Department of SEMAR clothing to interview, but the other party's phone call was not answered.

According to the annual report, SEMAR clothing was founded in 2002. It is an enterprise group with virtual operation as its characteristics and leisure clothing and children's clothing as its leading products. It has two major brand clusters of adult leisure clothing represented by SEMAR brand and children's clothing represented by Balabala brand. Among them, SEMAR brand was founded in 1996, positioning as a popular daily lifestyle brand mainly based on casual clothing, and Balabala brand was founded in 2002.

According to the financial report disclosed, the business income of the leisure clothing and children's clothing of SEMA will decline to varying degrees in 2020. Specifically speaking, children's clothing is an important source of revenue. According to the financial data, the operating income of children's clothing of SEMAR clothing will be about 10.132 billion yuan in 2020, accounting for 66.64% of the current operating income. The income of this product will decrease by 19.99% compared with the same period in 2019. In addition, the gross profit rate of children's clothing products of SEMAR clothing in 2020 is 42.44%, which is 3.62% lower than that in 2019.

Cheng Weixiong, an expert in textile and garment brand management and general manager of Shanghai Liangqi Brand Management Co., Ltd., said that affected by the epidemic situation, traditional clothing enterprises mainly offline had been greatly impacted. Although the children's wear business of SEMAR clothing accounts for a high proportion in the whole children's clothing market, its performance has been declining due to the pressure of the continuous expansion of physical stores, the impact of the epidemic on the offline, and the online e-commerce mainly focuses on discount sales business, with low gross profit.

In response to the decline in performance, SEMA apparel said that the impact of the epidemic is the main reason. However, some people in the industry believe that, in addition to the impact of the epidemic, the decline in the performance of SEMA clothing may be due to the failure of children's clothing business at sea.

In July 2020, SEMAR clothing issued an announcement that it plans to sell 100% of the assets and business of France's wholly-owned subsidiary sofizasas (sofizasas owns 100% equity of the kidiliz group) to the company's third largest shareholder, the purpose of which is to reduce operational risk and avoid greater loss of performance.

It is understood that the kidiliz group is the overseas children's clothing business of SEMA clothing. On April 28, 2018, in order to promote the high-end development of children's clothing business and expand the overseas market, the wholly-owned subsidiary of SEMAR clothing, SEMAR International Group (Hong Kong) Co., Ltd. acquired 100% equity and creditor's rights of sofizasas in cash of about 110 million euro (about RMB 844 million), so as to achieve the purpose of acquiring all the assets of kidiliz group.

After the acquisition of the group, SEMAR clothing hopes that the layout of the group can drive its children's clothing business to expand overseas and invest great energy. It is reported that after the acquisition of kidiliz group, SEMAR clothing introduced its "CATIMINI" and "absorba" brands into the Chinese market, and successively opened flagship stores in key cities and tmall platform. At the same time, some data show that in the first year after the acquisition of kidiliz group, namely, in 2019, the management expenses of SEMA clothing reached 1.029 billion yuan, an increase of 97.13% year-on-year.

However, the development of the kidiliz group did not go forward according to the expectations of SEMAR. According to the data, kidiliz group suffered continuous losses after being acquired by SEMAR clothing. According to the financial report data, at the end of 2018, due to the French yellow vest incident, the operation of kidiliz company, which has a large number of stores in France, is facing difficulties. In the fourth quarter of 2018, kidiliz group lost 49 million yuan, 307 million yuan in 2019 and 121 million yuan in the first quarter of 2020.

Under the huge loss, SEMAR clothing had to sell the group's business at a low price. In July 2020, SEMAR clothing sold at a low price of 680 million yuan, a difference of 160 million yuan from the original purchase price. This also means that only in the process of buying and selling, SEMAR clothing has lost 160 million yuan, not counting the number of losses in two years.

Affected by the epidemic situation and the low price transfer of kidiliz group and other factors, the children's clothing business that SEMAR is proud of also declined, and the number of stores closed exceeded the number of stores closed in the leisure clothing industry. According to the data, by the end of 2020, the number of Samma children's clothing business closed was 1426.

In addition to the failure of overseas children's wear business, leisure clothing, its second largest business, is also developing poorly. According to the data, from 2019 to 2020, the revenue of leisure clothing will drop by 3.64% and 24.26% respectively. With the development of the business is not ideal, SEMAR clothing gradually weakened its position. According to the financial report data, in 2016, the proportion of leisure clothing business of SEMAR was 52.51%, and by 2020, the proportion of leisure clothing business decreased to 32.6%.

Although the business income of SEMA casual clothing has declined, the gross profit rate of the product has increased slightly. According to the data, the gross profit rate of SEMA leisure clothing in 2020 is 35.88%, with a year-on-year increase of 0.28%.

Beijing Business Daily reporter also noted that since 2019, the performance of SEMA clothing has been weak. According to the financial data, in 2019, the operating revenue of SEMAR clothing is about 19.337 billion yuan, with a year-on-year increase of 23.01%; the corresponding net profit realized in the current period is about 1.549 billion yuan, with a year-on-year decrease of 8.52%.

Although the performance is not strong, it does not affect the dividend plan of SEMAR clothing. According to the announcement disclosed by SEMAR apparel, according to the profit distribution plan approved by the board of directors on April 9, 2021, the company will distribute cash dividends (including tax) of RMB 2.5 per 10 shares (including tax) and 0 bonus shares (including tax) to all shareholders with the share capital on the equity registration date determined when the company's future profit distribution is implemented as the base.

In the view of investment and financing expert Xu Xiaoheng, continuous and stable cash dividend is the embodiment of investment value of listed companies, especially in the context of supervision and encouraging cash dividends, listed companies want to boost investors' confidence by increasing dividends. However, it is not worth encouraging to pay dividends for the decline of performance. The company should act according to the actual situation.