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Epidemic Situation And Business Opportunities: Behind Liu'S Popularity Is The Opportunity Of China'S Sportswear Market

2022/4/26 13:08:00 0

If you want to say who is the most popular recently, it must be 50 year old Liu Fuhong.

Even if you are not a "liufuhong girl", you must have a "liufuhong girl" around you.

"Mermaid line! Vest line! Practice!" "The fat on my waist will come off, and I will take my waistcoat!" Liu Fuhong, a star isolated at home in Shanghai, and his wife, Wang WanFei, broadcast fitness live in the studio five days a week.

At present, the number of fans in Liu's official twitter account exceeds 42 million, and the number of fans is close to that of Li Jiaqi. According to the data, in the past 30 days, Liu's live broadcast has seen more than 100 million people, the latest record in 2022, and the highest daily price rise is more than 10 million.

The epidemic not only brought fire to sports and fitness, but also increased people's demand for fitness and exercise "accessories". Sports casual wear has become the consumer favorite again.

In 2021, the retail scale of China's sportswear market is 371.8 billion yuan, with a year-on-year growth of 19.1%, and the CAGR of 2019-2021 is 7.8%. From the perspective of horizontal comparison, from the two dimensions of market growth and concentration, sportswear track keeps ahead.

Optimistic about the growth of the industry in the next five years (expected double-digit compound growth), the main reasons are as follows: 1) Compared with the overseas mature market, the domestic market is still in the initial stage It has great potential in the future; 2） Policy continues to increase To improve the participation rate of sports; 3) Motion scene subdivision + extension.

Sportswear Industry: the strongest apparel track, It is expected to achieve double-digit compound growth in the next five years

According to the data of prospective industry research institute, the retail scale of China's sportswear market will be 371.8 billion yuan in 2021, 19.1% year on year In the same period, the base number of CAGR in the same period is 2021.8%, with some factors being lower. From the two dimensions of market growth and concentration, domestic sportswear track keeps ahead, as follows:

Market growth: according to the time dimension, we are divided into pre epidemic (2013-2019), in epidemic (2019-2021) and post epidemic (2021-2026e). In each stage, the growth rate of sports track keeps ahead, especially in the stage of epidemic, sports track shows better growth toughness. ?

Market concentration: Cr5 of sportswear track is 58.1% in 2021 Among them, Cr5 are Nike, Adidas, Anta, Li Ning and FILA brands respectively, and the competition pattern is significantly better than that of other circuits. ?

We are optimistic about the growth of the industry in the next five years (expected double-digit compound growth), mainly due to the following reasons:

1) compared with the overseas mature market, the domestic market is still in the early stage of development and has great potential in the future

According to the data of prospective industry research institute, this paper analyzes the per capita sportswear expenditure (horizontal axis) and the proportion of sportswear expenditure in clothing (vertical axis) in 2021 The Chinese market is still in its infancy It is only better than India and Vietnam, and there is still a big gap with Japan, South Korea, the United States, Norway, Sweden and other mature markets. ?

The overseas mature market still has a high prospect, which proves the future development potential of domestic market. From two dimensions,

　　1.1） Overseas sportswear market grows faster Taking the U.S. and German markets for example, the growth rate of sportswear market is faster than that of the whole clothing market in most of the time, and it has stronger resilience and faster recovery speed during the epidemic period in 2020;

1.2) after years of development, Overseas sportswear market is still in the stage of "quantity and price" rising simultaneously 。 Let's take Nike as an example. From the perspective of income growth in North America in the past few years, both the volume and price of clothing and footwear have kept pace with each other, and the growth is healthy. ?

2) continue to increase the domestic policy to increase the participation rate of domestic sports. ?

In recent years, the Chinese government has intensively introduced sports related policies to encourage residents to actively participate in outdoor sports. We believe that the 2022 Winter Olympic Games has stimulated the upsurge of people to participate in outdoor sports (especially ice and snow sports). Anta brand, as a sponsor partner of the Olympic Games, performed well in retail during the Winter Olympics. In the medium and long term, Under the guidance of policy, the participation rate of domestic residents is expected to continue to improve. ?

3) motion scene subdivision + extension

With the increase of sports per capita in China, we think that with the increase of sports per capita in China, At the same time, the demand for subdivision categories will be greater 。 On the other hand, the wearing scenes of sportswear are constantly extending, More non sporting occasions More and more people wear sportswear during work; In addition, the popularity of sports fashion categories (such as Li Ning in China) in the past two years has also effectively increased the penetration of sports brands among young people. ?

According to the data of prospective industry research institute, The proportion of China's sportswear in the overall clothing has increased year by year, from 7.3% in 2013 to 13.4% in 2021. However, compared with the mature overseas markets such as the United States, Germany and Japan, there is still much room for improvement.

Future core changes of the industry Growth path: from "quantity" to "quantity price"

In terms of the domestic market, we believe that the "volume" increase is the main driving force for the growth of the sports market in the past few years, that is, the expansion of stores will drive the growth of sales volume to meet the basic sports needs of more consumers. We can see from the annual revenue growth of Nike Greater China, fy12 to fy21, The contribution of "quantity" increase to income is much higher than "price" increase 。 ?

With the post-90s and the post-95's gradually becoming the main consumer, domestic Consumers' pursuit of product quality has increased significantly, and gradually began to accept products with high unit price and high premium For example, after the exposure of New York Fashion Week in 2018, Li Ning launched China's Li Ning product line, gradually lifting the overall ASP.

On the other hand, the Xinjiang cotton incident in 2021 has also greatly enhanced consumers' confidence in domestic brands. Against the background that the number of leading brand stores is generally relatively saturated, we believe that the driving force of the industry's future growth will change, that is, from the past "volume" increase to "volume price" increase. As mentioned earlier, In overseas mature markets, leading brands (such as Nike) are still in the stage of rising both in quantity and price, This has also increased our confidence in the upgrading of sportswear consumption in the domestic market. ?

We see that many domestic leading brands have successively released plans to enhance brand potential, boosting the growth trend of ASP. Taking Anta as an example, Anta launched the "win lead plan" in June 2021, focusing on 8 major areas, and proposed 5-year strategic goals, including:

Scale leading: 1) target flow compound growth rate of 18% - 25%; 2) Market share increased by 3-5 percentage points.

High quality growth: 1) strengthen the channel layout of tier 1-3 cities, and expect to contribute more than 50% of the revenue by 2025; 2) To strengthen the layout of shopping centers, the number of stores is expected to double; 3) More than 5% of the growth rate will increase to 30% in the future. ?

In the future, Anta brand will consolidate its leading position in the mass market, and at the same time, it will seize the opportunities in the middle and high-end market by enriching its product portfolio. It is expected that the contribution of medium and high-end products to revenue will increase from 10% to 40%.

Product category: Optimistic about female product potential and outdoor category development

Looking forward to 2022, combined with the future planning of Toutou leading brand, we are optimistic about the development of women's products and outdoor categories.

Women's products: we believe that with the improvement of modern women's independent consciousness, economic level and natural pursuit of health and beauty, they will continue to improve their voice in the field of sports shoes and clothing in the future, affecting the design direction of products. In addition to Lulu lemon, which started with women's products, other major international leaders have begun to speed up the layout in recent years, including:

1) Nike: in fy16-21, the growth rate of women's products is higher than that of men's products in most years. The growth rate of women's products in fy21 is 20% year-on-year, which is significantly higher than 11% of men's products.

2) Adidas: in the strategy of "controlling the market" released in 2021, it is clearly proposed to attract more female consumer groups, and the target is to achieve the compound growth rate of female categories to reach medium double in 2021-2025;

Local brand Li Ning Anta also began to strengthen the layout:

1) Li Ning: at the end of October 2021, it announced the placement of 120 million shares and raised HK $10.5 billion. Strengthening the distribution of women's categories is also one of the directions,

2) Anta: the brand reconstruction plan released in July 2021 also takes women as the core breakthrough category, creating a new sports aesthetic women's category of "technology + Beauty", and cooperates with brand spokesperson Gu ailing to lay out the women's market. ?

Outdoor category: we believe that the outdoor category is expected to achieve a faster growth from 2022, mainly due to:

1) catalysis of 2022 Beijing Winter Olympic Games;

2) In recent years, the government has issued many policies to support the development of outdoor industry ；

3) according to the experience of Europe and the United States, with the increase of per capita income level, consumers' demand for outdoor sports will increase significantly. In recent years, the outdoor brand of Anta Group, desant, has performed well in recent years, with 182 stores by the end of 2021; After being acquired by Anta, Archaeopteryx passed the Signing the first female spokesperson By means of channel and product structure adjustment, more "100 million yuan stores" will be created, and it is expected that there will be better performance in 2022. ?

Sales channels: from focusing on the number of stores to paying more attention to operation quality and structural optimization, the number of stores in China tends to be stable, whether it is domestic or overseas brands. By summarizing the offline store data of domestic leading Li Ning and Anta, as well as taobo and Baosheng International (the main dealers of Nike ADI), we find that the number of offline stores of each brand tends to be stable in recent years. Affected by the epidemic situation, After 2020, there is even a phenomenon of net closing. ?

Instead of focusing on the quality of the stores, we should not focus on the quality of the stores, but on the quality of the stores.

Taking taobo as an example, under the background of the decline in the number of stores after FY20, the store area in FY20 and fy21 increased by 11% and 4% respectively year-on-year, The proportion of stores with more than 150 square meters has increased year by year From 23% in fy17 to 35% in fy21.

Domestic brands such as Li Ning, Anta and Tebu will also open big stores as the operation focus in the next few years. In terms of channel structure, we will also pay close attention to the leading enterprises DTC transformation of brand (including Nike, ADI, Anta, etc.) on the company's operating efficiency. ?

Competition pattern: The trend of national tide continues, focusing on the stabilization of 22h2 overseas leading enterprises

Benefited from the Xinjiang cotton incident, the market share of domestic brands will increase significantly in 2021, and Adi will suffer more in overseas brands.

According to the data of zhongyan.com, in 2021, the market share of Anta, Li Ning and FILA brands in China will increase by 0.7, 1.4 and 0.3 PCTs respectively. As a representative of Guochao brand, Li Ning has the largest increase in market share. In the second half of 2021, the company launched a new brand Li-Ning 1990. Compared with China's Li Ning, its positioning population is more mature and its products are more fashionable, Through brand fission means to further open the growth ceiling. ?

On the other hand, the market share of Nike ADI declined by 0.9 PCTs and 2.5 PCTs respectively. Among them, ADI suffered a lot. We believe that its market share lost is mainly undertaken by local brands such as Li Ning and Anta.

According to the monthly sales trend of Baosheng International (Nike Adidas China dealer), since the Xinjiang cotton incident in March 2021, the CAGR for two years has been continuously lower than 0, which proves that Adidas' performance in the domestic market in 2021 is sluggish. ?

We have made statistics on the quarterly growth of mainstream leading brands in the market (subject to the availability of data, overseas brands and domestic brands adopt income and flow caliber respectively), and focus on the year-on-year growth data of 2021 vs. 2019

　　1） The running data of domestic brands have greatly exceeded the level in 2019 Among them, 21q2 benefited from the Xinjiang cotton incident, leading brand growth rate was larger; 2) The income of overseas brands in 21q1 performed well, among which Nike Greater China increased by 36% compared with that of 19q1, while the growth rate of revenue after 21q2 all dropped sharply, which is consistent with the above market share change trend. ?

We judge the changes of market share of domestic and overseas brands as follows:

Domestic brands: taking into account the relatively strong flow performance of domestic brands in 22q1 and the solid fundamental support (described in detail below), combined with the weak revenue performance of Baosheng international 22q1 (22q1 decreased by 25% year-on-year and 17% compared with 19q1), we believe that domestic brands are expected to continue the process of domestic substitution and continue to increase market share.

Overseas brands: due to the greater impact of the 22q2 epidemic on the first and second tier, we expect that the market share of overseas brands 22h1 will decline, while 22h2 is expected to stabilize. The reasons are as follows: 1) after the epidemic situation improves, More flexibility of overseas brands ； 2) Overseas supply chain and logistics will gradually resume, and the sales rhythm of new products tends to be normal. ?

According to the data of sports industry in China (2013-2019), in the epidemic (2019-2021) and after the epidemic (2021-2026e) The compound growth rates were 15.5%, 7.8% and 12.3% respectively , higher than the mature markets such as the United States, Germany and Japan, but also far higher than the global market; In addition, China's clothing market Cr5 is also higher, the competition pattern is better.

Compared with overseas leaders, domestic leaders have better profitability and growth.

From the perspective of profit splitting of overseas leading companies, the domestic market EBIT is far higher than that of overseas markets. Taking Nike and Adi as an example, if the headquarters expenses are shared equally according to the operating revenue, the EBIT margin of Nike Greater China in fy19-21 is about 30%, which is significantly higher than that in other regions.

In 2018-2019, the EBIT margin of ADI Pacific region exceeds 20% (mainly contributed by greater China). In addition, from the overall financial statements, the compound growth rate and net interest rate of domestic leading companies are significantly higher than those of overseas leading companies, indicating that domestic brands are fully enjoying the growth dividend of the domestic market.

Although the growth and profitability of overseas leading companies are not as good as those of domestic ones, their valuations are basically the same as those of domestic ones. We believe that the main reason is that the market recognizes the profit stability brought by the stronger brand power of overseas leading companies.

Looking to the future, Combined with the higher growth of China's market, the potential of local brands and the continuous improvement of market share, We believe that the valuation level of domestic leading companies has room for improvement and is expected to better match the company's future growth.

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