La Charbelle: Officially Entering A-Share Delisting Consolidation Period

On April 22, Xinjiang lashabel Clothing Co., Ltd. (hereinafter referred to as "La chapel") officially entered the A-share delisting finishing period and began to count down.

The women's wear brand, which once spread all over the country's streets and alleys, finally collapsed after frequent news of collapse and rescue in recent years. A hundred footed worm, dead but not stiff. In fact, La chapel's high light moment is a flash in the pan. After the A-share listing, the loss continues to increase, and the revenue has declined before the A-share listing.

The desperate gambling is the style of Xing Jiaxing, who was the founder of La charbell and was born in Rural Fujian Province. In 2003, when the recovery situation was not clear, Xing Jiaxing went against the trend to expand its stores and won the first opportunity of leap growth. In 2017, as the first "a + H" share listed women's wear brand, it was actually the result of capitalization operation, continuous leverage and no stock pledge. Since then, the share price almost all the way down to delisting.

This local brand, which started from Zara model, constantly adjusts its strategy and loses the window period of crisis relief. The more profound reason behind this is that the long-standing disadvantages of large companies and the lack of innovation indirectly lead to the formation of the second growth curve. Looking back, from the peak to the trough, the ups and downs of La chapel's ups and downs, can the enlightenment be a lesson for more Chinese women's clothing brands?

/ 01 / falling from peak to bottom: lack of endogenous motivation for innovation

Once the "revenue 10 billion club" women's head brand. If you slip, you lose. By 2021, the revenue of La chapel will be less than 500 million yuan, The total assets are 2.4 billion yuan, and the liabilities are as high as 4 billion yuan.

Once, too. On the eve of listing in Hong Kong, the market share of La chapel was second only to bestseller and E-land group, and then surpassed Zara, UNIQLO, H & M and other international fast fashion leading brands. It is the first "a + H" clothing enterprise, which landed in Hong Kong stock market in 2014 and a share in 2017. Net profit peaked in 2015. In 2018, it once became the listed women's clothing enterprise with the highest revenue (10.176 billion yuan). It is a coincidence, or necessity, that the crisis has emerged at its peak. After 2015, the net profit of La chapel began to decline, and in 2018, the net profit suffered a loss for the first time.

"La Chabel" from landing a shares into the highlight of the moment, to become "* ST lashia", only two years. After the avalanche. The number of stores dropped from nearly 10000 (9269 stores at the end of 2018) to 300 by the end of last year. "The number of offline channel outlets has basically hit the bottom", and even rented the headquarters building to pay off debts, which made the outside world feel sorry.

　　 Like many business legends, the defeat of La charbelle is also a "grass snake grey line, Fu pulse thousands of miles.". In fact, in 2015 before landing on a shares, the net profit of La chapel reached the peak of 615 million yuan, and then declined all the way : 532 million yuan in 2016 and 499 million yuan in 2017. From 2018 to 2021, the total loss in the four years is about 4.987 billion yuan (the net profit attributable to the parent company is - 160 million yuan, - 2.166 billion yuan, - 1.84 billion yuan and - 821 million yuan respectively).

The crisis surfaced at the time of the publication of the semi annual report in 2019: both revenue and net profit fell. According to the interim performance report of La charbelle in 2019, the first half of the year's revenue decreased by 9.78%, and the net profit suffered a huge loss of 565 million yuan, a decrease of 333.9%. At the same time, the gross profit rate decreased by 7.7% year-on-year. Meanwhile, the number of stores decreased sharply (9269 on December 31, 2018 to 6799 on June 30, 2019, a total of 2470 in half a year).

　　 For the well-known second curve theory, a more complete explanation is that before the first curve reaches its peak, the company must find the "second curve", and the second curve must start to grow before the first curve reaches its peak. Only in this way can we make up for the resources invested in the early stage of the second curve, make a "soft landing" and continue the growth period of enterprises.

　　 In retrospect, rachabel made a strategic failure, which led to today's rout.

Before 2011, La Chapelle had only three women's wear brands (LA Chapelle, puella and Candie's). In 2012, La chapel put forward the development strategy of "multi brand, direct marketing oriented", and started crazy M & A, which laid hidden dangers for the subsequent failure. By the end of 2018, there are at least 14 brands of men's wear and women's wear. However, the group's revenue is highly concentrated in a few brands. In fiscal year 2018, the top five women's wear brands accounted for more than 80% (80.35%). LaChapelle has brought more than 30% of the group's revenue. The homogeneous 7 modifer and Candie's did not perform well, especially for men's wear brands.

　　 Multi brand development strategy, only more quantity, but the quality is worrying. Many sub brands not only develop slowly, but also destroy each other and compete maliciously. As a direct result, when the revenue of major brands La Chapelle and puella declines, there is no reserve force to keep up. This means that La chapel's second growth curve does not exist. Therefore, it is inevitable to shrink the front line and step by step withdraw from the market. After the first half of 2019, through the integration of brands, there are only five women's clothing brands, one men's clothing brand and one children's clothing brand, with women's clothing as the development core and shrinking men's clothing business.

Why the revenue of major brands La Chapelle and puella will decline? The external cause is the extrusion of Zara, H & M and other brands, and the impact of the new crown epidemic, while the internal cause is the lack of product innovation.

　　 The fatal weakness of local brands such as La chapel, which missed the "national trend" wind, is the lack of innovation. In 2020, when a large number of "light of domestic products" continue to develop trendy brands around young audiences, rachabel is still in the mire of de stocking and has no intention of innovation.

　　 After the localization operation mode of Zara model failed, La charbell began to give up the "multi brand" management strategy, but stepped into another big hole: "selling tags". Before 2018, La chapel mainly focused on offline channels. In 2019, it will open online and expand the proportion of related businesses. But it's too late and slow. From the perspective of overall business operation, the strategy of brand authorization in the fourth quarter of 2020 focuses on the online authorization mode of "brand empowerment + operation service", and the transformation of improving turnover efficiency is still on a difficult climb. "Light assets, high gross profit, fast turnover" business model is not in place.

The domestic "tag selling" model is based on the Antarctic. Antarctica once cut down production lines and sold only tags to survive. Adidas and Nike basically adopt this asset light operation mode, but there are still many acclimatized models in China. For the upstream brands, such as rabel, this is the core business model of local brands such as design and operation. If there is no innovative design and strong operation behind the support, the so-called "brand" will quickly pass away. Innovation remains the core driver.

　　 From "multi brand" to "selling tags", behind the transformation of La chapel, the core competence never obtained is the user stickiness obtained under the refined operation. In the end, the increasing operating costs and inventory under multiple brands are a drag on the company. If it is said that "selling hangtag" is a way to survive, it is rather the only way out.

/ 02 / failure of capitalization operation and ineffective employment, missing the window period of "life extension"

Lack of local brand innovation is a common problem, and many enterprises have made great progress. The key reason for the avalanche of La chapel lies in the failure of capitalization operation. Weak growth leads to the unsustainable high market value supported by high leverage capitalization.

At the time when A-share will be listed for two years (August 2019), there is a big shareholder's equity pledge explosion in La chapel, and the share price of A-share market has been hit hard and hit a historic low. In September 2017, he landed on A-share, and in November and December, the actual controller Xing Jiaxing obtained the financing amount of Pledged Shares, which was converted into about 446 million yuan. After six times of supplementary pledge of the company's shares, Xing Jiaxing has already pledged 99.81% of its direct shares. Therefore, once the position is broken, no shares can be added to pledge.

Next, La chapel's main task is to "survive" by capital operation.

Xing Jiaxing's first move was to introduce foreign aid. In April 2020, when the company's capital was exhausted, Xing Jiaxing launched Duan Xuefeng, a professional manager and investment bank background, as chairman of the board, and signed a "secret contract" with him, which was later exposed: Duan will improve the company's management ability and coordinate the implementation of government investment promotion.

Later, Xing Jiaxing described in an interview the reasons for the decline of La chapel. Since 2018, he has found out that the company is "not quite right.". From the internal point of view, "because there has been almost no setback in the past decade, the team has become more and more inertia thinking, highly redundant, and the idea of reform can hardly be promoted."

For Duan Xuefeng who was introduced from outside, Xing Jiaxing obviously had high expectations. As early as August 2019, Xing Jiaxing was full of confidence in the future, "through the realization of some assets, maybe in half a year or a year, La charbelle can return to a more benign state to operate." During the period of cooperation between xialabel and Xinjiang, the outside world hoped for a time. However, the development of things was not satisfactory. Only seven months later, Xing Jiaxing proposed to the board of directors to remove the "fire fighting" chairman who was promoted by himself. The resignation of the new chairman means that La charbelle has missed the best window period for solving the crisis.

After the change, the senior management of La chapel is in a long period of turbulence. In 2020, the company will change its president five times a year, basically all of them are internal elders. Zhang Ying, who took office at the end of that year, has been in office since then. Shortly after Zhang Ying took office (January 2021), Xing Jiaxing forced Duan Xuefeng out. Zhang Ying was once elected as the new chairman of the board, and then veteran Wu Jin took over. At the end of March this year, some of the shares held by Xing Jiaxing were auctioned, which means that the era of Founder Xing Jiaxing controlling La chapel came to an end.

Wensheng assets, which is good at non-performing assets management, took the helm and took over La charbell. Shanghai Wensheng assets and Shanghai Qijin, the person acting in concert, took over the offer, and the latter became the largest shareholder of La chapel, with a total shareholding ratio of nearly 20%. It is believed that it is interested in the shell resources of La chapel in Hong Kong stocks. After that, all the candidates for the chairman came from Wensheng assets.

On the eve of this year's delisting, Zhao Jinwen, born in 1993, became the chairman of the board. This can not help but remind people that Xing Jiaxing left the countryside and went to Fuzhou to start a business in 1992. The "post-90s" chairman was elected to control the legacy of the first batch of entrepreneurs after the reform and opening-up. Zhang Ying, the current president, has been climbing to vice president and president since 2003, when she started as a designer in La chapel. In this way, La charbelle is not only marginalized in the asset system of Wensheng, but also has a sense of being left to itself.

In April this year, in the face of the company's delisting from A-share market, Zhang Ying said in an interview that she was "looking forward to returning to the A-share market". This is not so much a strategic consideration as a certain feeling of the veteran. Zhang Ying has been in charge of the brand business for a long time, which is the only "asset" left by La chapel. But, in addition to "selling tags", will there be a new way out?

/ 03 / the "Zara model" is responsible for the success or failure of large companies

The localization management of Zara mode has made the former glory of La Chabel. For example, since the company landed in 2017, the net income of a shares was as high as 9 billion. Specific to a single store a year to create a revenue of 950000, the average contribution of profit of only 53000.

　　 When the company's rapid growth, Wanjia stores are confident. Once the performance is poor, it means that the company has to bear huge operating costs for these low profit Direct stores. La chapel had to go on the road of "de Zara". In the second half of 2018, La chapel began to implement business models such as joint venture and franchise in the original channel layout dominated by direct marketing.

　　 In the early stage, the company has a large amount of overstocking due to the development of the pie style. Inventory turnover days is the lifeline of clothing industry. The turnover speed of La chapel exceeds that of other brands in the industry, resulting in capital turnover difficulties. In recent years, the number of days of inventory turnover in La chapel has exceeded 200 days, while in 2020, it has reached 418 days. In contrast, UNIQLO is about 140 days, Zara is only 80 days. Chen Fan women's average inventory turnover days are only 53 days. In order to get rid of inventory, La chapel began a sale in 2020.

After neglecting innovation, La chapel repeatedly sold old clothes. According to the financial report, since 2019, La chapel will not invest any R & D expenses. At the same time, domestic consumption of FMCG is upgrading, and domestic products are racking their brains to launch new models and develop trendy brands to attract groups of young people with strong consumption intention.

Before the rise of the national tide, due to the slow pace of reform, to a certain extent, the localization of Zara mode caused a burden to the company. "The economy has a great impact on the clothing industry. The emergence of a large number of shopping malls has led to the flow diversion of shopping malls, making the mode of opening direct stores a huge burden.". The ubiquitous shopping mall needs to match more flexible business strategies. In fact, La charbelle has been suffering from "big company disease" and is hard to turn around.

In 1992, Xing Jiaxing, a 20-year-old boy who grew up in Dashanli, Fujian Province, went to Fuzhou with hundreds of yuan to buy saplings. When he saw a vocational training school enrolling students, he used the money to sign up for "fashion design" from his family. In 1998, he started his own business in Shanghai, opening archives and making clothes.

　　 The opportunity came in 2003. When SARS hit, many stores closed and factories cancelled orders, he "increased horsepower production against the trend" and made a big gamble. When the SARS crisis was lifted, the rest of the industry was still in the recovery period, and he had already made full use of his power to plunder the market. This is the first time Zara business model started.

Never thought, the success or failure all depends on this - Zara model. In 2021, China's women's wear market will return to a trillion yuan scale. The market scale of medium and high-end women's wear accounts for about 14% of the total market size of women's wear. The growth rate of medium and high-end women's wear market is about 7.5%, which is 2.3 percentage points higher than that of the overall women's wear market. The market penetration rate has increased year by year. All this, it seems, has nothing to do with rachabel.

With the advent of the new crown epidemic in 2020 and the closing of many stores in La chapel, I wonder whether Xing Jiaxing will think about the enterpriser who was full of vigour and gambled on his youth during the SARS period in 2003.