Business casual men's Big Three experience pain

Large-scale closure of low-efficiency stores and wholesale-based ** ordering systems are being combined with spot-type ordering orders.... For business casual men’s three “giant” seven-penny, Jiumuwang, and China Lilang, they are conscious that they have previously The "sequelae" of extensive expansion is becoming prominent, and it is accelerating the search for transformation breakthroughs. Only at present, they must still undergo the “labor pains” of the transition period. Moreover, this “labor pain” will continue for some time.

Performance for the first time "double down", a total of 669 net clearance stores for the business casual men's three "giant" seven wolves, Jiumu Wang, China Lilang, 2013 is undoubtedly a bad year.

In 2012 and more than 10 years ago, they have always enjoyed the sweetness of high growth. However, by 2013, their business conditions have been declining sharply for the first time in many years, and the total "Double decline" in revenue and net profit.

The financial report showed that in 2013, Septwolves, Jiumuwang and China Lilang all had a “double decline” in revenue and net profit. This was the first time that Jiumuwang’s operating performance had fallen, and it was also the first time that Septwolves and China Lilang had fallen from their IPOs.

In 2013, Septwolves achieved a total revenue of 2.773 billion yuan, a decrease of -20.23% compared to 2012; an operating profit of 446 million yuan, a year-on-year decline of -38.47%; net profit of 379 million yuan, a year-on-year drop of -32.44%. Among them, apparel main business income was 2.613 billion yuan, a year-on-year decrease of -21.08%; moreover, sales of core category products such as jackets, pants, jackets, and T-shirts all showed negative growth.

The seven wolves said that the impact of terminal weakness since 2012 on the company’s performance began to show up in 2013. The main reason was that due to the impact of the macro environment, the apparel retail industry was sluggish and the company's orders fell. At the same time, the company reclaimed more inventory in order to ease the pressure on the distribution channel inventory.

In 2013, Jiumuwang achieved revenue of 2.501 billion yuan, a year-on-year decrease of -3.81%, and a net profit of 537.3 million yuan, a year-on-year decrease of -19.62%. Among them, its traditional offline channel revenue was about 2.36 billion yuan, down about -3% year-on-year. Jiumu Wang said that due to the slowdown in domestic economic growth, end-user consumption continued to be sluggish, subject to the decrease in sales terminals and the impact of e-commerce, the company’s product sales volume was 9,927,900 units, a decrease of -4.67% from the same period last year, and sales volume decreased led to the company The decline in operating income.

China Lilang achieved a turnover of 2.2986 billion yuan in 2013, a decrease of -17.7% from the 2.793 billion yuan in 2012, and a net profit of 516.1 million yuan, a decrease of -17.7% from the 62.68 billion yuan in 2012. The sales volume of the main brand LILANZ was RMB 2.0912 billion, a year-on-year decrease of -19.2%, which represented a decrease of -1.6% to 91.0% of the total revenue of Lilang Group. Regarding the decline in profits, Lilang said that it was mainly due to the Group's efforts to assist distributors in clearing channel inventory during the year, and the retail environment has not improved.

In fact, this sudden bad situation hasn't been evident in at least 2012. This year, the revenues of Seven Wolves, China Lilang and Jiumu Wang were 3.477 billion yuan, 2.793 billion yuan and 2.601 billion yuan, respectively, which represented year-on-year growth rates of 19.05%, 3.15%, and 15.20%, respectively; net profits were 561 million yuan and 6.27 yuan respectively. Billion yuan and 668 million yuan, the year-on-year growth rates were 36.09%, 0.6%, and 29.07% respectively.

However, in 2013, the situation drastically changed. In the first half of 2013, Jiumu Wang and China Lilang both began to experience a “double decline” with revenues of 1.163 billion yuan and 1.093 billion yuan respectively, representing year-on-year declines of -2.29% and -13.20%, and net profits of 290 million yuan respectively. 2.42 billion yuan, a year-on-year decrease of -14.03% and -12.80% respectively. Seventh Wolf's revenue has also begun to decline, achieving revenue of 1.423 billion yuan, a year-on-year decline of -4.27%, but net profit of 256 million yuan, still achieved an increase of 4.28% over the same period. In the third quarter, the situation was still deteriorating. Seven wolves with a slight increase in net profit in the first half of the year also joined the double-dip "queue." This situation has not improved until the end of the year.

Until the first quarter of 2014, the situation continued to deteriorate. According to the announced 2014 first quarter financial report, during the period, seven wolves realized revenue of 650 million yuan, a year-on-year decrease of -31.3%; net profit was 110 million yuan, a year-on-year decrease of -39.9%. Jiumu Wang achieved revenue of 545 million yuan, a year-on-year decrease of -22.15%; net profit of 145 million yuan, a year-on-year decrease of -24.25%. It can be seen that the decline in the two indicators of the two companies continued to increase in the first quarter as compared with the whole year of 2013.

With the declining performance, the three “giants” have also entered the adjustment period for dense stores. In 2013, the total number of stores of the three brands decreased by 669 in total.

As of the end of 2013, seven wolves had operated a total of 3502 stores, of which 464 were directly operated stores and 3,038 franchised stores, which were approximately 65 and 440, respectively, compared with 2012, totaling a total of approximately 505 stores.

Lilang Group has a total of 3455 stores, and the number of stores in the two major sales contributing areas in East China and South China accounts for 52.6% of the total. Among them, the main brand LILANZ has a total of 3,180 retail stores, and 3 are self-operated flagship stores. During the period, the number of its retail stores decreased by 47; the number of sub-licensed L2 stores was 275, one of which was its own flagship store, and L2 retail sales during the period. The net increase in the number of stores was 23, which also reduced the total number of stores in Lilang Group by 24 in 2013.

The number of shops in Jiumuwang is 3124, including 778 directly-operated terminals and 2,346 franchise terminals, which has reduced the number of stores by 140 in the year. In the first half of the year, 59 stores were netted, 101 were closed, and 42 were newly established. In the second half of the year, there was a net decrease of 81 and the number of franchise stores increased to 123.

For this, analysts of the Guojin Securities textile and apparel industry believe that the future of the domestic men's wear market will continue to linger at the bottom for a long time.

Guo Rui, Guo Caiyan, an analyst at CICC's textile and apparel industry, pointed out that the current inventory destocking in the menswear industry is still in progress and end consumer demand is still weak. Affected by this, the short-term performance of the company is unlikely to be significantly improved, and the inflection point is expected to emerge at the end of the year or early next year.

Ever Bright’s textile and clothing industry analysts Li Wei and Tang Shuang Shuang believe that the bad period may be even longer. “The current men's apparel industry is still in an adjustment period and it is expected that it will not be able to gradually improve until the end of 2014 or the first half of 2015.”

The four deep factors brewed the "bitter fruit"

The downturn in consumption, the high premium of the brand is no longer favored, and the three “giants” that have been indefinable all the time have encountered difficulties at the same time. The deep reasons are many. First of all, under the overall sluggish consumer environment, market competition has intensified, consumers are more rational, and brand premiums are no longer popular.

According to data from the China National Business Information Center, in 2013, the retail sales of the 100 key large-scale retail enterprises nationwide only grew by 5.0% year-on-year, a substantial slowdown of 7.3 percentage points from the previous year. Among them, the retail sales of men's clothing showed a negative growth, which was a year-on-year decline of -1.3%, and the growth rate was lower than the 12.4 percentage points in the same period of last year.

In a downturn environment, consumers' consumption habits are more rational and consumer attitudes have undergone a fundamental change. In the industry, the premium rate of the leading menswear brands in mid-to-high end positions is generally about 4 to 8 times, and the high-end positions are even as high as 10 and 13 times. Many branded apparels have experienced rapid growth in the past and rely on high premiums of such brands. . However, seven wolves said, "In the current environment, brand premiums have become more difficult for consumers to accept, consumers are more inclined to pursue more cost-effective products."

On this point, you can use Hai Zi's home as a comparison. As an important embodiment of the differentiation of domestic business casual men's “leading” brand Haishu home, “price dislocation”, the company’s product price increase rate is only 2.5 times, significantly lower than the level of the industry. In 2013, the company lowered its terminal sales price by approximately 15%, driving a significant increase in sales volume by more than 80%. Coupled with the uniqueness of the model, in the general environment of the general downturn in the men's market in 2013, the performance of Hailan Home has achieved high growth, with revenue of 7.15 billion yuan, a year-on-year increase of 57.9%; and a net profit of 1.47 billion yuan. , a year-on-year increase of 58.2%.

At the same time, consumer demand is more personalized and the requirements for products are higher, and the market is further subdivided. Due to the long-term implementation of the "ordering system", the response of domestic garment enterprises to the market has lagged behind, and it has not been completely oriented to the needs of end consumers. In addition, the lack of innovation capabilities and mechanisms in the apparel industry has resulted in a higher degree of product homogeneity and increased competition among companies, while also facing competition from international brands and emerging brands.

The rigid increase in cost, squeezed the profit of the franchisee, and the rigid increase in the cost of various factors caused the franchisees' profits to be squeezed and the willingness to open stores was reduced.

At present, the prices of commercial properties in the core areas and core commercial districts of major cities are still operating at a high level, the labor price continues to rise, and the upstream and downstream production and operating costs continue to rise. In the event that the terminal store's store performance was affected by the weak environment, the dealer's profits were squeezed again, which dampened the terminal's enthusiasm for opening stores.

The data shows that rent and labor costs currently account for more than 60% of retail business operating costs. Labor costs have double-digit growth every year. If you do not raise wages, you will not be able to recruit people.

Rent is another major pain point, and store rents have to increase by 20% to 30% every year. Most branded physical stores are leased, and once they are difficult to rent, they may face the risk of closing stores. Even if they are renewed, they will face the risk of high rental costs.

Seven wolves said that the main reason for the company's large-scale reduction in stores in 2013 was the concentration of stores at the peak of the store's opening in 2011, and dealers chose to close stores due to a decline in investment returns. Nine animal husbandry Wang also said that due to the overall economic downturn, franchisees inventory backlog in the past two years is generally higher, the terminal rental is still at a high level and other factors, franchisees have greater pressure on the profit, in 2013 the franchisees have reduced their willingness to open stores.

"Extensive" expansion sequelae highlight the third is that many years of high growth masked many problems in the industry and business development, and currently, this "extensive" expansion of the sequelae highlights.

In the past 10 years, the extension of high-speed expansion has made great contributions to the rapid expansion of brand sales. In 2005, there were 960 franchised stores for seven wolves and only 8 directly operated stores, and the main business income was only 313 million yuan. In 2011 and 2012, it was still two years of outward expansion of seven wolves. In 2011, the number of company's terminal channels was 3,976. The weak domestic demand that began to appear in 2012 also failed to stop seven wolves. The number of its terminal channels increased by 31. As of the end of 2012, its overall number of stores soared to 4007, and its revenue increased to 3.477 billion yuan. In eight years, the number of stores has increased by 4.14 times and revenue has increased by 11.1 times.

However, in 2013, the "bitter fruit" brought about by the expansion began to appear. The company's inventories amounted to 7,461,100 pieces, an increase of 15.24% over 2012. Although the proportion of inventories in the total assets of the company dropped by -0.61%, the total inventory value increased from 566 million yuan in 2012 to 657 million yuan.

Although Lilang has slowed the pace of opening stores in 2012 and began to integrate some low-efficiency stores, LILANZ still had a net increase of 195 stores. In 2013, reducing inventory has become one of Lilang's main tasks. At the end of the year, Lilang sold the off-season garments of the major direct-operated stores across the country through the “end-of-year sales event”. The cheapest price was less than the discounted price.

In the annual report, Lilang said that the company’s channel inventory for 2012 and previous products has been largely cleared, and its product inventory in 2013 is also approaching a healthy level. The financial report showed that Lilang’s inventory balance fell by 3.3% year-on-year, but the average inventory turnover days increased by 21 days to 76 days.

In 2013, the inventory of Jiumuwang slightly decreased by -4% from the beginning of the year to 625 million yuan, accounting for 25% of the total revenue, but still at a relatively high level. For this reason, the company properly digested some stocks through e-commerce platforms and flat-rate stores. .

The e-commerce fierce impact on the traditional retail model If we look at the external competitive environment, the fourth important reason is the impact of online sales.

In response to this, the three companies have invariably pointed out that the rapid development of business model brands and e-commerce provides consumers with a huge choice of space, and more and more purchases and payment behaviors have been transferred to new areas. The pattern produced a greater impact. This has also brought about rapid changes in consumer spending habits, consumption patterns, and consumption concepts. This has created huge challenges for the growth of brand expansion in the past through store expansion.

Fortunately, companies are now clearly aware of the challenges and actively seek transformation. Septwolves said that from the perspective of the entire environment, the old business model based on extensive business operations, ignoring refined management, and waiting for customers to come to the door, which is based on the rapid economic development of China, has become obsolete. Companies must accelerate the pace of transformation and upgrading.

Jiumu Wang also stated that the company will pay more attention to the refined operation of the brand in the future, and will focus on “optimizing the store structure, strengthening the store’s retail operation management, and improving store efficiency” as the focus of future operations. However, the transition from relatively “extensive” growth to refinement requires time and experience and may not be able to quickly increase operational efficiency in the short term. Therefore, the company will increase investment in refined operations and strengthen strategic planning. Strengthen organizational structure adjustment.