Mei Bang Dress Increases Doubt: Is It Reasonable To Spend 1 Billion 300 Million Additional Stores?

Recently, the three quarterly report of A shares has been disclosed. Data show that most casual wear listed companies are not as good as expected. The three quarter net profit of casual wear and children's clothing business increased by only 2.79% over the first quarter of, and the net profit in the third quarter decreased by 3.18% compared with the same period last year. The retail oriented Taiping bird and the "men's Wardrobe" Hai Lan's family suffered a "no increase in profits". The old company, meinbang dress has not been out of the trough for several years, the net profit in the first three quarters declined 50 times compared with the same period last year, and the loss in the third quarter was 100 million yuan, the worst record since the listing.

The whole industry is under pressure. La Natsu Bell is in deep mire of performance.

In the first three quarters of 2019, in the 5 casual wear companies, Semir apparel was the only company that had a positive growth in both revenue growth and net profit growth. Its revenue growth and net profit growth were 35.8% and 2.8% respectively. The revenue of Taiping bird increased by 2.4% over the same period last year, and net profit fell 26.8%. The revenue of Hai Lan home increased 12.63% over the same period last year, and net profit decreased by 0.45% compared to the same period last year.

But it is noteworthy that even Semir clothing, its net profit in the first three quarters increased by 2.79% compared to the same period last year, and the net profit in the third quarter dropped 3 percentage points over the same period.

The most sad day is La Natsu Bell's female leisure wear company. In the first three quarters, La Natsu Bell lost 825 million yuan, expected to lose all year, and the company also lost 160 million last year. In the three quarterly report, La Natsu Bell said that the main reasons for the loss were: the company's operating income decreased year by year, and accelerated the digestion of the seasonal products, resulting in a decrease in gross profit margin and a corresponding decrease in gross sales. Continued closure of inefficient loss shops resulted in the accelerated amortization of long term deferred charges; the financial expenses increased by the new rent criteria; and during the reporting period, the decline in inventory preparation and bad debt preparation increased year by year, thereby affecting net profit. In addition, the company's implementation of the new leasing criteria also has a negative impact on the current net profit.

That is to say, La Natsu Bell's losses are caused by many reasons. In the first three quarters, La Natsu Bell realized operating income of 5 billion 757 million yuan, down 7.16% compared with the same period last year, while net profit of the returned parent decreased by 445% compared to the same period last year, and the decline was significantly higher than the decline in income. Gross margin declined from 62.2% in the same period last year to 58.96%, and the rate of decline was not very large. The most important reason for the company's huge losses was the accelerated amortization of the long-term prepaid expenses resulting from the closure of the store and the increase in the provision for depreciation and provision for bad debts.

In the three quarterly report, La Natsu Bell did not disclose the exact number of closed stores. According to the semi annual report, La Natsu Bell closed 2470 stores in the first half of 2019, closing nearly 14 stores a day. In the first three quarters, the company's assets impairment loss was 204 million yuan, an increase of 56% over the same period last year.

The main reason for La Natsu Bell's massive closure and huge losses is the strategic mistakes made by the company in the past few years. Before 2010, the domestic casual wear enterprises were racing around, and there were great leaps in operating income and channels. In 2010 -2015, due to the barbaric growth in the past few years, the state of Bon apparel and Semir costumes were in a large number of shops. The blind expansion also resulted in a serious backlog of stock. After 2015, Semir clothing, Hai Lan home and other enterprises upgraded the company's products and brands, and began to focus on the management of the supply chain.

While colleagues began to focus on brand upgrading and supply chain management, La Natsu Bell expanded under the guidance of the strategy of "whole brand and direct operation" and left the old road of Semir and America. Before 2011, the company had only three women's wear brands and 1841 stores, and the number of stores increased to 6887 at the end of 2014, and the number of stores at the end of 2017 was as high as 9448.

Unfortunately, La Natsu Bell did not show a strong ability to manage. At the end of 2017, the number of stores increased to nearly 10000, but reduced to 6799 in one and a half years, and 2470 stores in the first half of 2019. The expansion of several years led to La Natsu Bell's high inventory. As at the end of the three quarter of 2019, the company's stock book value was as high as 2 billion 199 million yuan, accounting for 57.8% of current assets and nearly 60%. If the company can not digest the existing inventory, it will inevitably generate huge assets impairment losses and directly reduce the company's net profit.

La Natsu Bell, who landed on A shares in September 2017, lost 160 million yuan and 825 million yuan in the first three quarters of 2018 and 2019 respectively. After the listing, he made a total loss of 485 million yuan.

Mei Bang clothing continues the law of "odd years deficit"

Another old company, Mei Bang apparel, has been hovering in the doldrums in recent years. Smith Barney was one of the earliest casual wear enterprises in the country. In the last ten years of 90s and the first half of this century, the state owned garment industry enjoyed the reform bonus. After the initial capital accumulation was processed and wholesale, it began to take the light asset road of brand operation. During the period, the number of stores and its performance continued to grow. During the 2010-2015 years, the company's early expansion began to suffer from maladies. Before and after 2015, the company has been seeking breakthroughs in its transformation, but the results are not significant and the profit is not as good as expected.

In the first three quarters of 2019, the company realized a net profit of -2.38 billion yuan, and achieved net profit of -2.48 billion yuan, a decrease of 5034% compared to the same period last year. Three quarterly reports also show that the company expects a loss of 500 million -10 billion yuan this year, which just confirms the law of odd years of loss. In 2015 and 2017, Smith Barney lost 432 million yuan and 305 million yuan respectively, while in 2016 and 2018 only 36 million yuan and 40 million yuan in net profit were achieved.

Mei Bang clothing explains the reason for the huge loss in 2019: the first half of the year, due to the impact of the delivery period, led to the delay in the new product launch in spring and summer in 2019, and failed to meet the market demand in time. The supply chain delivery problem has gradually improved in the second half of the year. The new products in autumn and winter are listed on demand. The decline in operating income in the three quarter is narrower than that in the first half of the year, and the fourth quarter is expected to continue this trend. At the same time, the company will further increase the realization of the cash in stock. The online and offline channels plan to use the four quarter "double eleven", "double two" and other major marketing activities nodes to carry out major promotional activities simultaneously to accelerate cash withdrawal. The above measures may have a greater negative impact on the four quarter and annual net profit.

"Double eleven" and other promotional activities are the positions of casual clothing companies to focus on firepower every year. This shows that the supply chain is the most important reason leading to the decline in annual performance. For apparel companies, supply chain delivery is one of the most important embodiment of apparel companies' operational capability. When there is a problem in the supply chain, especially in the five years, three years of huge losses and two years of micro surplus, the impact of the American Apparel can be imagined.

Mei Bang dress increases doubt: is it reasonable to spend 1 billion 300 million additional stores?

Under the background of the pressure of industry and the sluggish performance of the company, a $1 billion 300 million increase plan was launched from the beginning of 2015.

According to the "2019 year non public development bank A share stock plan (two revised version)" (hereinafter referred to as the "fixed increase plan") released by the United States State clothing in September 20th, the company intends to raise the total amount of non-public offering stock by no more than 13.03 yuan, and fundraising is mainly used for brand upgrading and product supply chain transformation projects and repayment of bank loans, and the estimated investment amount is 998 million yuan and 305 million yuan respectively.

Among them, nearly 1 billion yuan of investment projects - brand upgrading and product supply chain transformation projects are indeed in line with the development path of the industry. Internationally renowned casual wear brands such as Zara, UNIQLO, H&M and others have built up supply chain for the realization of product globalization strategy. Brand upgrading is also a necessary weapon to enhance product competitiveness. If we only look at the headlines of the investment project, it is necessary and reasonable for us to increase our apparel.

But if we look closely at the sub items under the project, we will have some doubts. According to the fixed increase plan, the total investment of brand upgrading and product supply chain transformation project is 3 billion 200 million yuan. The following five sub projects are brand upgrading and image renewal, supply chain mode transformation, information technology management system and retail big data platform upgrading, store upgrading and new store construction. The investment amount is 500 million yuan, 100 million yuan, 519 million yuan, 740 million yuan and 1 billion 340 million yuan respectively.

It can be seen that in 3 billion 200 million of the investment projects, the investment of new store projects has reached 1 billion 340 million yuan, accounting for 41.8% of the total project investment. Of the 998 million funds to be raised in large projects, new stores will be invested in 448 million yuan, accounting for more than 4 yuan.

As mentioned above, the pressure on the growth of domestic casual wear is not small at present. The profits of the company in recent years are also lingering in the doldrums. Is this large amount of fund-raising invested in new self built shops, which is in line with commercial rationality? Is it in line with brand upgrading and product supply chain transformation?

What is particularly noteworthy is that the number of stores in the United States has been decreasing in recent years. According to the annual report, at the end of 2012, the number of stores in the United States was 5220, and at the end of 2016, it was more than 3700. After 2017, the number of stores was no longer announced in the annual report.

If there are more than 5220 stores in 2017, why is there a decline in performance when stores increase? If there are no more than 5220 stores after 2017, the number of stores is decreasing as a whole. Is it reasonable for a company to invest heavily in new self operated stores? Can 1 billion 340 million yuan new store be digested in the future? Will the future earnings cover the advance cost and whether it will achieve the expected result?

In the new store construction project, the United States and costumes should firmly grasp the trend of the gradual development of clothing consumption demand to the three to five line cities, and promote personalized and experiential new retail formats in more areas of the country. According to the existing infrastructure and future development goals of the marketing network, the company will set up several Direct stores in the next three years according to the construction standards of smart stores and multi fashion style brands. The internal rate of return of the project is 18.15% after tax, and the investment recovery period (after tax / static) is 4.63 years (including construction period).

The success of the United States will increase the growth of the apparel industry to the 35 tier cities, from slogan to action to effectiveness, and how long it will take to achieve the so-called 18% internal rate of return.