Hongxing Erke: The Decline Of Performance Is The Labor Pains Before The Rapid Development.

In November 3rd, in the company's own view, the decline in performance for some time may be just the throes before the rapid development.

If we say that in the past 10 years, it is the national sportswear.

Hongxing Erke's 2009 performance report shows that its sales volume is 1 billion 999 million yuan, down 30.8% from 2 billion 889 million last year.

The decline is also a sharp decline, which is quite different from other domestic sports apparel listed companies.

Lining's sales revenue in 2009 was 8 billion 387 million yuan, an increase of 25.4% compared with the same period last year. Net profit increased by 31% yuan and RMB 945 million yuan over the previous year's 721 million yuan; Anta's earnings report showed that the net profit in 2009 increased by 39.8%, up to 1 billion 250 million 900 thousand yuan, exceeding the average net profit of analysts, which was nearly 10% yuan. Even PEAK, which had just landed on Hong Kong stock last year, also achieved sales of 3 billion 95 million yuan in the whole year, an increase of 51.6% yuan over the previous year, and the net profit growth was 51.6%, reaching RMBs.

"Compared to 2009, the market environment improved this year, and the related national consumption policy has brought certain opportunities to the sporting goods market.

This year is also a "sports year". The inspiring effects of major sports events such as winter Olympics and Asian Games will create more opportunities for sporting goods developers.

This is Anta sports vice president Zhang Tao's judgement on this year's domestic sporting goods market.

However, the first quarter performance of Hongxing Erke did not reflect the supporting role of these "effects".

Hongxing Erke reported in the first quarter of 2010, as of March 31st this year, the company's revenue was 491 million yuan, a year-on-year decline of 13.5%, gross profit 155 million yuan, down 31.9% compared to the same period last year.

But luckily, Hongxing Erke performs well in its main attacking tennis products market.

At the end of last year, the "best tennis shoes brand survey" jointly launched by people's sports channel and Qianlong tennis shoes channel was selected by 29 thousand netizens. The only domestic brands ranked before Hongxing Erke were Lining's family, though they were 7 foreign brands before them.

"Whether Anta, PEAK or Hongxing Erke, they are looking at the domestic first-line market."

Liao Jierong, an independent analyst in the apparel industry, said that consumers in the front-line market are much more demanding on the brand and more critical in quality.

In Liao Jierong's view, Hongxing Erke's development mode and brand positioning are all right. The problem of performance decline is mainly in the rhythm of expansion.

According to the public information of Hongxing Erke, at the end of 2009, there were about 4003 retail outlets in Hongxing Erke, while the number at the end of 2008 was 3824, with an increase of only 179, far slower than that of other major sporting goods brands in other countries.

This year, Hongxing Erke's shop speed has not improved significantly. In the first quarter, only 27 new stores were opened, and less than 2009 of the new stores 1/6.

In the clothing industry, the size and speed of opening stores depend on the amount of money, and the decline of Hongxing Erke naturally affects the investment on the store.

In the earnings report, Hongxing Erke's explanation for the decline in performance is the weakening of domestic market demand. In addition, the overstock of dealers has led Hongxing Erke to reduce the price of the dealer's delivery so that the dealer can digest the inventory.

According to people close to Hongxing, Hong Xing's success in the past few years after the successful expansion of the IPO store, in the brand promotion has also hit a lot of money, even without cost.

This leads to the opening of shops now, and has to "eat vegetables".

But in the company's own eyes, these seem to be just the throes of high-speed development.

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"The next two years will be a rapid development period of Hongxing Erke. Our number of stores will expand from 4000 to 6000 now, and sales will also increase from about 2000000000 yuan to 5 billion yuan."

At the end of May, Wu Rongzhao, vice president of Hongxing Erke, said in an interview with reporters.

In fact, as China's first overseas listed sports brand, after the pains of "de Stocking" in 2009, Hongxing Erke is recombing its sales network and developing it in a more prudent manner.

Hongxing Erke started business for 10 years, and its turnover grew from the initial about 10000000 to 600 million yuan in 2005. By 2008, the turnover had reached 2 billion 800 million yuan.

But then it was the decline in 2009 and the first quarter.

The reason is that in addition to the weakening of domestic market demand mentioned in the company's earnings report, the excessive inventory of dealers also led Hongxing Erke to reduce the price of the dealer's delivery so that the dealer can digest the inventory.

Wu Rongzhao also explained that in 2008, Hongxing Erke's shipment was expected to be too high, which directly led to a "de Stocking" process in 2009.

"Let's take an example: we sold 10 thousand pairs of sneakers to a dealer in 2008. In fact, the dealer only sold 8000 pairs of sneakers, and then 2000 pairs of sneakers were left. In 2009, the distributor may sell 10000 pairs of shoes, but in fact they only need to enter 8000 pairs of goods, because there were 2000 pairs of stock before."

Wu Rongzhao said.

But Wu Rongzhao believes that the most real data of the sales volume should be to see the amount of purchases that consumers should buy, rather than simply counting the shipments of companies, so in fact, sales of Hongxing Erke in 2009 had not been so large.

Different from the above analysts, the slow growth of outlets is considered to be an important reason for the company's performance decline.

In response, Wu Rongzhao said that the company improved the existing retail outlets last year, improved its services and decoration, and closed some dissatisfied outlets according to the principle of survival of the fittest.

"The number of outlets increased slowly in terms of quantity, but the quality of single stores was improved."

At present, the domestic sports apparel market is fiercely competitive. Nike and Adidas occupy the first tier cities and are pushing forward to the two or three line market. Lining and Anta are unwilling to stay behind, as well as PEAK, XTEP and many other local brands.

Wu Rongzhao believes that the two or three line market with inherent advantages is the top priority of Hongxing Erke.

Hongxing Erke will continue to focus on the development of the two or three tier cities, and the two or three tier cities still have great room for development. The new more than 2000 outlets are also located in two or three tier cities.

In view of the two or three tier cities, Hongxing Erke is looking for the target of eating: the two or three lines of foreign brands that have not yet entered the Chinese market, and the brands that have not yet entered the Chinese market, but their performance is not good enough, and China's market performance is not matched with the international status.

"We are actively looking for such acquisition opportunities."

Wu Yue.

But he also said that Hongxing Erke also need to set up a large flagship store in Beijing, Shanghai and other big cities to expand and enhance the brand image.

"We have no obvious advantages in the first tier market, but we must see that publicity is more effective in the first tier cities."

Wu Rongzhao said.

Expansion is not just in China, but Wu Rongzhao also wants to expand overseas.

At present, Hongxing Erke's overseas market accounts for about 10% of the total sales. This proportion ranks the top among the domestic sports brands. Its main overseas markets are concentrated in the Middle East, South America, Southeast Asia and Europe. Especially in the Middle East, Hongxing Erke ranks the top 5 in the local market share.