Stock Surging, "BELLE" To Inventory

By the end of 2012, Belle International (01880.HK, the "BELLE") stock increased to 6 billion 518 million yuan. In 2012, all customers spent a whole year quietly playing a hard stock battle, from layoffs to business department rectification and storage center reduction, and so on, did not become the first dead clothing business. Traditional clothing companies were almost crushed by inventory in 2012, and BELLE had to start breaking arms to survive.

"If BELLE wants to break up with the Chinese operator of Italy brand Kappa, if it turns into a reality, it will not have a great influence on BELLE. After all, Kappa is only one of the second tier sports brands of BELLE agency, and its share of its revenue is very small (not more than 5%). Zhao Xiao, an analyst at China Merchants Securities (600999, stock bar), told the securities market weekly that "two points are not clear now. One is the impact of one-time provision loss on performance, and the two is whether the stock is recovered by China's trend."

In 2012, BELLE shoes and sports revenue accounted for 64% and 36% respectively, footwear gross profit rate 68%, sports 37%.

There are many sports brands of BELLE agency. Among them, the first-line sports brands are NIKE and ADIDAS, while the second tier sports brands include KAPPA, among which NIKE and ADIDAS account for more than 80% of BELLE's sports apparel business. Since the 2008 Olympic Games, sports brand performance has begun to show a downward trend.

By the end of 2008, BELLE's stock had nearly doubled to 4 billion 229 million yuan, and its net profit in 2008 only increased slightly by 1.06% over the same period last year, which is in sharp contrast to the doubling of net profit in 2007. BELLE's second-line sports brand's profitability and inventory turnover efficiency were significantly lower than the first-line brand level. Therefore, in the first half of 2009, BELLE vigorously cut down the number of low efficiency sportswear shops, and closed 346 stores, of which 304 were second-line brand shops.

For half a year, BELLE's Destocking It seems to be fruitful. By the middle of 2009, the stock on BELLE account had dropped from $4 billion 229 million at the beginning of the year to 3 billion 708 million yuan. By the end of 2009, the company's net profit increased by 25% compared to the same period last year, and entered a period of rapid development again. However, the rumour that BELLE will break up with the Chinese operator of Italy brand Kappa in China is accompanied by another sharp increase in the stock of the company.

Why does BELLE go to stock always to take the sport apparel business? BELLE's sportswear business only involves distribution and retail links, and does not involve in manufacturing, while footwear business is the whole industry chain including manufacturing links. Therefore, the former is significantly lower than the footwear business in terms of profitability, while inventory turnover is faster than footwear business. It also runs two businesses. The inventory indicators presented on the company statements will look better. NIKE and ADIDAS agents, which account for more than 80% of BELLE's sports apparel business, remain the focus of the company.

In terms of footwear business, in addition to more intensive promotional discounts, in 2012, BELLE mainly focused on reducing inventories by developing new categories and channels. According to the salesperson of a BELLE department store in a department store in Beijing, "over the past year, the number of new product development has decreased." The company added 2614 new products in 2012, reaching 17564 retail terminals. These new stores are mainly concentrated in the three or four line cities and the central and western regions, which is the strategy of BELLE's channel sinking. "We usually have new products in the stores in the first tier cities, and the sales promotion is only a few months ago, the longest will not exceed 1 years, and a larger number of old goods inventory will normally be transferred to three or four line cities to digest." The salesperson said.

Zhao Xiao said, "at present, BELLE's stock should not be as big as before. However, in view of the oversupply of China's apparel industry, BELLE's footwear business should not see a sharp increase."

In the short term, the e-commerce purchase network will not become the strategic focus of BELLE. It also needs to invest for a long time until it can find a profitable mode. "BELLE has a strong bargaining power in the department store channel." An investor with BELLE said, "however, in today's rapid development of e-commerce, can BELLE, which relies heavily on traditional department stores, create brilliant results?"

BELLE's newly developed fast Fashion Footwear Brand "15 minutes" is still in the profit frame construction period, is still in a loss situation, "it may take one or two years to achieve the profit break." This may be an exploration of BELLE's inventory in the traditional retail mode. "