Shoes And Clothing Industry Closed Shop Tide Incoming Red Dragonfly Go Where To Go

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In the past 20 years, the most prosperous commercial center in Hangzhou, Yanan road is the first choice for many merchants to enter Hangzhou city.

However, due to the fact that the gross profit is not enough to cover the increasing cost of rent and so on, from the end of April this year, the me&city at the intersection of Yanan road and Fung Kai road was officially closed. Then, several flagship stores, including Jasonwood, AOKANG and Metersbonwe, had been withdrawn from the opposite side and nearby, and now it is the red dragonfly.

In fact, Yanan road is the epitome of the whole shoe and garment industry. In recent years, due to the economic pformation and the rising cost of rent and manpower, the traditional manufacturing industry has encountered bottlenecks, and the shoe and clothing industry has ushered in the throes of "closing shop tides".

Against this background, the Red Dragonfly shoe industry has thrown out 130 stores expansion plans to spend 867 million yuan in the prospectus, accounting for 88.9% of the total investment fund, and has great determination to go all out, but is the market going to buy it?

Shoe clothing industry "shut shop tide"

Footwear industry is facing a deep downturn.

The weakness of traditional sales channels, the rising rigidity of rent, labor costs, and difficulties in online business pformation are making the domestic shoe and clothing industry fall into the mire of growth and fatigue.

It shows that AOKANG, the oldest shoe manufacturer in China, has closed more than 400 stores in 2013, and has repurchased more than 500 loss shops, with a year-on-year profit decrease of 46.5%. This figure did not improve in the first quarter of this year, operating income fell 11.21% compared to the same period last year, and net profit fell 30.3%.

Profits fell by 46.5% year-on-year; last year, sales of AOKANG shoes dropped by 30.4% compared to last year, and men's shoes dropped by 11.5%.

Jinjiang, Fujian, is one of the main producing areas of footwear industry. Data show that in 2013, the profits and profits of several listed footwear and clothing companies in Jinjiang declined. Anta, XTEP, PEAK, and 31st degree companies shut off thousands of terminal stores, and only one of the seven wolves had closed 500 stores in 2013.

The Lining group, headquartered in Beijing, has reduced nearly 1400 stores since 2012.

In the first half of this year, the trend of shoe - clothing stores has increased, Anta's number of stores has been reduced by 56, Lining has dropped by 244, and PEAK has reduced 333.

The brand of women's shoes is no exception. Daphne, Qian Baidu and Saturday have seen a trend of closing stores and decreasing profits.

Daphne's 2013 annual report shows that the company's turnover, gross profit and operating profit all have a negative growth of 0.8%, 6.3% and 61.9%.

Daphne closed 53 stores in the first quarter of 2014, including 12 direct outlets and 41 franchises.

It also reduced the number of outlets in the first quarter, a net decrease of 54 outlets and a decrease of 8.6% in same store sales.

Li Peng, secretary-general of the footwear industry association, said that the pressure of manufacturing cost has been widespread in recent years. This is one of the reasons for the general decline in the profits of the footwear industry. But the key is that the industry is still in excess of capacity and supply. This surplus is not simply a supply exceeding demand, but the industry's supply is still homogenized.

In Li Peng's view, this homogenization has brought serious inventory pressure to footwear enterprises. Some enterprises are selling at low prices in order to clear inventories, so that the profits of shoe industry are declining continuously and are in a vicious circle.

The list of high inventory companies can write down a long list of names such as Lining and AOKANG.

The Red Dragonfly itself is a good example. In 2011~2013, red dragonfly revenue was 2 billion 718 million yuan, 3 billion 68 million yuan and 3 billion 222 million yuan respectively, the growth rates were 52.58%, 13.64% and 4.85%, respectively. The growth rate slowed down obviously, but on the contrary, the stock increased significantly. The book value of the company's inventory at the end of 2011, 2012 and 2013 years was 497 million yuan, 606 million yuan and 606 million respectively.

Therefore, in the short run, whether shoes or apparel brands or fashion brands are going to store or shop is still the main theme of the industry.

The prospect of expansion is unpredictable.

Why do red dragonflies choose to move against the trend at the time of "closing shop tides"?

The company prospectus shows that at present, red dragonfly has more than 4400 stores, but from its composition, 3833 of them are franchised stores, accounting for 86.56% of the total marketing terminals; among the only 595 direct terminals, 545 are shopping malls, and the dominating power is in the hands of the shopping malls. Only 50 of the independent battalion stores really hold the red dragonfly, accounting for only 1.13% of the total marketing terminals, and the control of marketing channels is weak.

Compared with similar companies, the red dragonfly is obviously at a disadvantage in its own channel.

On Saturday, the total number of shoe chain stores was 2363, of which 1868 were self owned stores, and Daphne operated 6702 outlets, including 5472 self operated stores, and 2286 stores with a total number of 1556 outlets.

This time, the Red Dragonfly will focus on the construction of direct investment stores, and intends to use 867 million fundraising to build 130 Direct stores. The purpose is to change this situation.

But whether such expansion is effective at present is doubtful.

As a matter of fact, in recent years, there are no exception in the market of shoes and clothing enterprises.

In the public roadshow before the launch on Saturday, 2009, Zhang Zemin, chairman and general manager of the public, announced publicly that "in the year and the next two years, there will be about 3000 brands of Saturday brand and Sophia brand".

But by 2012, the actual shop opening schedule had only been completed by 65.6%. The cost of opening shop was far higher than the expected cost of IPO, which became the main reason for its expansion. On Saturday, the shoe industry even once opened three stores.

And increasing the proportion of direct investment is also facing great risks. Direct operation means that the company has to bear all the costs and operational risks of the stores. Under the current situation of continuous increase in the cost of commercial leasing and labor costs, it is easy for the company to get bogged down in net profit.

From AOKANG, we can see that the homogenization expansion without a single weapon is doubtless a double-edged sword.

After the successful listing of AOKANG international in 2012, it began to increase the proportion of direct investment. Due to the sluggish market demand, the company's revenue and net profit in 2013 dropped by 19.1% and 46.6% respectively.

As of the first quarter of 2014, the company still did not get out of the mire, and revenue and net profit fell 11.21% and 20.3% compared with the same period last year.

Red dragonfly is no more competitive than the above.

The gross profit margin of red dragonfly is significantly lower than that of the industry average.

Statistics show that in the 2011~2013 years, the combined gross profit margins of Red Dragonfly were 34.05%, 35.49% and 36.11% respectively; the average gross profit margins of five companies in BELLE, Daphne, Saturday, 1000 degrees and AOKANG were 53.73%, 52.59% and 53.01% respectively in the past 2011~2013 years.

It is worth mentioning that the Red Dragonfly's gross margin is lower than that of its peers, and its asset liability ratio is much higher than that of its peers.

Data show that in 2011, 2012 and the first half of 2013, the asset liability ratio of Red Dragonfly Footwear industry reached 58.31%, 52.98% and 46.02% respectively, while the average asset liability ratio of the same period was only 30.14%, 28.81% and 27.08%.