Is The Noble Bird Falling Into A "Beauty Trap"?

In recent years, listed companies have competed in the cross-border sports industry, and the traditional sports shoes and clothing manufacturing enterprises, Guirenniao, have also caught up. According to the data, since 2014, Guirenniao has repeatedly used "big money" funds to arrange multiple subdivisions of the three major sports sub industries, namely, sporting goods manufacturing, sports competition business and sports services, in an attempt to build itself into "the first company in the domestic sports industry".

The ideal is full and far away. In the 2016 semi annual report, the operating revenue of Guirenniao is all from the traditional shoe and clothing manufacturing business, while the contribution of the company's sports industry business to the operating revenue is 0. In this regard, some insiders said in an interview that the honored bird Sports Although we can't blindly see the decline of the transformation attempt, the domestic sports industry has not yet entered the "harvest period".

Recently, Shanghai Stock Exchange issued a Letter of Inquiry to Guirenniao Co., Ltd. (hereinafter referred to as "Guirenniao"), concerning a recent merger and acquisition of the company. On the evening of March 12 this year, Guirenniao disclosed that it planned to acquire Weikang Fitness by issuing shares and paying cash. The transaction price of the underlying asset was initially determined to be 2.7 billion yuan. After the transaction was completed, Guirenniao would hold 100% of the equity of Weikang Fitness, and Weikang Fitness would become a wholly-owned subsidiary of Guirenniao. Through this acquisition, Guirenniao's business It will be extended to the field of physical fitness.

It is understood that Wellcome Fitness's Welsh fitness clubs are mainly distributed in Shanghai, Beijing, Chongqing, Hangzhou and other domestic first and second tier core cities. A member consultant of Wales in Beijing told reporters that Wales first started in Shanghai and has only entered the Beijing market in recent years. At present, Wales has only four fitness clubs in Beijing, which are located in Chaoyang Gate, Jianguomen Gate, Xihongmen Gate and Dongfang Xintiandi, However, she also said: "Wales is expanding its stores in Beijing very fast. In April, another new store will open in Muxiyuan, and in the second half of this year, Wales will open three to five new stores in Beijing." As for the revenue of a single store, the consultant did not understand.

According to the transaction plan, Weikang Fitness achieved an operating revenue of 516 million yuan and 743 million yuan in 2015 and 2016, respectively, and a net profit of 19837200 yuan and 48395100 yuan in the two years. The operating revenue and net profit in 2016 increased by 43.84% and 141.86% respectively compared with the same period last year. In this regard, the plan explained that the reason why the operating revenue increased by more than 30% in 2016 was that there were many new stores opened in 2014 and 2015, and the operating revenue of these new stores was released in 2016. However, the reason for the high growth of Weikang Fitness's net profit could not be found from the currently disclosed plan.

In this regard, the Shanghai Stock Exchange inquired about the financial authenticity, internal control of cash, identity information of members and other data of Weikang Fitness in the Inquiry Letter issued on March 25, and requested Guirenniao to further explain the core competitiveness of the underlying assets and the sustainability of the rapid growth of future profits in combination with the industry development status and business model. However, as of the press release, Guirenniao has not responded to this.

While the subject matter of the merger and acquisition was inquired by the regulators, Guirenniao planned to change the registered name of the company to "All around Sports Co., Ltd.", which also changed from "renaming announcement" to "canceling this renaming event" within one day. Some analysts believe that the reason why Guirenniao cancelled the name change is that it was worried that the application could not be passed due to the stricter name change rules.

It is understood that Guirenniao started its business in the production of traditional sports shoes and clothing, which is similar to most local brands. Most of its shoes and clothing products are located in the third and fourth tier cities in China. Guirenniao It was explained that because the average income of residents in tier three and four cities is lower than that in tier one cities, and consumer price sensitivity is relatively high, some domestic sports brands focus on the market in tier three and four cities, and through the centralized marketing network layout, pricing strategies suitable for consumers in tier three and four cities, Targeted marketing promotion and R&D design concept following the trend are gradually growing in the third and fourth tier cities.

According to the data, from 2010 to 2013, the number of stores at the channel end of Guirenniao expanded from 4027 to 5560, and the total area of retail terminals also achieved synchronous growth, from 282100 square meters to 420000 square meters. While the sales channels have been rapidly expanded, the performance of Guirenniao has also been driven step by step. The reporter noticed that from 2010 to 2012, the performance of Guirenniao achieved a significant growth, with the operating revenue increasing from 1.535 billion yuan to 2.855 billion yuan, an increase of 85.99%, and the net profit increasing from 222 million yuan to 528 million yuan, an increase of 137.83%.

However, Guirenniao seems to have "overexerted" in the process of early expansion. After its listing in 2014, the number of stores of Guirenniao began to shrink on a large scale. After reviewing the financial reports of the company from 2013 to the first half of 2016, the reporter found that the number of stores of Guirenniao in China has declined from 5560 in 2013 to 4313 in the first half of 2016.

Among them, the number of stores in the third and fourth tier cities that were once "proud" of the honorable birds declined significantly, from more than 2092 stores and 2135 stores in 2013 to 1621 stores and 1422 stores in the first half of 2016, respectively. Correspondingly, the honorable birds ended their rapid growth in 2013, with the operating revenue declining 15.74% year on year and the net profit declining 19.79%, In 2014, the performance of Guirenniao continued to face adjustment - operating income and net profit fell back to the profitability level before 2011.

In view of the dilemma of shrinking number of stores and declining performance, the reporter called Guirenniao as an investor, and the other party said, "The textile shoes and clothing industry has changed from extensive expansion to refined management, and the past practice of seizing market share has been eliminated. At present, we pay more attention to the health of the brand, and we will naturally choose to close stores without vitality and efficiency. "

Also in 2014, Guirenniao proposed to upgrade the company's development strategy from "traditional Sportswear The "industry operation" is upgraded to "a sports industrialization group based on the manufacturing of sports apparel products and coordinated development of various sports industry forms", and at the same time, resources integration is carried out by looking for M&A targets with clear profit models. Chen Yi, a senior consultant of Guirenniao, said in a high profile before that, "What we want to do is become the first company in the domestic sports industry."

In this regard, Zhang Qing, CEO of Keyway Sports Consulting Co., Ltd., said to reporters: "In the field of traditional sports shoes and clothing, some professional sports brands, such as' Arthur ', are popular with consumers, while Guirenniao is in the second tier of local sports brands. It is not so much a sports brand as a leisure brand with sports characteristics," he said, This non specialization has greatly increased the possibility of Guirenniao's products being replaced. In this context, Guirenniao's transformation can be said to be both an active change and a helpless move.

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