Daphne's Performance Has Been Declining Continuously, And Its Self Salvation Has Become Increasingly Difficult.

Daphne, which is at the back of its development, has been reduced by Wellington Management Group LLP in recent years.

Recently, Daphne International Holdings Ltd (Daphne "00210-HK") was Wellington Management GroupLLP with a HK $0.1750 average price of HK $8 million 454 thousand and 500, with a total price of HK $1 million 479 thousand and 500.

After the reduction, the number of shares held by Wellington Management GroupLLP was 95132548 shares, accounting for 5.77% of the issued shares.

But this is not the first time Wellington Management GroupLLP has reduced Daphne in the short run. HKEx's rights and interests data show that Daphne international was reduced by 38 million 508 thousand Hong Kong dollars at an average price of HK $0.19 per share in Wellington Management GroupLLP in June 26th, involving about HK $7 million 316 thousand and 500.

Though Wellington did not mention the reasons for the reduction. However, for four consecutive years of loss of Daphne, it is doubted that the reason for reduction is related to the company's performance.

Years of decline in performance

According to Oriental Wealth, the total revenue of Daphne has been declining year by year in the past 2015-2018 years. They are 7 billion 20 million yuan (RMB: the same below), 5 billion 816 million yuan, 4 billion 356 million yuan, and 3 billion 616 million yuan respectively. In 2018, it dropped by 20.8%, and the net profit for the same period was -3.17 billion yuan, -7.33 billion yuan, -6.14 billion yuan and -8.71 billion yuan respectively, showing a deficit for four consecutive years.

Among them, the annual report shows that the number of shops in Daphne's core brand business decreased from 3589 in 2017 to 2648 in 2018 (including 2404 Direct stores and 244 franchised stores). According to the 2018 earnings report, core brand business turnover fell by 19.2% to HK $3 billion 799 million.

Daphne's core brand business refers to the retail business of footwear products and accessories that sell its own brand Daphne and shoe cabinet in mainland China.

The continued decline of Daphne's performance is related to multiple factors. From the external macro environment, the development of Daphne has been hindered by the slow pace of economic development, the addition of trade wars and the decline of consumer confidence.

At the same time, due to the growing popularity of electricity providers, the various segments of the consumer market will be dispersed at a faster pace, so the business environment becomes more challenging. The competition faced by Daphne will become increasingly fierce.

From the perspective of Daphne itself, Daphne has become more and more difficult to keep up with the increasingly complex consumer demand and fierce competition due to the slow transformation of its business.

In the face of difficult business environment and difficult transformation, the company shut down some poor performing shops for four consecutive years to reduce unnecessary costs. Daphne's closing time can be traced back to 2015.

In 2015 -2017, Daphne closed 805 stores, 999 homes and 1009 stores respectively. As of December 31, 2018, there were 899 outlets and 42 franchises in the 941 sales outlets closed throughout the year.

In addition to closing stores, the group is also trying to increase its market penetration through the sales channels of more fashionable shopping centers in order to adapt to fast changing consumption patterns and consumer preferences. The group also strengthened product research and development, focusing on fashionable and comfortable sports shoes, and expanding the product range to meet the needs of different customers.

For example, in 2018, the group went hand in hand with Disney and singer Zhou Bichang to launch the most beautiful cross-border product of "seven" waiting. The company has launched a series of activities for these products, including invited stars to attend flash shop activities, endorsement of key opinion leaders, social media marketing and live online activities.

　　 Daphne is more difficult after self redemption.

What should Daphne do in the future?

With the intensification of competition in the same industry, Daphne's road is becoming more and more difficult. Unlike other brand positioning, Daphne's positioning is popular. With the development of market diversification, Daphne products lack innovation and are gradually divorced from the aesthetic of consumers.

Judging from online shops, the price of Daphne's new products is usually about 150-350 yuan. For young consumers, the same price can buy a more unique and innovative design on the Internet. It's no reason to buy Daphne again with the same money. And such a consequence, resulting in a decline in Daphne's sales, directly facing inventory accumulation.

Although in 2018, in order to restore the stock to a healthy level, the company accelerated the clearance with a large discount, but the consequences directly led to the downward pressure on the company's turnover and gross profit margin after narrowing of the retail network and discounts.

Where will Daphne go in the face of the heavy asset business model and the impact of new retail sales?

In order to meet the healthy development of the market environment, Daphne said in its annual report that it will strive to innovate business models, enhance product development capabilities, speed up the supply chain, and enhance the effectiveness and restructuring of sales channels.

Products, the company will continue to achieve product upgrading. At present, the company needs to increase investment in product research and development. While emphasizing the fashion and comfort of products, it needs to diversify the layout of products. In addition to the diversity of products, the company should expand product categories to seize more business opportunities.

In addition, through in-depth analysis of data from various branches, the company seeks market preferences and marketing strategies of consumers. It is beneficial for the company to continuously expand its membership base while improving its product planning and strategy.

To expand market share, companies need to improve the efficiency of sales channels. Daphne also pointed out in its 2018 annual report that the current retail business of the company is mainly composed of self operated shops, of which the business model is inevitably "heavy assets". In order to alleviate the current business risks, the company will adopt a partnership system.

In retail, more demand for innovative technology and advanced business models. For the impact of new retail, Daphne will adjust policies and strategies from consumer demand, understand consumers' habits and aspirations, optimize channels and information technology, and acquire a wider competitive market for new brand building.

From the current situation of Daphne, whether it is shutting down shops or trying to transform, it has failed to get rid of Daphne's dilemma, which also shows the awkward situation faced by Daphne.