Its Market Value Dropped From HK $170 Billion To 2 Billion 850 Million, Only 12 Years Ago.

Companies that experience big ups and downs can be found everywhere, but there are probably few companies, such as the global leader (00330). As a fashion brand with a peak market value of more than HK $170 billion (the same market value), Si Jie is now almost 2 billion 850 million yuan short of a year's net loss.

It is understood that after the announcement of its annual performance announcement on September 18th, Si Jie said that the company achieved 12 billion 932 million yuan income in the whole fiscal year ended June 30, 2019, down 16.3% compared to the same period last year, although the deficit in the period narrowed by 16.1%, but it still amounted to 2 billion 144 million yuan. Compared with the market value of the remaining 2 billion 850 million yuan in September 20, 2019, the Yuan's deficit in the latest fiscal year is close to the total market value of the company.

However, we must know that in 2007, Si Jie global hit a peak value of over 177 billion yuan, which is the absolute leader in consumer brands.

Empire collapse

Esprit, born in the United States, has reached its peak in Chinese hands. APP understands that Esprit was born in San Francisco in 1960s, and has become the most popular clothing brand among teenagers in the United States in 1980s. But what really brought him to the top is a Hongkong native named Xing Liyuan, who is also known as Brigitte Lin, the famous actress of Hongkong.

Xing Liyuan became an agent of ESPRIT in 1972, and founded the Esprit Far East Limited, which is mainly responsible for ESPRIT Asia's business. After that, he listed the business and assets on the Hongkong stock exchange in 1993. In 1997, Si Jie Far East bought WTL's ESPRIT private business. The company officially changed its name to "Si Jie Global Holdings Limited". In the following year, Si Jie global joint venture with Huarun set up Huarun Industrial Co., Ltd. to further expand its business in mainland China. In 2002, Si Jie universal bought the remaining ESPRIT stake, ESPRIT became the brand of the global unified management and operation, and Xing Liyuan, the largest shareholder of Si Jie global 42%, also ranked among the 500 richest in the world. In the glorious era, the market value of SG is over 170 billion yuan, and its stores all over the world are the first brand controlled by Chinese people and influential in the world.

But on the way to the top, the development of Si Jie world is not smooth sailing. Zhitong finance and economics APP understands that the wholesale mode has achieved Esprit, and has also pushed Esprit to the throne. The wholesale mode with the advantages of low risk and light assets is enough to match the brand with strong appeal. It does not mean that there is no need for self built channels, which has made Esprit rise rapidly in its early stage. However, the short supply chain caused by the wholesale mode makes Esprit unable to respond to the market reaction in a timely manner, and the product that does not conform to the consumption trend. At that time, the long Esprit order cycle and the high cost of the supply chain were the end of the ZARA and UNIQLO brands. Profits are diverted into the pockets of wholesalers, coupled with the breakdown of communication between consumers and producers, and Esprit bears the label of "high prices and constant styles".

Meanwhile, the erroneous positioning of the Chinese market will also make it difficult for the future. From the beginning to the end, the operation headquarters in Germany, the design department in Hongkong, from the designer to the management of the Chinese market and Chinese consumers lack of understanding and attention. In particular, the excellent performance of Europe in the 2002 allowed Esprit to merge the Asia Pacific and North American regions to the administrative level of Europe. It can be said that the company had been surrounded by the European market with Germany as its center of gravity, and sales in Europe accounted for over 80% of its global business. After China joined the WTO in 2004, the Esprit market in China will face more competition from international brands.

By the year 2006, fast fashion enterprises were growing fiercely. Even the international clothing giant GAP began to feel the influence of Spanish brand ZARA. Xing Liyuan, who seemed to smell a wrong thing, resigned from the board of directors and CEO of Si Jie global group in the same year, and began to reduce shares in Si Jie world. After the outbreak of the financial crisis in 2008, Si Jie encountered many wholesale customers who could not pay their bills due to tight cash flow. Some customers had already gone bankrupt, and the wholesale channels were blocked and inventory backlog could only be sold at a low price. This decision led to sharp shrinkage of the value of the brand and the surge of domestic electricity providers and international fast fashion.

From the peak of 2007 to the end of 2008, the biggest decline in the market value of Si Jie was more than 70%. After 2008, it fell into a decline period, and there was no sign of rising again. During the period, Xing Liyuan, who has been constantly cash in, has reduced shares by more than 10 times. He completely lost the stock of Si Jie in 2010, totaling about HK $23 billion 328 million. After 2010, the performance of Si Jie has been described in a bleak way. Although there has been a transformation plan, it has not had any effect. At this point, the era of Si Jie has basically come to an end.

Latest developments

When the time came back to 2019, the situation of Si Jie global improved slightly. APP understands that in the past year, the company has been shutting down unprofitable shops and optimizing the layout of retail stores. It has closed 169 unprofitable shops, and 14 have received rent reduction and 3 reduction areas, and 20 expect to implement closure or rent reduction in the next financial year. At present, the total controllable area has decreased by 14.3% year-on-year, resulting in the latest fiscal year revenue down 16.3% to 12 billion 932 million yuan, if the impact of foreign exchange is eliminated, the decline is -12.9%. However, the company's gross profit margin dropped by 1 percentage points to 50.3% over the first half of the company's reporting period.

Market segmentation, Germany is still the company's most important market, the latest fiscal year recorded 6 billion 687 million yuan, a year-on-year decline of 14.2%, accounting for 51.7% of revenue, Germany, outside Europe, the Americas and Middle East countries, the contribution of 5 billion 12 million yuan, down 13.1%, accounting for 38.8% revenue. The Asia Pacific region, which is composed of China, Singapore, Hongkong, Malaysia, Taiwan, Macao, Thailand, India, Burma and Philippines, has the worst performance. The net sales area has dropped by 33.3% as a result of the withdrawal from the Australian new market, so the income in the region has dropped by 34.9% to 1 billion 233 million yuan and the revenue account for only 9.5%.

But fortunately, the cost performance is good, the company finally recorded a narrowing of the loss. Zhitong finance and economics APP learned that the employees' costs, rental costs, logistics expenses, marketing and advertising expenses, depreciation and other operating costs of the company's regular recurrent expenditure fell by 17.2%, 17.4%, 20.2%, 29.6%, 13.9% and 27.8%, respectively. The regular recurrent expenditure of 7 billion 88 million yuan was 19.7% lower than that of the same period last year, and the decline was greater than the decrease in income and gross profit. Therefore, the company's basic business before the interest and tax losses was 587 million yuan, which is much better than that of the same period last year.

Even if we calculate the special project cost of 11.1% yuan to 1 billion 493 million yuan over the same period, the net loss of the company's 2 billion 144 million yuan is also narrowed than that of 2 billion 554 million yuan in the same period last year. That's why the stock price of the company has risen nearly 27% since the beginning of September.

But for the time being, a slight improvement in the short term has not played a role in reversing the situation.