[Financial know] Adi and Anta have greatly discounted the inventory crisis of apparel companies?
China-Singapore Jingwei client, April 29th (Wu Yihan intern Du Lunhui) "25% off all items, 50% off on some items, 50% off on new models in 2020, buy one get one free." It is found that many clothing brands have begun to carry out large-scale preferential activities, including many well-known clothing brands such as Nike, Adidas and Anta.
Behind clothing brands have launched a large number of preferential activities, it is the sales difficulties faced by shoe and clothing companies under the epidemic. The time is about to enter May. The time window for winter and spring clothing sales will be closed. How to deal with the inventory accumulated by apparel companies in the past few months will undoubtedly become one of the problems faced by many shoe and apparel brands.
Adidas offers 50% discount on some products
The sales dilemma of the service enterprises behind the preferential activities
Recently, Sino-Singapore Jingwei found in many shopping malls in Beijing that many apparel brands have begun to carry out preferential activities such as "50% off on some products, buy one get one free, and 60% off on the whole store." , Nike and other well-known shoes and apparel brands.
In fact, behind the recent launch of preferential activities by clothing brands, it is the huge operating pressure the industry is facing under the epidemic. On April 24, the US clothing giant GAP said that in response to the crisis, the company will suspend the payment of wages to more than 80,000 company employees from this month to allow employees to take unpaid leave. It is found that there are currently few people in the store, and the words 50% off and 30% off are available everywhere. On April 27th, Adidas released the first quarter of fiscal year 2020 results. During the reporting period, the company's net profit fell by 96% year-on-year, and more than 70% of stores worldwide were closed. And due to the massive closure of stores, Adidas stocks have increased significantly. According to Credit Suisse's warning, these stocks may take up to one year to clear.
It should be pointed out that it is not only foreign companies that are affected by the epidemic. The first quarterly report of 2020 issued by many domestic apparel listed companies also shows that the company's performance has fallen sharply due to the epidemic. Among them, many listed companies mentioned their own Inventory issues.
Hailan's first quarterly report in 2020 showed that due to the epidemic, the company's net profit fell by 75.59% year-on-year during the reporting period. In the 2019 annual report, Hailan House warned that the new coronary pneumonia epidemic will have a greater impact on offline retail and will adversely affect the company's sales performance. And one of the risks is the risk of the company ’s inventory. The annual report shows that as of the end of 2019, the inventory value of Hailan House is 9.044 billion yuan. Hailan House said that 48.29% of these inventories are products with non-returnable terms. If the market environment changes or competition intensifies, it may lead to the risk of difficulty in realizing or falling prices.
In addition, the first quarterly 2020 report disclosed by Seven Wolves showed that the company had a net loss of 42.052 million yuan during the reporting period, of which the asset impairment loss reached 60.263 million yuan, because “affected by the epidemic, the company ’s inventory digestion was slow, and the corresponding inventory decline was accrued ".
The famous economist Song Qinghui pointed out that during the Spring Festival, it should have been the largest peak season for offline consumption throughout the year, which is conducive to increasing the profitability of textile and apparel companies. However, due to the outbreak of the new coronavirus infection pneumonia epidemic, the epidemic has a huge impact on textile and apparel companies, which directly leads to rapid decline in terminal consumption and serious accumulation of inventories.
New Jiaowei Zhao Jiaran at a half-price promotion of a variety of goods in a Gapu store
Garment enterprise's inventory "problem"
How to deal with the inventory backlog has always been one of the challenges that apparel companies have to face. Generally speaking, for those products that are difficult to sell, clothing companies will often deal with them by selling them at a reduced price or returning them to the manufacturer.
However, whether it is a price reduction promotion or eventually returned to the manufacturer, it means that the value of the original commodity has declined. For listed apparel companies, in order to prevent the annual book losses caused by inventory backlogs, the company will regularly perform impairment tests on inventory commodities, and accordingly make provision for inventory depreciation to cover the impairment losses of inventory commodities.
However, the provision for impairment of inventories will also affect the company's performance. According to incomplete statistics from the China-Singapore Jingwei client, among the listed apparel companies that have announced their 2019 annual reports, 10 listed apparel companies have made provision for inventory price declines, with a total amount of 950 million yuan. Among them, the seven wolves, Meibang clothing (Metersbonwe), and Soyote accounted for the top three reserves for inventory depreciation, which were 324 million yuan, 221 million yuan, and 112 million yuan, respectively.
Some apparel listed companies accrued the amount of inventory depreciation reserve in 2019. Sino-Singapore latitude and longitude cartography
Among the above 10 companies, except for the substantial increase in non-net profit deductions due to mergers and acquisitions on Saturday, only the seven companies Wolf and Newspaper reported positive net profit deductions, while the remaining seven companies Net profit fell.
The most typical case that affects performance due to inventory backlog is Li Ning. After 2008, under the influence of the “Olympic fever”, domestic sports shoes and apparel companies such as Li Ning expanded rapidly. From 2008 to 2011, the number of Li Ning ’s stores The number of companies increased from 5,000 to 8,000, but high-speed expansion has led to various problems such as a backlog of dealers ’inventory and a decline in store efficiency.
In order to solve the problem of inventory backlog, after 2012, Li Ning implemented a series of reform measures including inventory clearance and rationalization of sales network, and accrued a large amount of inventory bad debts, which directly led to the company's net profit in 2012-2014 3 There was a continuous loss during the year.
More importantly, because of the accumulation of inventory, Li Ning's offline franchisees continue to use price reductions, discounts and other promotional methods to clean up inventory, which directly leads to the damage to Li Ning's brand image. Since then, Li Ning's brand image has been rebuilt Focus direction.
Will the apparel industry's inventory crisis reappear in 2012?
Many industry insiders worry that under the influence of the epidemic, the apparel industry may reproduce the industry's inventory backlog in 2012 for domestic brands represented by Li Ning. However, Sino-Singapore Jingwei integrated the opinions of multiple brokers and found that although most analysts still believe that the epidemic will bring inventory pressure to apparel companies, on the whole, the follow-up processing and recovery time of this inventory problem will be longer than the previous domestic shoe and clothing brand inventory The crisis is shorter.
Li Jie, an analyst at China Everbright Securities' textile and apparel industry, pointed out that although domestic epidemic prevention and control are beginning to show results, foreign epidemics are still intensifying. Therefore, we remain cautious about overseas demand and textile export. At the same time, the pessimistic expectation of the growth rate of the macro economy may lead to shrinking market consumption willingness, especially the consumption of optional products, so the short-term epidemic situation will continue to suppress the retail sales of clothing.
Huang Shuyan, an analyst at the Great Wall Securities textile and apparel industry, said that as domestic prevention and control efforts tend to ease, branded apparel consumption is expected to improve in the second quarter. However, considering that most of the listed apparel companies have allowed the exchange of products in the first quarter and the third quarter, by reducing the production volume in the third quarter, to reduce the pressure on distributors and their own inventory, it is expected that the negative impact of the report will continue to the third Quarter.
Guosheng Securities pointed out that under the influence of the epidemic, the terminal flow of the apparel industry has declined, and objectively there is inventory pressure. However, from a comparative perspective, the reasons for the formation of this inventory problem and the company's retail management model have changed. The current inventory problem is better than the 2008-2012 inventory crisis.
According to Guosheng Securities, the core cause of the inventory crisis in the sports shoes and apparel industry from 2008 to 2012 was oversupply. The expansion rate of stores was much higher than the growth demand of the industry. It takes too long to clear inventory. The current inventory pressure of enterprises is mainly caused by the external impact of the epidemic, and the management capabilities of leading enterprises have also been significantly improved than before, and the channels for digesting inventory are also more diversified. Therefore, the follow-up treatment of this inventory problem and the restoration of the used The time may be relatively short. (Sino-Singapore Jingwei app)
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