Footwear Companies 2019 Performance Inventory: Daphne Closed 2395 Stores Saturday Net Profit Soared 15 Times

Over the past 3 years, the traditional footwear industry is still sluggish, especially in the category of fashionable women's shoes. The market is shrinking as a whole, and the difficulty of operation is gradually increasing.

Throughout the 2019, the performance of the red dragonfly has dropped, and Daphne has closed a lot. With the changing times, more and more "traditional" shoe companies are in trouble. The reasons are the same: strategic mistakes, crazy expansion, lack of focus, lack of innovation and Internet thinking, and capital chain breakage.

Expansion is the cornerstone of the market and a drag on performance.

Shop, shop crazy. Expansion is the cornerstone of the market and a drag on performance. In the last ten years, driven by the dividend of the era, the major shoe companies joined the store as the core growth driver to expand crazily. From the rapid expansion to the sharp decline in performance, the typical case is Daphne.

In 2019, Daphne reached its highest peak since its establishment, closing 2395 stores in one year, but the loss is still as high as 1 billion 12 million yuan. According to statistics, Daphne, once a shop full of streets, has closed nearly 4000 stores in recent 4 years. The market value has dropped from HK $18 billion 900 million to HK $200 million, or 99%.

The rise of the electricity supplier, the fierce homogenization of competition and the changing trend of consumption have greatly affected the traditional shoe industry. Some industry analysts said that the reason for the decline of Daphne stems from the huge impact of the electricity supplier.

With the upgrading of consumption, the acceleration of urbanization and the popularization of the Internet, online shopping has become the mainstream consumer trend of consumer groups nowadays. The popularity of online shopping has further exacerbated the impact of physical retailing, and the transformation of physical retailers is imperative. Faced with the challenges of internal and external economic environment and the structural adjustment of retail consumption, the traditional shoe companies have been unable to make rapid progress simply by expanding their scale and reducing costs.

Consumption style continues to be younger. Sports shoes have the greatest potential for growth.

In recent years, with the younger consumption and diversified life scenes, the Chinese shoe market is turning to sports, leisure and sports shoes. According to a research data, from 2018 to 2023, all segments of footwear market grew by more than 10%, while the growth potential of sneakers segment was the largest, with an expected growth of 46% to 89 billion US dollars in 2023. In China, the revenue of the segment is expected to reach US $10 billion 600 million in 2020, becoming the world's second largest market after the United States, with a compound annual growth rate of 10% between 2020 and 2023.

Consumption style continues to grow younger, but with Daphne as the representative, traditional footwear companies are mostly doing capacity and scale, lack of brand adhesion to consumers' demands, lack of unique brand positioning and style, and products launched are basically replicable brands of bestsellers, which can not impress young consumers.

At the same time, a lot of fashionable footwear brands from the world have emerged in an endless stream. With the new sense of experience, they quickly captured the hearts of consumers and further impacted the traditional footwear companies in China.

The future market is mainly based on emotional consumption and content consumption. Enterprises should classify consumers' needs and styles, and then locate them in some markets accurately, so as to gain unique existence value. For example, BELLE, which has been separated from traditional business, has found a new way out of the hot sports sector.

In 2006, BELLE international became the holding company and controlling shareholder of Tao Bo international, and Tao Bo international has been operating as an independent business of BELLE international. By February 28, 2019, Tao Bo International Holdings has 8343 direct outlets, of which 98.8% are single brand stores. Besides, it runs many brand stores mainly through its own store brands such as Topsports and Foss.

According to Frost&Sullivan, a consultancy firm, in 2018, it is the largest sports shoe and clothing distributor in the Chinese market with a market share of 15.9%. Nike is the second largest retailer in the world, and is Adidas's largest retailer in the world.

With the promotion of Anta sports, Lining and other domestic sports giants, the overall trend of the sports sector will undoubtedly become a new opportunity for sports, pushing the former "shoe king" BELLE into the second half.

Active transformation stop loss

In the last two years, Daphne and Daphne became the most talked about domestic footwear group on the last two years. One is the pressure on women's shoes to turn to new retail businesses, and Saturday, which surged on investment in Internet business, is a Daphne struggling in the traditional shoe business. The transformation measures are different, the effect is uneven, the domestic shoe industry competition pattern also clears day by day.

Judging from the performance of 7 listed footwear companies in 2019, we can draw an inspiration that the golden age of brand shoes made in China has already passed. More and more traditional shoe companies are eliminated in the competition. In order to survive, enterprises must find their way of development in the process of transformation. For example, on Saturday, 2019, they abandoned their capacity and went on the light asset line by relying on the main business of the Internet business. BELLE found new opportunities in the sports sector.

In addition, some enterprises are also trying to transform, but with little success. Daphne, which is losing money, began experimenting with light asset mode and introduced motion elements. In order to enhance its brand image, it removed the Chinese name "Daphne" from 2015, changed logo to more internationalized "DAPHNE", stationed in shopping centers, changed the visual image of stores, and cleaned up some shops which were not up to standard or with low profit. In order to attract young consumers, Daphne has also launched cross-border products with us fashion brands Opening Ceremony, Zhou Bichang and Disney, and joined the Korean designer brand in the autumn and winter fashion week in Seoul. But from Daphne's latest performance, these initiatives have had little effect.

Let's take a closer look at the performance of 7 listed footwear companies in 2019.

1, Daphne: huge loss of 1 billion, the number of stores closed to five years.

In 2019, Daphne's turnover fell by 48% to HK $2 billion 126 million, operating losses increased by 30% to HK $1 billion 20 million, and shareholders' losses increased by 8% to HK $1 billion 70 million.

Among them, Daphne's core business brand turnover decreased by 50% to HK $1 billion 883 million per year, accounting for 82% of the total turnover, and the turnover of other brands declined by 33% to HK $389 million, accounting for 18% of the total turnover.

Chart source: Daphne annual report 2019

Close 2395 sales outlets

Daphne said that the decrease in group turnover was mainly due to a significant reduction in the number of shops and the unsatisfactory appearance of core brand businesses. In 2019, the number of Daphne shops decreased by 2395 from 2820 in December 31, 2018 to 425 in December 31, 2019. Among them, core brands decreased from 2648 in 2018 to 360, while other brands were reduced from 172 in 2018 to 65.

This is the largest store that Daphne has started since 2015 to reduce the number of shops that do not meet the standard or profit margins. From 2015 to 2018, the number of Daphne stores was 827, 1030, 1064 and 941 respectively.

Comprehensive adjustment to "light assets" mode

In the earnings report, Daphne said 2019 was a year of "drastic" reform of the company, and will be fully adjusted to the "light assets" mode. In order to cope with the size of the streamlined sales network, Daphne made a significant structural adjustment, intensified efforts to clean up the over season stocks, and the inventory level dropped by 84% to HK $1 billion 620 million, and the average inventory turnover days decreased significantly by 41 days to 157 days.

Daphne also accelerated the pace of structural adjustment so as to achieve the "light assets" business model. In 2019, Daphne changed its thinking of reducing the proportion of franchisees in the past, and decided to transform most of the direct shops into partner system or franchise system, so as to reduce operational leverage risk. At the same time, we will continue to promote the layout of new image shops in shopping centers so as to enhance brand image.

In addition, the group will increase investment in the business of e-commerce, and regard it as a new business breakthrough. In order to develop the electricity supplier, Daphne will continue to optimize the supply chain, create more "net red explosion fund", and conduct online marketing through cooperation with new e-commerce platforms and KOL.

2. On Saturday, net profit rose by more than 15 times.

In April 23rd, the annual report released on Saturday showed that in 2019, the company achieved a total revenue of 2 billion 90 million yuan, an increase of 36.6% over the previous year, an increase of 3 years, a net profit of 150 million yuan, an increase of 1582% over the same period last year.

The "exploiter" of surging performance is its Internet business. In March 2019, we completed the acquisition of the remote network on Saturday, and developed the information technology service business centered on the precision marketing of mobile Internet. Benefiting from this, Saturday turned into a deficit in 2018, and achieved rapid growth in 2019.

At the same time, as the "first leg of domestic women's shoes" on Saturday, the main business of women's shoes has shrunk. In the face of many years of sluggish performance, on Saturday, we gradually abandoned the production of brand shoes, and chose online sales to build marketing platforms. Due to the success of the "net red economy" express, the achievement of market value doubled in a short time. It is not exaggerated to say that the best time in history is on Saturday.

Internet advertising has the largest revenue contribution

From the perspective of business structure, "Internet advertising" is the main source of business revenue. In terms of business, the income of clothing, footwear and Internet advertising business in 2019 was 1 billion 235 million yuan and 854 million yuan, with an increase of -9.00% and 405.97% respectively.

On the Internet advertising business, after March 2019, the network and the revenue growth significantly increased, and Onlylady and girlfriends business continued to expand. Along with the boom of the live broadcast of the net red anchor, the net red stocks have been on the draught. On Saturday, 2019, the volume of short video advertising and live goods business increased rapidly. The GMV of short video platform was about 210 million yuan.

Chart source: Saturday 2019 Annual Report

Women's shoes shop direct to join

On Saturday, the company optimized its operation mode and gradually transferred its direct stores to franchised stores to reduce the proportion of direct outlets. At the end of 2019, the total number of shops was 1231, and the extension decreased by 10.67%, of which 669 were self operated stores, 36.83% were down, 562 were franchised, 76.18% increased, and the number of outlets was significantly reduced.

On Saturday, the change of retail business mode can gradually reduce the proportion of offline stores, and gradually change the original department stores into franchise stores, reduce inventory, optimize asset structure and improve asset operation efficiency.

3, 100% net profit in 2019 decreased by 18.6%, the loss narrowed.

In March 30th, the company released its unaudited results in 2019, with a profit of 1 billion 936 million yuan, down 18.6% from the same period last year, and the loss attributable to shareholders was 315 million yuan, narrowing 18.7% compared with the same period last year.

The announcement shows that in 2019, the revenue of retail and wholesale business, contract production business and toy retail business was 1 billion 626 million yuan, 211 million yuan and 321 million yuan respectively, with a decrease of 20.7%, 7.8% and 50.3%.

Focusing on the main business has become the key word in 2019. According to the 2019 results, the income of footwear business reached 1 billion 837 million yuan, accounting for 85.1% of the total revenue, while toy retail revenue accounted for only 14.9% of the total revenue. Footwear business became the main contributor to the main business of the company.

Chart source: 2019 performance announcement

Close 203 self run shoe store

For the decline in performance, the company said that the decline in revenue from retail and wholesale businesses was mainly due to the decline in shoe sales in the same store compared with the same period last year and the closure of inefficient shoe shops. In 2019, it closed 203 self operated shoe retailing stores and 48 third shoe shoe retailers. As of December 31, 2019, the company has a network of 1214 self operated shoe retailers and 245 third shoe shoe retailers in various parts of China.

In 2019, the company further optimized the retail network composed of online and offline stores, and launched strategic cooperation with retailers of different sizes, such as department stores, shopping centers and outlets, to increase market share and coverage, increase the growth rate of same store sales and promote online sales.

4, red dragonfly: revenue and net profit both declined, Direct stores 317.

Red Dragonfly achieved operating income of 2 billion 970 million yuan in 2019, down 2.35% from the same period last year, and realized net profit of 131 million yuan, a decrease of 33.36% compared to the same period last year. The company has 4166 stores, including 317 Direct stores and 3849 stores.

Source: Red Dragonfly 2019 Annual Report

Public information shows that the Red Dragonfly company was successfully listed in 2015. Since its listing, the company's performance has not increased significantly. Compared with 2017, the company's revenue and net profit has declined for two consecutive years. The net profit is the first time it has been reduced to less than 100 million yuan since the disclosure of business data.

Red Dragonfly said that the operating income was slightly declined by the domestic economic environment, while sales, management and asset impairment accounted for an increase in the proportion of operating revenue, resulting in a year-on-year decrease in net profit attributable to shareholders of listed companies.

Leather shoes is still the core product of the company's annual revenue of 2 billion 393 million yuan.

According to the specific products, leather shoes are still the core products of the company, achieving 2 billion 393 million yuan in the reporting period, a decrease of 3.11% compared with the same period last year. Leather products are the second largest products of the company, achieving 312 million yuan in the reporting period, 0.60% less than the same period last year, and the share of children's articles and other products is still smaller. The reporting period achieved 88 million yuan and 6 million 355 thousand and 700 yuan respectively, down 2% and 56% respectively compared with the same period.

5, nine Hing Holdings: profit attributable to shareholders increased by 46.55%, steady progress in performance

In March 21st, nine Hing Holdings announced its performance last year. In 2019, the group achieved an income of $1 billion 545 million, a decrease of 2.75% compared with the same period last year, and shareholders accounted for 95 million 925 thousand dollars in profit, up 46.55% from the same period last year.

Chart source: Nine Hing Holdings annual report 2019

Nine Hing Holdings is the leading force in the production of women's shoes and casual shoes. At present, the company is in the process of transformation from OEM to OBM. The company's own brand, represented by "STELLA LUNA", "WHAT FOR" and "JK&JY", has successfully entered the market.

The total revenue of the whole year was less than that of last year, mainly due to the reduction in overall shipments during the year and the reorganization and integration of retail business in the group's brand business, the announcement said. During the year, the growth of fashion sports shoes orders was ideal, while the contributions from fashion and leisure footwear division were in line with the group's expectations, because the group continued to focus on improving profit margins rather than volume growth.

In this year, the gross profit and operating profit of the group were greatly improved because of the group's strategy of improving profit margin (i.e. increasing production efficiency, transferring capacity from China to Southeast Asia and improving customer mix and product mix).

6, AOKANG International: net profit of 22 million 500 thousand yuan in 2019, down 83.57% compared with the same period last year.

In April 27th, AOKANG International released the annual report for 2019. During the reporting period, the company achieved operating income of 2 billion 726 million yuan, a decrease of 10.41% compared to the same period last year, and realized a net profit of 22 million 490 thousand yuan attributable to the owners of the parent company, a decrease of 83.57% compared to the same period last year.

During the reporting period, the company promoted amoeba management, focusing on channel innovation and technology, enabling fashion products. Through the creation of explosive funds, multi brand operation, layout and other channels to help the transformation and upgrading of the company.

Chart source: AOKANG international annual report 2019

Channel upgrading

In 2019, the company comprehensively assessed the market capacity and competitive advantage of the cable sub store, and chose the best and the inferior to focus on improving the efficiency of single store. At the same time, the company launched the first C2M franchise store, and issued a C2M investment policy in the same period. The company creates a new generation of the new generation of "AOKANG life hall" and "Kanglong original designer shop", providing consumers with integrated, scene based experiential consumption. By building a digital consumer experience scenario, collecting consumer behavior data, we accurately interpret consumer needs to meet the needs of personalized and exclusive services.

Brand reform and upgrading

The company is guided by product promotion. In 2019, it launched the 2 series of AOKANG's "anti skid shoes", which is the main functional technology. It launched the skating challenge competition and the "bottom dare" attitude marketing around the functions of the series products; in order to further enhance the brand's fashion, it reached a strategic cooperative relationship with CCTV's "fashion masters" column, and launched the series of shoes of Shanhai monster. With the "people's daily new media", "man Wei" reached IP joint cooperation to promote brand reform and upgrading.

7, Tian Chong fashion: 2019 net profit of 207 million yuan, 1193 Direct stores

The 2019 annual report, released in April 28th, shows that during the reporting period, the total business income of the two major business segments, including footwear apparel and mobile Internet digital marketing, was 2 billion 89 million yuan, an increase of 1.8% over the same period. The net profit attributable to shareholders of listed companies was 207 million yuan, down 14.37% compared to the same period.

Footwear apparel online revenue increased to 20.4%

In 2019, the company made a substantial adjustment to the offline stores, and the overall operation efficiency increased significantly, especially ZsaZsaZsu and KissKitty. Online channels continued to exert power, and online revenue grew by 36.5% in 2019, and the share of revenue increased from 14.6% in 2018 to 20.4%.

The offline channel is mainly based on the "direct camp + Affiliate" mode. The company focuses on the shops under the layout of the central cities and key business areas, and actively develops new large shopping centers and commercial complexes. As of the end of the reporting period, the company has 1731 marketing outlets (1193 direct battalions and 538 affiliate), with stable market penetration and coverage.

Chart source: 2019 Annual Report