News From Shoe Enterprises: Anta Is Not Very Optimistic About Its Performance In The Capital Market

Instead of being Nike in China, we should be Anta in the world. Ding Shizhong, Chairman of the Board of Directors and CEO of Anta Group, has achieved half of his goal.

With a market value of more than HK $270 billion, Anta (02020. HK) has become the third largest global sportswear enterprise, and its size can not be ignored by any giant. However, in the eyes of many consumers, Anta's brand image may not surpass that of Nike, nor become Nike in China.

Behind this phenomenon is the rapid expansion of Anta in recent years. An important factor in Anta's growth is its speed of M&A in the global market, which also shows Ding Shizhong's vision.

In August 2009, Anta spent 332 million yuan to obtain the trademark use right and franchise of FILA in China from Belle International. However, the outside world has already thought that this is expected. Ding Shizhong has already publicly said that he will purchase one of the top 15 sporting goods enterprises in the world

Although it took Anta many years to remodel FILA, from the current revenue, it is undoubtedly a successful acquisition. In the first half of 2022, FILA will achieve a revenue of 10.777 billion yuan, accounting for 41.5% of Anta's total revenue.

For Anta, whose ceiling is hard to break, the acquisition of international brands opened a door for Ding Shizhong and became the source of strength for Anta's growth.

Perhaps it is unwillingness to spend years to build a declining international brand, or it is hope to get a ticket to carry the future, and Anta will put more and more chips on the gambling table.

In 2018, domestic sports brands ushered in the new year of sports, and the national trend also followed the trend. Anta quietly gathered strength. In March 2019, Anta purchased the parent company of Archaeopteryx, Amafin Sports, for 36 billion yuan. From the perspective of the industry, this acquisition case is like a snake swallowing an elephant. The size and influence of the two sides are very different. For Anta, Amafin is "tough".

Today, Anta has become a "giant", but behind the data frenzy, it still faces many problems: the ceiling of Anta's main brand is covered, the growth of FILA is weak, and Amafin is still losing money. This seemingly strong world's third largest sportswear group appears to be "puffy".

Decline in financial indicators

At present, Anta, which seems to be gaining momentum, is shedding its bright coat and revealing the outline of "puffiness".

Over the past few years, Anta has been trying to rescue both internally and externally. The most significant move is to start the transformation strategy of DTC (facing consumers directly) and transform from "wholesale retail" to "direct retail".

Behind this, Anta's main brand shows obvious internal weakness and is trapped in a growth bottleneck. Since 2018, the revenue share of Anta's main brand in the whole group has declined year by year, from 59.4% to 48.7% in 2021. Even if the share rebounds in the first half of 2022, it will be difficult to return to the peak.

In the second quarter of 2022, the retail sales of the main brand Anta fell by about 5% year on year. In contrast, in the second quarter of 2021, the retail sales of Anta brand products increased significantly by 35% - 40% year on year.

In the first half of 2022, the revenue of Anta's main brand increased by 26.3% to 13.36 billion yuan, but compared with the retail sales of all other brand products, the retail sales increased by 30% to 35% year on year, and the main brand was not attractive.

At the same time, Anta is still bearing the burden of diversification strategy, which is directly reflected in the decline of many indicators in the financial report in recent years.

The first thing to bear the brunt is the snowballing debt. According to the statistics of Time Weekly, the ratio of Anta's total liabilities to total assets will be around 50% from 2019 to 2021, while before 2018, the asset liability ratio will be mostly below 30%.

Earlier, Galaxy International Securities had released an analysis and forecast that after Anta's diversified acquisition of Amafin, its financial situation would face rising financing costs, rising debt ratio and increasing earnings volatility.

According to Anta's business data, the above prediction many years ago is corresponding to reality. In the first half of 2022, Anta's asset liability ratio will reach 45.85%, and its total liabilities will be about 29.501 billion yuan. In contrast, the asset liability ratio of Li Ning in the same period was 28.68%, and the total liabilities were about 8.888 billion yuan, which showed a wide gap in financial status.

At the same time, in the first half of 2022, Anta Group's operating revenue will be 25.965 billion yuan, up 13.8% year on year, and 55% year on year; Net profit recorded 3.588 billion yuan, a year-on-year decrease of 6.6%; The overall gross profit rate was 62.0%, down 1.2 percentage points year on year.

There is no doubt that part of Anta's development is closely related to the overall environment. Ma Gang, an analyst in the clothing industry, told the Times that there were problems in the macro environment, and Anta would choose the strategy of exchanging price for volume, which would lead to the phenomenon of increasing income without increasing profits.

Under the influence of the general environment, Anta can not escape the inventory crisis caused by the industrial product surplus. In the first half of 2022, the inventory turnover days will increase by 28 days to 145 days, the highest level in recent years. Compared with other brands, the inventory turnover days of Li Ning and Nike in the same period were 55 days and 109 days respectively.

Cash cow now ceiling

Ding Shizhong may have seen that the space for the main brand to rise is limited. In terms of data, half of the huge Anta now comes from acquired international brands, while Anta's "international dream" began 13 years ago in FILA.

In 2009, Anta acquired the trademark use right and management right of FILA in China from Belle International, which became the turning point of Anta's development.

FILA was once very eye-catching, from successfully getting rid of losses to becoming an important part of Anta's revenue. In the first half of 2022, FILA will achieve a revenue of 10.777 billion yuan, accounting for 41.5% of the total revenue.

But in fact, since taking over the operation in 2009, Anta took four years to make FILA break even, and gradually turned losses into profits in 2014, which became the main engine of Anta's performance growth.

However, FILA, which plays the role of "cash cow" all the year round, seems to have hit the ceiling of growth after entering 2022.

In the first half of 2022, Anta Group's retail sales of FILA brand products achieved a negative growth of low units on a year-on-year basis. Financial reports show that in the first half of 2022, FILA's revenue will be 10.777 billion yuan, down 0.5% year on year; Gross profit was 7.395 billion yuan, down 22.8% year on year. From the performance in recent years, FILA's revenue growth is still declining, from 74% in 2019 to 25.1% in 2021.

"FILA single brand can only cover a limited number of consumers, and it is not surprising that there is a growth bottleneck." Ma Gang told the Times that every brand has a growth bottleneck, which is an objective law.

Tang Xiaotang, an independent analyst in No Agency fashion industry, believes that FILA, as a brand in Anta's mid market, is more likely to face difficulties caused by weak consumption. At the same time, the brand momentum of FILA has declined compared with its early days, and it is difficult to recover this trend once it is formed.

Wu Daiqi, CEO of Shenzhen Siqisheng Company and brand management expert, said in an interview with Time Weekly that the more terminal stores there are, the higher the demand for production, supply and marketing for enterprises. Especially for clothing, fashion and seasonal changes have greatly tested the operation ability of enterprises.

"In addition, sports apparel enterprises will inevitably be affected by the overall environment, including the economic downturn, and the impact of the epidemic on normal store operations is relatively large." Wu Daiqi said.

Although the overall growth has bottlenecks. But over the years, Anta still hasn't stopped the pace of merger and acquisition. Now, Anta Group has owned many brands such as Anta, FILA, Di Sant, Spandi, Kelong Sports, Xiaoxiaoniu, and continues to move forward with a huge body.

Can Yamafen sustain Anta?

In the face of diversification strategy, Amafin, which was acquired by a large amount of money, can be said to be an important chess piece of Anta's large-scale internationalization and high-end route.

Up to now, this acquisition is still a "* * * acquisition" in the history of the domestic sporting goods industry at a high price of 36 billion yuan, but since the acquisition, this chess piece has not yet embarked on the path of profitability. The outside world is worried that in the future, Amafin may bring too heavy a burden to Anta's capital turnover.

Amafin has gained momentum in recent years, but its data has lost money for years. From 2019 to 2021, the total amount will exceed 2.3 billion yuan. In the first half of 2022, although the overall performance of Amafin has improved and its first profit contribution has exceeded 100 million yuan, it has failed to bring about practical results.

From Ma Gang's point of view, Amafin and FILA have different paths. FILA is to occupy China's high-end market with fashion trends. "Yamafin is not only occupying the high-end outdoor market in China, but also shouldering the mission of overseas expansion, which is the most important difference."

Amafin, founded in 1950, has many international famous brands, including Arc'teryx, the "Hermes" archaeopteryx among outdoor brands, Wilson, Salomon and other sports equipment manufacturers. However, in combination with its many brands, Archaeopteryx is undoubtedly a well-known and competitive brand with the concept of "sports luxury", and Anta is regarded as a future growth point.

The financial report shows that in the first half of 2022, the revenue of AS Holding, the parent company of Yamafin, reached 9.67 billion yuan, an increase of 21% year on year, but it still lost money. By the third quarter of 2022, in the Anta brand matrix, the sales of "other brand products" where Archaeopteryx belongs will increase by 40%~45% year on year, surpassing FILA.

Tang Xiaotang told reporters around the Times that the consumption environment has not yet fully recovered, but for Anta, Amafin, who is responsible for the high-end outdoor market, can still grow at a relatively high speed even though its consumer audience is relatively small.

"But in the long run, the outdoor sports market has not yet reached a mature time in domestic development. Anta needs to think about how to carry out market education in the follow-up, but also need to be alert to the fierce competition of the minority track." Tang Xiaotang further analyzed that.

In fact, over the past few years, Anta has "used the knife" several times to strip off the non core assets of Amafin Sports. It has successively sold the interactive fitness brand "Precor" and the diving computer and tools and sports watch brand "Suunto" under Yamafin. At the same time, its Archaeopteryx, Weiersheng, Bikefeng and other brands have also started their Chinese layout.

The latest news is that at the end of 2022, there is market news that Anta is considering the spin off and listing of its Amafin, and it is expected to raise at least $1 billion. In this regard, Anta said to the reporter of the Times: "Regarding Yamafen, Anta does not comment on market rumors and speculation".

"The track where Anta is located is highly dependent on capital. At present, the whole track is in the recession stage of the industry, and enterprises are more eager for capital." Wang Chikun, an independent economist and financial commentator, told the Times that Anta chose to quickly split Yamafin for listing, which is to further establish a strategic defense line and hope to solve the problem of strategic upgrading of the operating market through the capital market.

In any case, Anta's greatest glory comes from its size, but its biggest problem also comes from this.

Looking forward to the eve of the big bet acquisition of Amafin, Ding Shizhong, as the acquisition promoter, once sent an internal letter to all Anta employees, saying: "During the decision making period, he stayed up all night for several consecutive days, thinking about what this matter means to the company and society." Now, nearly four years later, Ding Shizhong still needs to work step by step.

But now, the reaction of the capital market has poured cold water on Anta Group.

In June 2021, Anta's share price peaked at nearly HK $180, and then maintained a downward trend. As of noon on December 30, Anta had a share price of HK $103.1 and a total market value of HK $279.775 billion, down about HK $210 billion compared with the total market value in June last year.