Senma Lu tired: pressure on rent and labor costs, the drawbacks of the proxy model

In the first half of this year, Semir apparel revenue and net profit both fell. The company achieved revenue of 2.511 billion yuan, a year-on-year decrease of 16.54%; and a net profit of 248 million yuan, a year-on-year decrease of 43.22%. This is the company's net profit decline after the first quarter of this year's decline in performance.

Before the listing in March 2011, the light asset and agency model was the innate advantage of the apparel company and a magic weapon for the company's rapid growth. However, this model is showing its drawbacks, coupled with the dual pressures of rising costs and escalating brand escalation. After the listing, Semir apparel is encountering “Waterloo” on the road to growth.

The disadvantages of the agency system model

When Summa Fashion went public in March 2011, it was quite controversial. An analyst said at the time that Senma Garments, as a traditional retailer operating clothing, had a total share capital of 670 million shares and limited growth. It should not be listed on the SME Board. However, Semima apparel eventually landed on the SME board at a 45-percent issued P/E ratio and a issuance price of 67 yuan.

The company was exposed after it went public. On the first day of its listing, the stock price broke and then fell all the way. On August 30 this year, the stock price had fallen to 21.39 yuan, a record low. Compared with the highest stock price of 64.58 yuan set on the day of listing, the share price has dropped by more than 60% over the past year and a half.

Behind the stock price hit a new low, the company's performance in the first half of this year also fell for two consecutive quarters. The reason is that, apart from the poor overall situation of the apparel industry, it is also related to the profit model of Semir apparel.

Different from the heavy-asset model of traditional clothing manufacturers, Semima apparel, which operates the popular casual wear brand, implements an agency system. The company does not have a factory and all production is outsourced. This asset-light business model has always been the inherent advantage of Semir.

As of the end of 2011, the number of company stores reached more than 7,000, of which direct stores accounted for 7% to 8%, about 500; about 6,500 franchise stores.

For many years, Senma's clothing has been rapidly expanding on the agency system with strong replication ability. However, after the scale was expanded, the drawbacks of this model began to show.

On the one hand, in order to seize the terminal channel, Semir, as a brand owner, needs to provide various favorable conditions for channel providers, which will erode their profits. A staff member from Beijing Xidan Sima Store revealed to reporters that some channels are worth more than 100 million yuan, and that life is better than being a brand. “The channel provider controls the brands, or at least is equal to the brands, (the latter ) How can there be excess profits."

On the other hand, the joining of franchisees or agents makes the intermediate cost too high. An obvious contrast is that foreign fast-fashion mature companies such as Spain's ZARA and Japan's Uniqlo all adopt the direct-operated store model, while domestic fast-fashion apparel companies such as Semir and Smith Barn mostly adopt the combination of direct sales and franchise, and even There are agents.

This makes it impossible for franchisees, agents and enterprises to form a mechanism that is conducive to inventory control, resulting in a problem of large stocks and long accounting periods. As of the first half of the year, Semir's inventory reached 1.473 billion yuan, which is nearly 30% higher than the same period of last year, and also increased by 10% from the previous quarter. Both inventory revenue ratio and inventory turnover days have increased in varying degrees.

According to incomplete statistics, in the fast fashion apparel industry in China, the production-to-sale ratio maintained at 60%-70% is a good level, and the production-to-sales ratio of ZARA is above 85%, with almost no inventory pressure.

It is worth noting that even if they are all based on a combination of direct operation and franchising, Semir is also relatively behind the domestic competitor Smith Barney. The reason is that during the first two years, Smith Barney has increased its investment in direct-operated stores, and its proportion of direct sales stores is stronger than that of Semir.

Taking 2010 as an example, the number of stores in Smith Barney's stores accounted for 19% of the total. Senma's direct sales accounted for only 4%. Therefore, the company's expense rate was relatively high, but after this period, the advantages of its direct-operated stores were reflected: At the same time, the net profit of Semima apparel declined by 40% in the first half of this year, while the net profit of Semitame increased by 15% year-on-year.

Dong Cheng Securities analyst Cheng Yuan believes that "from the perspective of brand core competitiveness, Smith Barney's ability in brand building and channel management are slightly stronger than Senma, and Senma's current channel expansion strategy is more adapted to the appetite of the capital market, but In the long run, the risk is greater than that of Smith Barney.”

The weight of rent and labor costs

Regarding the reasons for the declining performance this year, Semirwear said in the semi-annual report that it is mainly affected by the slowdown in macroeconomic and apparel demand, and the increased competition from international apparel brands and domestic apparel brands, as well as increased terminal channel costs. Increased pressure.

The staff of the Summa Apparel and Securities Department emphasized that “the impact of rental increases is significant.” Many retail analysts also admitted to reporters: “At present, the retail chain is working for the real estate boss.”

How much is the rent increase pressure? Sima Beijing Xidan store clerk said that in the past year, the store's rent rose no less than 50%, labor costs rose no less than 30%.

According to the survey results of the China Shopping Center Industry Information Center, 2812 shopping centers in 106 cities across the country in 2011, including high-quality shops, rents rose by more than 30% in the past year.

In response to this pressure, Semir began to take measures to purchase property. The company recently announced that it intends to use the raised funds of 156 million yuan to acquire 100% of the shares of Zhejiang Huaren Industrial Co., Ltd. For this real estate located in the core business district of Hangzhou, Semima clothing has paid a premium of three times premium.

The acquisition of real estate is mainly for the purpose of increasing and expanding stores. In recent years, Semir has been rapidly opening new stores, and at the same time it has started upgrading large stores, upgrading store images, and enriching product categories, etc., to enhance endogenous efficiency (referring to 1 square meter of terminal stores). Efficiency, the average amount of sales per square meter). Although the opening of large stores makes the company's direct-operated stores drop in efficiency in 2010, but in the long run, the store's efficiency will continue to increase after it enters maturity.

Another pressure comes from the fact that, compared with international giants such as ZARA and C&A, there are gaps in the image and response speed of Summa Garments. As a result, foreign big brands have achieved up to 30,000 yuan through direct sales and large store models. The efficiency of 50,000 was flat, but the efficiency of Semir Fashion Stores was only about 15,000.

In addition to the rising cost of shops, the cost of raw materials is also rising. Although international cotton prices have continued to decline since the beginning of this year, in order to protect the interests of cotton farmers, the state has adopted a protection price collection and storage system on the one hand, and a quota sliding tax system on imported cotton on the other hand. As a result, the spread of cotton prices at home and abroad continued to rise.

Brand building

Compared with the pressure of model and cost, an intrinsic factor that restricts the growth of Semir apparel is its brand positioning. The company currently operates a dual-brand operation and operates the "Summer" brand casual wear and the "Bala Bara" brand children's wear. The former is for consumers aged 16 to 29, while the latter mainly provides clothing products for children under 14 years of age.

At present, the competition in the youth casual apparel industry is becoming increasingly fierce. The high-end market is impacted by fast-growing international fast fashion brands such as ZARA and H&M that have entered the Chinese market. Low-end markets need to face the impact of online shopping and lower-priced regional brands. On August 29th, the reporter saw in the Senda Beijing Xidan shop that there was a large number of people here, but most of them were students who saw the discounts. The sales situation was not as good as the surrounding shopping malls.

Ma Gang, an independent commentator in the shoe and apparel industry, believes that "the shortcoming of Semir apparel is its young casual brand image established through marketing and its outstanding cost-effective products. It focuses on the second and third line markets, although it makes Semirwear a leader in the casual wear industry. However, in the first and second-tier markets, brand appeal is not strong enough."

In fact, as a fast-fashion clothing brand, it is necessary to continue to grasp the market demand to achieve three points: First, to be able to make agile responses to changes in consumer demand trends; Second, to be able to grasp the consumption characteristics of different regions as much as possible to suppress inventory; It is able to efficiently organize production and delivery, and shorten the time from the factory to the store. However, Senma is currently far from doing well as an international brand.

ZARA's marketing philosophy believes that even the best products, if they are not sold, will only occupy the waste of warehouses and stagnant funds. Instead of waiting for prices, it is better to quickly generate cash and promote secondary production. Therefore, ZARA's pricing is slightly lower than that of women's brands in shopping malls, and its style is rich in colors. There are the latest trendy singles, basics and accessories, plus richly designed men's and children's clothes, and even a family's clothing. All can be purchased in one stop.

At the same time, the children's wear business, which is the main focus of the company’s future performance, has also experienced challenges. Although “Balabara” has the title of the first brand of children's wear in China, it has become a competition for many well-known international and domestic clothing brands to join the children’s wear market in China. "The competitive pressures encountered are faster than expected. In the first half of this year, Balabala’s revenue dropped by 4% year-on-year.

According to the "Report on China's Children's Wear Product Market Analysis and Investment Prospects for 2012 to 2016" published by Shangpu Consulting, the middle-income group is the main body of children's wear, while 94% of consumers trust foreign children's wear brands. This also reduces the competitiveness of domestic industries.