However, as the epidemic is gradually brought under control and consumption gradually recovers, this sector seems to be experiencing some turning points. On December 28, sporting goods stock Li Ning rose by more than 3%, and Anta rose by more than 2%. Both stocks hit record highs. As of press time, Li Ning reported HK$51.6, up 1.98%, and Anta reported HK$122.9, up 3.63%. Goldman Sachs has also re-adjusted its expectations for China’s sportswear market, and the spring of the industry seems to be approaching.
Although apparel has always been a necessity for consumption, the industry level has been mediocre in the past 20 years, underperforming the market. In such a general environment, what is the secret why the prosperity of sportswear industries such as Li Ning and Anta has attracted more and more attention from the market? Can Li Ning and Anta, whose market values have repeatedly hit new highs, maintain the market’s long-term confidence in the growth of the sportswear industry?
1
The sudden emergence of sportswear brands
Li Ning and Anta have begun to grow into industry leaders after going through the early trial and error phase. . Anta’s strategy is to expand its brand territory through acquisitions. Anta recorded a total revenue of 33.9 billion in 2019, of which the FILA brand accounted for 14.77 billion, accounting for 43.6%, with a year-on-year growth of 73.9%. It can be said that it helped Anta realize its dream of “recreating Anta”.
Li Ning is by creating a national trend “China Li Ning’s brand has a unique label, which has caused Li Ning’s revenue to grow from 8.8 billion in 2017 to 13.9 billion in 2019. In the third quarter of 2020, Li Ning’s e-commerce channel sales further improved, recording a low-end growth of 40%-50%. With such performance, it is not difficult to understand why the market values of Li Ning and Anta have reached new highs.
Looking at the sportswear sector of the Hong Kong stock market, in addition to Li Ning and Anta, there are also some players that have also maintained relatively considerable performance growth. 361 Degrees achieved operating income of 5.63 billion yuan in 2019, a year-on-year increase of 8.6%; net profit attributable to the parent company was 430 million yuan, a year-on-year increase of 42.4%. Xtep International achieved operating income of 8.183 billion yuan in 2019, a year-on-year increase of 28%; net profit attributable to the parent company was 728 million yuan, a year-on-year increase of 11%.
From this point of view, it seems that the Hong Kong sportswear market segment has a good scene, but when it comes to the global market, Anta and Li Ning have many competitors. , in the increasingly fierce competition environment, it is not easy to continuously improve brand competitiveness and get out of the fundamentals.
However, looking at the entire clothing market, the sportswear branch in the past two years seems to be the same as in previous years. Fast fashion brands, which are still leading the way, have taken a completely different path.
2
“Slow down” fast fashion in sportswear
These domestic sportswear brands mentioned above have grown vertically in recent years. It’s remarkable to see. However, in horizontal comparison, the influence of fast fashion brands such as Uniqlo and H&M among clothing brands is also constantly expanding, which in turn has an impact on the sportswear sector.
Due to the gradual slowdown in the growth rate of the domestic economy and residents’ income, consumers have begun to get rid of their blind worship of high-end brands and high unit prices. With the explosion of commercial real estate and the return of consumers to rational consumption, fast fashion brands have emerged. H&M, KM, ZARA, Forever 21 and many other foreign fast fashion brands have embarked on an era of “horse racing” that has lasted nearly 10 years.
In order to preserve its strength, fast fashion has to stop the classic strategy of rapidly increasing sales and quickly opening new stores. Turn to increase your online business and try to recover losses as much as possible. H&M’s financial report stated that sales during the second fiscal quarter (March 1 – May 31, 2020) were severely affected by the new coronavirus epidemic. In mid-April, about 80% of the group’s stores were temporarily closed, while online sales surged 36% in the second fiscal quarter.
CK and Tommy Hilfiger’s parent company suffered a huge loss of 7.7 billion yuan
PVH Group, the parent company of Calvin Klein and Tommy Hilfiger, suffered a huge loss in the first fiscal quarter of 2020 (as of In the three months to May 3) sales fell 43% to US$1.257 billion (approximately RMB 8.89 billion), and the net loss was as high as US$1.1 billion (approximately RMB 7.786 billion). Among them, Tommy Hilfiger’s sales fell by 39% to US$615 million, and Calvin Klein’s sales also decreased by 46% to US$426 million.
Image source: PVH Group Financial Report
PVH Group CEO Emanuel Chirico said the group currently has US$1.8 billion in cash and available borrowings. PVH Group expects that 85% of its stores will resume operations in mid-June, and the revenue decline in the second quarter will be more significant than in the first quarter.
<img width=100% height=auto data-preview-src=""data-preview-group="1"src="http://pic.168tex.com/Upload/News/image/2Onlinesaleswillaccountformorethanaquarterofthegroup's business.
As of the close of trading on June 16, Inditex Group closed at 24.695 euros per share, with the latest market value of approximately 76.91 billion euros.
H&M sales fell by 50%
The financial report released by the Swedish H&M Group, the world’s second largest clothing retailer, on June 15 showed that as of the end of May Sales in the second fiscal quarter fell 50% to 28.66 billion Swedish kronor (approximately RMB 21.841 billion), but the decline was smaller than expected as epidemic restrictions in many markets have begun to relax and stores have begun to reopen.
Image source: H&M official website
In this context, many fast fashion brands are currently also Explore the transformation path of sustainable development. For example, Uniqlo is promoting environmental protection concepts this year. Currently, GAP is also simplifying its product configuration, focusing on the four pillar products of jeans, khaki pants, T-shirts, sweatshirts and pants.
As the epidemic gradually comes under control, the performance of domestic sportswear brands such as Anta and Li Ning has begun to stabilize. However, at the same time, fast fashion brands that are not waiting for death are also continuing to save themselves. Who can take the lead in the future with the profound management accumulated The operational barriers and brand matrix built to stabilize the moat and consolidate growth logic are still unknown for the time being.
3
Can the industry’s accumulation of energy bring about a continued increase in overall valuations?
Whether it is the competition with fast fashion brands or the performance of sportswear in recent years, it actually reflects the potential of this track. Not only that, the overall valuation of the industry will increase in the future. There seem to be traces to follow.
First of all, public awareness of exercise will also be further improved after the epidemic. Secondly, The increase in national income levels has led to an upgrade in the consumption of sports-related products, and the country is also increasing policy support for the sports industry. It is foreseeable that China’s sports shoes and apparel market will continue to expand in the future, and is expected to continue to grow in the future.
However, it is worth noting that there are still some uncertainties in the epidemic. All in all, with the recovery of economic growth, the end consumption of sportswear will further recover, driving the industry’s inventory and discount levels to return to normalization. According to Goldman Sachs’ expectations, the compound annual growth rate of China’s sportswear market revenue from 2019 to 2025 will reach 10%.
So in the future, in an environment where the valuation of consumer goods leaders in other industries continues to increase, the overall increase in the valuation of sports apparel leaders is relatively reasonable. However, for some domestic sportswear brands, if they want to enhance their industry voice and bring better profit prospects in a fiercely competitive environment, they still need to develop in a long-term game.
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