On May 27, I.T (00999.HK) released its 2019 financial report. The financial report shows that during the reporting period, the company’s revenue was HK$7.719 billion, a year-on-year decrease of 12.6%; gross profit was HK$4.734 billion, a year-on-year decrease of 16.1%; net loss was HK$746 million; the loss attributable to the company’s equity holders was HK$747 million.
I.T is mainly engaged in the sales of fashion and accessories, and is located downstream of the entire clothing industry chain. Ruyi Group (002193.SZ), an upstream supplier in the clothing industry, and internationally renowned brands such as Adidas (PINK: ADDYY) and Uniqlo, as well as midstream brands, are also struggling to survive.
As a result, as the global clothing industry falls into a cold winter, many clothing giants have set their sights on the Chinese market. However, recently, the financial reports released by many clothing companies seem to have poured cold water on the clothing industry, and the Chinese market does not seem to be as optimistic as everyone thought.
The global apparel industry is experiencing a cold winter
One of the sports brand giants, Adidas, first quarter 2020 financial report Show: The company’s net sales in the first quarter were 4.753 billion euros, a year-on-year decrease of 19%; operating profit was 65 million euros; net income was 26 million euros, a year-on-year decrease of 96%. At the same time, the company also predicts that sales in the second quarter of 2020 may decline even more, with a year-on-year drop of more than 40% expected, and operating profits may be negative.
On March 17, Adidas announced that out of consideration for the health and safety of employees, customers and partners, it will temporarily close stores in Europe and North America (including brand-operated stores and franchised stores) , to curb the spread of the new coronavirus. This move has caused more than 70% of Adidas stores around the world to be closed.
In mid-April, Adidas issued another statement stating that almost all self-operated and dealer stores in Europe, North America, Latin America, emerging markets, Russia and most of the Asia-Pacific were temporarily closed, and wholesale and dealers in the above markets were temporarily closed. Physical retail activity has come to a complete standstill.
Due to large-scale store closures, Adidas inventory is high. The financial report shows that as of the end of December 2019, Adidas’ inventory increased from 3.45 billion euros at the end of 2018 to 4.09 billion euros at the end of 2019.
Not only Adidas, but also Uniqlo, one of the casual wear giants, cannot escape the impact of the new crown pneumonia epidemic.
Recently, Uniqlo’s parent company Fast Retailing Group (06288.HK) announced its interim report for fiscal year 2020. The financial report shows that during the six months from September 1, 2019 to February 29, 2020, Fast Retailing Group’s comprehensive income was 1.2 trillion yen, a year-on-year decrease of 4.7%; net profit was 100.4 billion yen, a year-on-year decrease of 11.9% %. In addition, Fast Retailing Group predicts that the company’s net profit will decrease by 40% year-on-year in fiscal year 2020. This is the first profit decline for Uniqlo in four years.
In the past few months, many Uniqlo stores in mainland China, South Korea and other places were also temporarily closed due to the epidemic, which caused the company’s revenue to be greatly affected. Data shows that in March 2020, Uniqlo’s Chinese store sales fell by about 40%, the United States and Europe fell by 50% year-on-year, and Japan fell by 28%.
However, recently, as the epidemic situation in China has improved significantly, UNIQLO’s stores in China have gradually resumed operations since March. It is reported that the Chinese market is Uniqlo’s second largest market after Japan, accounting for 22.4% of the company’s total revenue. As of the end of 2019, UNIQLO had approximately 750 stores in China.
Is China a life-saving straw?
As a result, when the foreign epidemic has not passed the critical period and the clothing industry is still paralyzed, many foreign clothing giants have increased their investment in the Chinese market.
“The global outbreak of the COVID-19 epidemic has brought about very severe challenges, and even healthy companies are not immune. Currently, we are focused on responding to current business challenges and redoubling our focus on the Chinese market recovery and the opportunities seen in the e-commerce business,” Adidas CEO Kasper Rorsted said.
Uniqlo Greater China Chief Marketing Officer Wu Pinhui revealed in an interview with the media: “UNIQLO’s plan to open 80-100 stores every year is not It will change. In addition to a large number of stores in China, it is also the most important production base of Fast Retailing Group, the parent company of Uniqlo. Among the 242 clothing processing factories it cooperates with, 128 are located in China.”
Remove Due to the fact that the Chinese market has returned to normal consumer activities, Cheng Weixiong, a textile and clothing brand management expert and founder of Shanghai Liangqi Brand Management Co., Ltd., also explained other reasons why foreign clothing brands have increased their investment in the Chinese market. He said: “The Chinese market accounts for The proportion of global consumption is rising rapidly; China, as an emerging consumer market, has relatively diversified needs, which is different from the European and American markets where the consumer market is relatively solid; local market users’ admiration for well-known European and American brands also makes international brands more acceptable than local brands.”
At the same time, he also said: “China may not be able to save foreign clothing companies, but at least when the European and American markets are blocked, it will increase investment and maintenance in emerging consumer markets. This is the key for any global brand. It’s a choice everyone will make.”
The reporter also interviewed Wang Wenhua, executive director of CIC Consulting, and she explained: “Partial growth…This can only alleviate the decline of the global apparel industry. The emphasis and investment in the Chinese market can be expected in the future. The decline of the overall economy at the world level is bound to affect people’s expenditures, thereby affecting all aspects of people’s basic necessities of life. The Chinese market should be the first to emerge from the impact of the epidemic. Global clothing companies, especially clothing brands targeting the general public, can maintain growth in the Chinese market and need to keep up with the characteristics of domestic consumer groups, including online and platform Cooperation, opening up online and offline systems, localization of marketing and a series of other issues. Otherwise, it will inevitably lead to the situation of being acclimatized and sadly withdrawing from the market. ”
In fact, the Chinese market does not seem to be as optimistic as everyone thinks.
Oliver Wyman The company’s (Oliver Wyman) survey results show that China, the world’s largest clothing market, is expected to shrink by 15% this year, which is equivalent to erasing a market value of US$60 billion, and there will be almost no retaliation in the field of public clothing in April and May. Expenditure.
Moreover, most of the European and American customers served by many clothing foreign trade companies have suspended or canceled orders. Therefore, in order to save themselves, many foreign trade companies have switched exports to domestic sales, and have also tried to live broadcast “bringing goods” to On the front line.
The market is shrinking, foreign goods are constantly pouring in, exports are switching to domestic sales, the number of goods far exceeds the carrying capacity of the domestic market, and it is difficult to digest it for a while. The clothing industry may usher in a new round. The price war of destocking. Faced with such a complex and severe situation, how can clothing companies break the situation?
Wang Wenhua pointed out: “Breaking the situation is not something that can be achieved overnight. It requires clothing companies to digitalize and online their business. Start preparation and accumulation earlier, understand more about the consumer groups where the brand is positioned, study their lives, shopping scenes and habits, and use digital tools in channels and marketing to adjust the company’s growth strategy to be sustainable in the future. Things to think about when it comes to growth. The demand for clothing has always been a rigid need, and as the economy gradually returns to normalcy as the epidemic is brought under control, the demand for clothing will gradually be released and return to normal growth. It’s just that the epidemic, as a catalyst, will change the future strategies and layout of many garment industry participants, and the future prospects are still promising. ”</p
