“361 degrees, one more love.”
Accompanied by this familiar advertising slogan , the sports brand 361 Degrees has gradually become a household name.
However, in the early trading of Hong Kong stocks on the 14th, the stock price of 361 Degrees can be described as “90 degrees downward” “Dive”, the huge drop shocked investors! 361 Degrees, which had been silent for many days, suddenly “dived” and directly “became an immortal”.
After the opening of trading on November 14, the stock price of Hong Kong stock 361 Degrees (1361.HK) fell rapidly, once falling below the HK$1 mark, plummeting 38.13% to HK$0.99, setting a record low .
Since 361 Degrees has not released any major news recently, it is speculated that it may be related to the announcement about the auditor issued on the 13th. It is reported that KPMG has served as the auditor of 361 Degrees since its listing in 2009. Therefore, people can’t help but wonder whether the sudden end of cooperation is for the reasons stated in the announcement.
Behind the controversy over the change of auditors, 361 Degrees’ performance has been sluggish in recent years, which has also become a topic of concern to investors. Taking the 2018 financial report as an example, 361 Degrees’ total revenue last year was 5.227 billion, a slight increase of 0.02% year-on-year; but the net profit was only 304 million, a year-on-year decrease of 33.48%.
Picture source: 361 Degrees official Weibo
361 Degrees’ stock price plummeted at the opening on the 13th. 361 Degrees issued an announcement stating that KPMG accountants The firm has resigned as the company’s auditor because KPMG and the company were unable to reach an agreement on the audit service fee for the annual audit for the financial year ending December 31, 2019. The board of directors resolved to appoint Dahua Ma Shiyun Accounting Firm Co., Ltd. as the company’s new auditor, effective from November 13, 2019.
361 Degrees previously announced on the Hong Kong Stock Exchange that core brand sales achieved a low single-digit year-on-year growth rate in the third quarter of 2019; children’s clothing brand products in the third quarter of 2019 of retail sales (measured by retail value) increased by a high single-digit percentage compared to the same period last year. At the opening of the market on the 14th, it opened 361 degrees lower at HK$1.41. The stock price plummeted all the way, falling more than 38% to a minimum of HK$0.99 during the session, a record low. As of 11:30 am on the 14th, Beijing time, the stock plummeted 22.5%, temporarily trading at HK$1.24, with a transaction volume of approximately HK$27.45 million. Based on this calculation, the latest total market value is HK$2.626 billion. In sharp contrast, the latest market value of Anta Sports (2020.HK) is approximately HK$202.1 billion, which means that the market value of 361 Degrees is less than 1.3% of Anta! These two sports brands are both from Jinjiang, Fujian Province, the “Shoe Capital of China”, but their fates can be described as very different.
361° stock continues to be depressed, core business declines
Frozen Three A foot is not as cold as a day. Before encountering today’s sudden plunge, 361 Degrees’ performance growth was weak and its stock price had been depressed for a long time.
In October 2017, 361 Degrees’ stock price once stood at HK$3.9, with a total market value of approximately 10.2 billion yuan. Subsequently, the company’s stock price entered a downward channel, “falling and falling” until it hit a bottom of HK$0.99. The 2018 financial report shows that 361 Degree’s total revenue was 5.227 billion yuan, a slight increase of 0.02% year-on-year; net profit was 304 million yuan, a year-on-year decrease of 33.48%. Compared with Anta’s net profit of 4.1 billion yuan and Xtep’s 657 million yuan, 361 Degrees is already lagging behind by several positions.
The serious decline in profitability of 361 Degrees has been revealed as early as 2018: in 2011, 361 Degrees’ net profit was still 1.133 billion yuan, but in the following seven years, the net profit was actually 1.133 billion yuan. A sharp decline of 73.2%.
In this regard, 361 Degrees stated that the growth momentum of the sportswear market mainly comes from the demand for footwear, and it will continue to focus on the footwear business in the future. The main reason for the sluggish performance is that the domestic and foreign economic prospects in 2018 are full of uncertainty, which has affected the confidence of enterprises and consumers, resulting in weak consumption willingness. But looking at other sports shoes and apparel brands, Anta achieved revenue of 14.911 billion yuan in the first half of the year, a year-on-year increase of 40.3%, and achieved net profit attributable to the parent company of 2.483 billion yuan, a year-on-year increase of 27.7%. 361 Degrees only recorded revenue of 3.24 billion yuan, accounting for only 20% of Anta; net profit was 367 million yuan, accounting for only 15% of Anta; Anta Sports’ latest market value was approximately HK$202.1 billion. As of 11 a.m. on the 14th, 361 After plummeting 22.5%, it was temporarily quoted at HK$1.24, with a transaction volume of approximately HK$27.45 million. The latest total market value calculated based on this is HK$2.626 billion. In other words, the market value of 361 Degrees is less than 1.3% of Anta!
The sluggish performance of 361° has led to continuous store closures and layoffs
As of At the end of 2018, the number of 361 Degrees core brand stores was 5,539, a decrease of 269 stores compared with the end of 2017. Compared with the 8,082 stores at the end of 2012, the number of stores decreased by 2,543 stores in six years.
�At the same time, the number of employees at 361 Degrees is also decreasing. In 2018, the company had 7,992 employees, a decrease of 6.59% compared with the previous year’s 8,555 employees; compared with 2011, the decrease was as high as 20.11%.
Image source: 361 Degrees official Weibo
In addition, 361 Degrees also experienced a sharp decline in operating cash flow, and the company’s receivables The phenomenon of money rising. According to the financial report, in 2018, the company’s net cash flow generated from operating activities was 295 million, a decrease of 64.55% compared with 832 million in the previous year. Two years ago (2016), 361 Degrees’ net cash flow from operating activities was as high as 1.132 billion. As of the end of 2018, the company’s total receivables were 3.12 billion (of which accounts receivable were 2.399 billion), and receivables accounted for 54.09% of the company’s net assets.
In addition, the negative incident involving spokesperson Sun Yang some time ago also had a slight impact on 361’s brand image. Due to the cooperation with Anta, the contract requirements clearly stipulated that athletes must wear official award-winning uniforms when they stand on the podium. However, Sun Yang wore the clothing of his personal endorsement brand 361 on the podium. Although he later changed Anta’s clothing, but Anta’s logo has been covered up many times. Anta issued a statement in this regard, which also caused considerable controversy in domestic public opinion.
361° launches brand remodeling plan and enters first- and second-tier cities
In the context of the previous decline in performance, 361 Degrees has also made efforts in branding and research and development, striving to “revive its glory.” In 2018, 361 Degrees’ advertising and promotion expenditure was 557 million, a year-on-year increase of 10.02%. Advertising expenses account for more than 10% of revenue.
In terms of product innovation, in June 2019, 361 Degrees launched the 361 Degrees X Gundam co-branded series, which caused a rush to queue up to buy. As recently as November, 361 Degrees once again sold a limited edition 361 Degrees Unicorn Gundam limited edition gift box at the SOLESTAGE trendy store in Sanlitun, Beijing, causing nearly a hundred people to queue up to buy it. This move proves 361 Degrees’ intention to adapt to the times and keep up with the trend. ”
361 Degrees and Gundam launch joint gift box Picture source: 361 Degrees official Weibo
According to Xinhuanet, due to the Performance declined significantly in the first half of the year. 361 Degrees pushed forward a rebranding plan in the second half of 2018, including signing a contract with Universal Studios, sponsoring e-sports teams and sponsoring a series of high-end events. 361 Degrees also stated in its financial report that due to the current 20% of mainstream Consumers account for 70% of China’s total retail consumption, and this proportion is still on the trend of further expansion. To this end, the group will use brands, products, activities and other perspectives as the foothold of brand remodeling. 361 Degrees pointed out that in the future It is necessary to operate 1,000 basketball courts in first- and second-tier cities and approach the broadest mass sports market through “basketball into communities”, hoping to drive the main consumer base from the mid- to low-end markets to first- and second-tier cities. In addition, 361 degrees’ R&D expenditure in 2018 was RMB 215 million yuan, accounting for 4.1% of the annual revenue, while the R&D expenditure in 2017 was 173 million yuan. This strategy of increasing R&D investment in the face of operating adversity makes people feel “eye-catching”. For 361 degrees of tearing off the mid-to-low End label, positioning shift to attack first- and second-tier markets, and some brokerage research reports have recognized this. A research report from Everbright Securities in May this year pointed out that although 361 Degrees’ performance was lower than expected, in the long term, the rebranding plan will It is expected to build product competitiveness.
Picture source: 361 Degrees Children’s Clothing Official Weibo
In addition, although the performance of the adult clothing category is poor , but 361 Degrees performed well in the children’s clothing market. In the first half of 2019, 361 Degrees’ children’s clothing business revenue increased by 6.6% year-on-year to 388 million yuan, accounting for 12% of the group’s revenue in the same period. 361 Degrees’ children’s clothing business began in 2010 and is one of the largest in the industry. Pioneer, it has always been operated as an independent business unit. Its children’s clothing products are positioned at mid-to-low prices, with a growth rate of 14.7% in 2018.</p
