Children’s clothing business at sea: how can Senma clothing save its performance

On April 12, Senma clothing released its 2020 financial report, which showed that the company’s net profit fell 48% year on year. Senma clothing attributed the loss of performance to the impact of the epidemic, but in the process of its development, it is not difficult to find that the poor development of the core business of children’s clothing has a certain impact on its performance. Under the situation of sales decline of leisure clothing and children’s clothing business, Senma clothing will hope to turn its performance around by sinking its channels to the third and fourth tier cities at the same time of the new national trend.

童装出海业务折戟 森马服饰拿什么拯救腰斩的业绩

Performance cut

From the performance data released by Senma clothing, in 2020, the operating revenue of Senma clothing was about 15.205 billion yuan, a year-on-year decrease of 21.37%; the operating profit was 1.105 billion yuan, a year-on-year decrease of 48.65%; the net profit was 806 million yuan, a year-on-year decrease of 48%; and the non net profit decreased by 49.01%.

From the specific business point of view, its main business children’s clothing revenue was 10.132 billion yuan, a year-on-year decline of 19.99%, accounting for 66.64%; leisure clothing revenue was 4.956 billion yuan, a year-on-year decline of 24.26%, accounting for 32.6%. In terms of stores, by the end of 2020, 1019 leisure clothing stores have been closed, and 1426 children’s clothing stores have been closed.

For the decline in net profit, Senma clothing explained that it was mainly affected by the epidemic.

However, from the development of the past two years, the performance of Senma clothing is not stable. According to the financial report data, from 2017 to 2020, the revenue of Senma clothing increased by 12.74%, 30.71%, 23.01% and – 21.37% respectively, and the net profit increased by 20.23%, 48.83%, 8.52% and – 48% respectively. Especially in 2019, when its revenue increases by 23.01%, its net profit will decline by 8.52%.

In this regard, Cheng Weixiong, an expert in textile and clothing brand management and general manager of Shanghai Liangqi Brand Management Co., Ltd., analyzed that although the business of children’s clothing of Senma clothing has developed well in the past two years, its performance has been affected to a certain extent by the continuous expansion of stores, the increase of costs and the sluggish development of the whole clothing industry. In addition, as a traditional clothing enterprise, the development of e-commerce channels has become its short board. Coupled with the impact of the epidemic, the performance of semma clothing has declined.

Financial data show that as of December 31, 2020, Senma clothing has established 8725 offline stores in all provinces, autonomous regions, municipalities directly under the central government and overseas, including 681 Direct stores, 7693 franchise stores and 351 joint stores.

Data show that Senma clothing is an enterprise group with leisure clothing and children’s clothing as the leading products. It has adult leisure clothing represented by Senma brand and children’s clothing represented by Balabala brand. In 2017, children’s clothing exceeded adult leisure clothing to become the company’s core business, and in the subsequent development, the business continues to expand.

Children’s wear business at sea

Although semma clothing attributed the performance cut to epidemic factors, some people in the industry believe that the performance cut of semma clothing, in addition to the impact of the epidemic, or more from the business of children’s clothing to sea.

In July 2020, Senma clothing announced that it plans to sell 100% of the assets and business of its wholly-owned subsidiary sofizasas (sofizasas owns 100% equity of kidiliz group) to Senma group, the third largest shareholder of the company, in order to reduce operational risk and avoid greater loss of performance.

It is understood that kidiliz group is the overseas children’s clothing business of semma clothing. On April 28, 2018, in order to promote the high-end development of children’s clothing business and expand overseas markets, Semir International Group (Hong Kong) Co., Ltd., a wholly-owned subsidiary of Semir clothing, acquired 100% equity and creditor’s rights of sofiza sas100% in cash, so as to acquire all assets of kidiliz group.

However, the development of kidiliz group has not been in line with the hope of semma clothing. According to the data, kidiliz group has suffered continuous losses after being acquired by Senma clothing. According to the financial report data, at the end of 2018, affected by the French yellow vest incident, kidiliz company, which has a large number of stores in France, is facing difficulties in its operation. In the fourth quarter of 2018, kidiliz group lost 49 million yuan, 307 million yuan in 2019 and 121 million yuan in the first quarter of 2020.

In fact, at the beginning of the acquisition, kidiliz group was already in a state of loss. Sendiliz clothing has disclosed in the acquisition transaction that as of December 31, 2017, the total assets of kidiliz group were 496 million euros, the total liabilities were 210 million euros, and the net assets were 285 million euros; in 2017, the operating income of kidiliz group was 427 million euros, the net loss before tax was 24 million euros, and the net loss after tax was 27 million euros.

Under the huge loss, Senma clothing had to sell the group’s business at a low price. In July 2020, Senma clothing sold at a low price of 680 million yuan, a difference of 160 million yuan from the original purchase price. This also means that only in the process of buying and selling, Senma clothing has lost 160 million yuan, not counting the number of losses in two years.

In addition to the overseas business of children’s clothing, its second largest business, leisure clothing, is also underdeveloped. According to the data, from 2019 to 2020, the revenue of leisure clothing decreased by 3.64% and 24.26% respectively. With the development of the business is not ideal, Senma clothing gradually weakened its position. According to the financial report data, in 2016, the proportion of semma’s leisure clothing business was 52.51%, and by 2020, the proportion of leisure clothing business will drop to 32.6%.

Bet on the increase of national tide

In the two major business development is not smooth, Senma clothing will focus on the field of Guochao. In April 2020, Senma clothing and tmall youth laboratory jointly launched the ancient myth “Shanhaijing” Guochao cooperation series; in June, Senma clothing and the game “after tomorrow” jointly launched a series of products; at the end of August, Senma clothing and Shaolin Temple jointly launched Guochao joint fund.

However, it is worth mentioning that Senma’s clothing has plagiarized its reputation when it first entered the country. For Senma clothing released “Shaolin Temple” co branded clothing, the main Henan Shaolin Intangible Assets Management Co., Ltd. jumped out to fight against counterfeiting and said: “Senma clothing used” Shaolin Kung Fu “for clothing labels and commodity names without authorization. After the company contacted Senma company, Senma returned the notice letter and refused to communicate.” On the Internet, doubts about the plagiarism of Senma’s clothing are also overwhelming.

In addition, as the new national trend has become a short-term new trend in the clothing industry, many enterprises, such as Meibang clothing, taipingniao, sports brand Li Ning, have continuously launched national trend products, and all of them have driven their performance development to varying degrees. This poses a certain challenge for Senma clothing.

In addition to betting on the new Guochao track, the channel sinking has also become one of the strategies for semma clothing to reverse its performance. In June 2020, Senma clothing announced that it plans to open 600-800 stores in the third and fourth tier county-level cities to expand the layout of children’s clothing business.

Xu Xiongjun, a strategic positioning expert and founder of Shanghai Jiude positioning Consulting Co., Ltd., said that under the influence of the epidemic situation in 2020, the children’s business of semma clothing will be greatly impacted, and the overseas business will be broken down and the performance will decline. Now choosing to sink to the third and fourth tier cities is a good opportunity for the brand, which will increase its growth space to a certain extent. Previously, Senma children’s clothing was mainly aimed at the first and second tier cities, but now the sinking may drive its performance to achieve a certain growth.

However, some people in the industry said that Senma clothing has been building high-end development of children’s clothing business, such as large-scale acquisition of high-end overseas brands. Now choose to sink, to a certain extent, contrary to its high-end development, is not conducive to the development of high-end children’s clothing brand.

Beijing Business Daily reporter Qian Yu and Zhang Junhua

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