La Chapelle, once known as the “Chinese version of ZARA”, has actually reached the stage of being filed for bankruptcy liquidation.
On the evening of November 22, *ST Rasha (603157, Rasha Bell) issued an announcement stating that the company learned from the express transfer from the Xinshi District People’s Court of Urumqi (referred to as the Xinshi District Court) that the company’s creditor Jiaxing Chengxin Garment Co., Ltd. (referred to as Jiaxing Chengxin), Haining Mangrove Clothing Co., Ltd. (referred to as Mangrove), and Zhejiang Zhongda Xinjia Trading Co., Ltd. (referred to as Zhejiang Zhongda) submitted bankruptcy applications to it. The facts of this lawsuit filed by the three parties are all related to the unresolved debt issues of La Chapelle in the 2020 litigation case.
On November 24, a reporter from the 21st Century Business Herald called the Securities Department of La Chapelle as an investor. Relevant staff said that there is great uncertainty in the creditor’s application for bankruptcy liquidation of the company.
“Because according to relevant regulations, such bankruptcy cases of listed companies are generally under the jurisdiction of the Intermediate People’s Court. The Xinshi District Court is a grassroots people’s court. The request does not comply with the relevant legal procedures. The company will also promptly submit the request to the Intermediate People’s Court. An objection application was submitted to the New Urban District Court, and we have not received any ruling on this bankruptcy liquidation, so there is great uncertainty,” the person said.
Putting aside procedural issues, the above-mentioned bankruptcy filing announcement has shown that La Chapelle is “full of holes.”
La Chapelle admitted in the latest announcement that the company is still facing a large debt burden and operating pressure at this stage.
Trapped in huge debt
Judging from the company’s third quarter report released on October 28, as of September 30, the amount involved in La Chapelle’s lawsuits that have been decided but not fully executed is approximately 2.086 billion yuan, and the amount involved in pending lawsuits is approximately 530 million yuan.
According to public disclosures, as of October 26, 2021, due to numerous litigation cases, a total of 144 bank accounts of the company and its subsidiaries have been frozen, including 130 general accounts, 12 basic accounts and 2 special users for raising funds. The frozen amount is approximately 126 million yuan; the equity of 17 subsidiaries of the company has been frozen, and the total amount involved in case execution is approximately 673 million yuan; due to the impact of 31 litigation cases, 4 real estate properties of the company (as of September 30, 2021 (with a total book value of approximately 1.701 billion yuan) was seized. As of October 28, the company had been involved in a total of 58 unconcluded/unmediated litigation cases.
The other side of the huge debt is La Chapelle’s declining performance.
The 2020 annual report shows that the company achieved operating income of 1.819 billion yuan, a year-on-year decrease of 76.27%, and a net profit of approximately -1.84 billion yuan. Although it has narrowed compared with the previous year, it is still in a state of huge losses. As of the end of the third quarter of 2021, La Chapelle’s net assets were approximately -896 million yuan. In the first three quarters of 2021, the net profit attributable to shareholders of listed companies was approximately -289 million yuan, and operating income was 365 million yuan, a year-on-year decrease of 78.16%, of which Operating income in the third quarter was 86.703 million yuan, a decrease of 71.74% compared with the same period last year.
In other words, La Chapelle is already insolvent.
According to the content of the application submitted by the three parties mentioned above, La Chapelle has no property in his name that can be executed. “As a debtor, the respondent cannot pay off its due debts, and its assets are insufficient to pay off all debts or it clearly lacks solvency. The respondent’s situation has met the relevant conditions for bankruptcy.” Mangrove’s application stated.
La Chapelle admitted in the latest announcement that the company is still facing a large debt burden and operating pressure at this stage.
Under such current situation, La Chapelle also faces the risk of capital market delisting.
Since LaChapelle landed on the Shanghai Stock Exchange in 2017, it suffered its first loss of 160 million yuan in 2018. In 2019, its net loss expanded to 2.166 billion yuan, and it suffered another loss in 2020. On July 1, 2020, because the audited net profit for two consecutive fiscal years was negative, La Chapelle “wore the stars and wore hats”, and the stock abbreviation was changed from “La Chapelle” to “*ST La Chapelle”.
If La Chapelle’s net assets remain negative in 2021, the company’s A shares will be terminated from listing.
Blind expansion lays the foundation for disaster
Looking back at the ups and downs of La Chapelle, many people will point to blind store openings and large-scale mergers and acquisitions as the reasons.
At the beginning of the listing, La Chapelle mentioned in its prospectus that the funds raised from the IPO will be used for retail network expansion and new retail information system construction. In the next three years, 3,000 new outlets will be added, which means that it will break through in 2020 as planned. 10,000 households.
Regarding the opening of more and more stores, Xing Jiaxing, founder of La Chapelle, believes that the more stores opened, the easier they are to manage. Because the experience of opening from 300 to 600 stores told him that “the more stores you open in a place, the higher the management efficiency will be and the cost will be reduced.” “Management costs will gradually be controlled as the scale increases.”
At the end of 2017, the number of La Chapelle stores reached 9,448.
Meanwhile, LaChapelleWe are still spending a lot of money on more and more brands.
As of the end of 2018, La Chapelle had a total of 15 brands, but five brands, La Chapelle, Puella, Candie’s, 7m, and La Babité, contributed 80% of its revenue.
One of the most controversial is the acquisition of French brand Naf Naf SAS.
In January 2018, La Chapelle announced that it would acquire 40% of the women’s clothing brand Naf Naf SAS under the French VIVARTE Fashion Group for 52 million euros (approximately 410 million yuan). Then in November 2018, La Chapelle also became interested in the remaining 60% and planned to invest 35.34 million euros (approximately 278 million yuan) to acquire 60% of the equity of La Cha Apparel II Sàrl, thus indirectly acquiring 60% of the equity of Naf Naf SAS. The final date for the improvement acquisition and delivery matters has been extended to July 1, 2019.
In order to complete the acquisition, the company signed an agreement with a third party and provided a loan of no more than 38 million euros.
However, the performance of Naf Naf SAS has been weak since 2017, with a loss of approximately 51.26 million yuan in 2017, and the loss will tend to expand in 2018.
It should be noted that the sequelae of this merger continue to this day.
Among La Chapelle’s current 58 cases, the one with the highest debt is a dispute over a guarantee contract. The amount of litigation involved is as high as 311 million yuan. The cause was in May 2019. La Chapelle used 100% of the equity of three of its original wholly-owned subsidiaries as pledge. , applied for a merger and acquisition loan of 37.4 million euros from Haitong International Consulting Co., Ltd. to pay the transaction price for the acquisition of 60% equity of Naf Naf SAS. The company and its subsidiaries provided joint liability guarantees for the loan. Later, due to the company’s liquidity Difficulty in repaying the loan on time.
The building is about to collapse without any help
For La Chapelle, being filed for bankruptcy was just a final wake-up call to her fate, and her crisis has been clearly revealed in the past two years.
Performance stalled, gross profit margin declined, inventory days increased, etc., and various financial data continued to deteriorate. In August 2019, Xing Jiaxing also experienced a high proportion of pledge liquidations.
Regarding the reasons for the stalled performance, La Chapelle pointed out in reply to the Shanghai Stock Exchange’s 2018 annual report inquiry that the sales growth rate of the clothing retail industry has slowed down in recent years, competition within the industry has intensified, and some companies in the industry have experienced a year-on-year decline in gross profit margins. . In addition, La Chapelle, which mainly operates under the direct operation model, also faces the adverse impact of rising rigid costs such as labor and rent.
Although there are industry problems, La Chapelle’s blind expansion strategy may bear greater responsibility. Beginning in 2018, La Chapelle, aware of the crisis, began to adopt a contraction strategy.
At the end of 2018, the number of La Chapelle stores decreased for the first time, but there were still 9,269. In 2019, La Chapelle took the initiative to close stores to survive, reducing the number of physical stores by more than 2,400. By 2020, the number of La Chapelle’s domestic offline operating outlets has dropped from 4,878 at the beginning of the year to 959 at the end of the year.
At the same time, LaChapelle began to cut off her arms to survive. With the impact of financial pressure, the epidemic and other factors, many of the company’s subsidiaries have successively declared bankruptcy. In January 2020, La Chapelle issued an announcement stating that its subsidiary Jack Walker had reasons for bankruptcy because it was unable to pay off its due debts and its assets were insufficient to pay off all debts. The court accepted Jack Walker’s bankruptcy liquidation application. In May of the same year, La Chapelle issued an announcement stating that its wholly-owned overseas subsidiary French Naf Naf SAS was unable to pay off its suppliers and local governments, and the local court had ruled that it would initiate judicial reorganization.
In this year’s semi-annual report, the company stated that it will continue to focus on the business strategy of “shrinking focus, reducing costs, increasing efficiency, and innovative development”, doing its best to alleviate the company’s liquidity pressure, and focusing on ensuring the stability of production operations and core businesses.
“The current main problem is debt. The company and various stakeholders, including suppliers, will actively communicate, coordinate and solve the debt problem. In addition, it may also be through the disposal of some of the company’s idle assets and the introduction of new investment and financing. channels to help the company improve its predicament.” said the aforementioned person from La Chapelle Securities Department.
Judging from the personnel changes, La Chapelle is also in a precarious situation.
In February 2020, Xing Jiaxing, as the actual controller of the company, retired from his position as chairman. In March this year, the 141.6 million La Chapelle A shares held by it were auctioned, and it had already lost control of La Chapelle.
</p
