Recently, A-share listed apparel companies have released first-half performance data one after another. Some are happy and some are sad.
Wind data shows that as of August 1, 22 companies have released interim performance forecasts or express reports for 2023. Among them, 7 companies expected to increase, 3 companies turned around losses, 2 companies predicted losses, 2 companies made first losses, and 7 companies continued to lose money. Among the companies that continue to lose money, the revenue and net profit of most companies have improved compared with the same period.
Obviously, the performance of clothing companies generally recovered in the first half of the year. This is inseparable from the stabilization and recovery of the domestic economy and the recovery of terminal consumption in the clothing industry. It is also related to the company’s actual results in cost reduction and efficiency improvement. However, against the background of the overall recovery of the apparel industry, there are still many apparel companies that expect a decrease in net profit in the first half of the year, continued losses, or first losses. The reasons for losses include the decline in export business, low competitiveness of main business, and negative circumstances.
The growth elasticity of men’s clothing is more obvious in the first half of the year
The seven pre-added apparel companies include Hongxing Co., Ltd., Semir Clothing, Jinhong Group, Gelisi, Septwolves, Peacebird and Baoxiniao. Among them, there are 4 companies that have predicted that the year-on-year growth limit of net profit exceeds 100%, namely Hongxing Co., Ltd., Semir Apparel, Jinhong Group, and Ellisi.
As of August 1, 7 apparel companies have forecast increases in their first-half performance. (Data source: Wind)
Hongxing Co., Ltd., which specializes in home furnishings, underwear, underwear and other products, has the most eye-catching performance growth rate. It is expected that the company’s net profit attributable to shareholders of listed companies in the first half of 2023 will be 55 million to 60 million yuan, a year-on-year increase of 983.55% to 1082.06 %.
Hongxing Co., Ltd. said that compared with the same period last year, the company’s revenue scale increased and the sales and administrative expense rate decreased. However, 27 million yuan of the current profit is the advance compensation for fire accident insurance received by the company in May this year, which is a non-recurring profit and loss. At the same time, the base of indicators such as net profit attributable to shareholders of listed companies in the same period last year was low.
The reporter noticed that although Hongxing’s net profit had the highest year-on-year increase, it earned the least. The other six apparel companies that had pre-increased their net profits in the first half of the year all exceeded 100 million yuan. Among them, the net profit caps of Semir Apparel, Baoxiniao and Peacebird in the first half of the year reached 550 million yuan, 410 million yuan and 250 million yuan respectively.
Affected by factors such as the epidemic, the performance of domestic apparel companies will generally be under pressure in 2022. According to a research report by Soochow Securities, the overall revenue growth rate of the apparel industry last year fell by single digits year-on-year, and net profits fell by a large margin. Looking at the segment segments, sports apparel has a solid business operation and outdoor track performance is better, while the revenue and profits of other tracks have declined. In order from low to high degree of damage, they are men’s clothing, mid-to-high-end women’s clothing, and casual clothing.
Since the beginning of this year, the apparel industry has gradually recovered from the impact of the epidemic, and terminal flow has continued to repair. Data from the National Bureau of Statistics shows that in the first half of the year, the year-on-year growth rate of retail sales of clothing, shoes, hats, and knitted textiles was 12.8%, exceeding the growth rate of total retail sales of consumer goods of 8.2%, and second only to the growth rate of gold, silver, and jewelry at 17.5%.
Guosen Securities believes that thanks to the recovery of social occasions, the growth elasticity of men’s clothing is more obvious, and women’s clothing and casual clothing are showing a month-on-month growth trend as the business environment improves. Generally speaking, most high-quality brands have benefited from the rapid recovery of revenue and significant improvement in inventory cycles after the relaxation of epidemic control. Net profit exceeds expectations mainly due to the continuation of strict cost control.
It is worth mentioning that in terms of cost reduction and efficiency improvement, at the end of December last year, the chairman of Peacebird personally carried out the organizational structure reform and announced that the original six independent business divisions and online operation platforms would be transformed into three major functional centers, and Close inefficient stores. During the first quarter of this year, the company’s expense ratio dropped by 0.8 percentage points to 45.3%.
In addition to the pre-increased clothing companies, there are three other companies that have achieved a turnaround, namely Jiumuwang, Sanfu Outdoor, and Meibang Clothing, with the upper limit of net profit being 98 million yuan, 16.5 million yuan, and 15 million yuan respectively.
As of August 1, three clothing companies had turned a profit in the first half of the year. (Data source: Wind)
The way these clothing companies turn around their losses is to increase revenue through multi-brand operations, improve product strength, etc., and then reduce costs and increase efficiency by optimizing channel structures, controlling rents and labor costs, etc.
It is worth mentioning that domestic clothing companies often cross over into the financial and real estate industry, and this part of their income will eventually be reflected in their performance. Among them, affected by the fluctuations in the secondary market, the gains and losses from changes in the fair value of the financial assets held by Jiumu Wang in the first half of the year are expected to be -90 million to -75 million yuan, with the loss reduced by approximately 20% year-on-year. Meibang Apparel disposed of part of the equity of Guiyang Real Estate and associate company Huarui Bank, and the income from related asset disposal and investment increased year-on-year.
Clothing exports are not as prosperous as domestic sales
Some people are happy and some are sad. Against the background of the overall recovery of the apparel industry, there are still many apparel companies that expect a decrease in net profit in the first half of the year, continued losses, or first losses.
Among them, the clothing companies with the lowest net profit in the first half of the year include *ST Bailong, ST Modern, *ST Soote, *ST Mosaic, and Anner, with net profit losses of 50 million and 46 respectively.440,000, 45 million, 30 million, 28 million yuan.
As of August 1, many clothing companies had reported losses in the first half of the year. (Data source: Wind)
The reporter found that some clothing companies that rely on export business have suffered varying degrees of losses, such as Bangjie Group, Jihua Group, and *ST Mosaic.
Bangjie Co., Ltd. explained that the company’s apparel business segment has a relatively large proportion of export sales and is highly dependent on the international market. Due to factors such as the international political and economic environment, textile market trade policies, international supply and demand, and the early backlog of foreign customer inventories, the company’s operating income in the first half of the year declined significantly year-on-year.
Statistics from the General Administration of Customs show that in the first half of the year, domestic exports of clothing (including clothing accessories) were 516.94 billion yuan, a year-on-year increase of 0.7%. Although it is still at a historically high level in the industry, it is facing unfavorable conditions such as weakening global demand, insufficient orders, and increasing challenges in the trade environment.
In addition, some loss-making clothing companies are plagued by negative situations. What is worse is *ST Soute. The company is in debt crisis, its main bank accounts have been frozen, and many financial institution loans have been overdue and defaulted. The bank interest and penalty interest payable in the first half of the year is expected to be 180 million to 200 million yuan. Downstream customers have difficulty in cash flow, and there are more customers with credit deterioration such as bankruptcy, breach of trust, height restrictions, and lawsuits, making it difficult for the company to collect payment. In terms of business, it mainly relies on selling inventory products and collecting trademark licensing fees, platform service fees, etc. The operating performance of foreign-invested joint ventures has also declined.
ST Guiren, which has previously caused heated discussions due to its cross-border pre-made dish track, is expected to have a net profit loss of 23.1755 million yuan in the first half of the year. ST Guiren said that due to factors such as the macroeconomic situation, the effective market demand was insufficient in the first half of the year. In addition, the company’s main business operations are mainly in the sports shoes and clothing industry and the food industry. The company has a small market share in these two industries, and the market competition pressure is high.
Can the apparel industry continue to recover in the second half of the year?
In the first half of the year, domestic sales in the domestic apparel market were more prosperous than exports. Will it continue in the second half of the year? Most institutions believe that domestic apparel exports will fluctuate in the short term, but as the overseas destocking cycle proceeds steadily, orders are expected to improve in the second half of the year. West China Securities believes that the turning point for export orders to turn positive will have to wait until next year.
In terms of domestic sales, most institutions believe that following the series of policies to stabilize the economy and expand consumption issued by the National Development and Reform Commission, the Ministry of Commerce and other departments in the middle of the year, residents’ overall consumer confidence and spending power are expected to improve. Against the background of optimistic consumer sentiment, retail sales data of the domestic apparel industry will further pick up in the second half of the year.
Bohai Securities also proposed that as the impact of the epidemic gradually weakens, terminal passenger flow recovers, and business and social activities increase significantly, domestic residents’ clothing consumption demand will continue to be released.
Regarding the direction of the apparel industry in the second half of the year, Shenwan Hongyuan predicts that the weak recovery will continue in the third quarter, and with the further improvement of the retail environment, the arrival of the peak season and a low base, a highly elastic window is expected to usher in the fourth quarter.
Specific to the subcategories, Western Securities is optimistic about the sports shoes and apparel sector, believing that its competition barriers and entry thresholds are high. With the support of the Hangzhou Asian Games in the second half of the year, leading domestic companies will benefit in the second half of the year. In addition, due to the increased demand for social, travel and business travel, subcategories with business social attributes and sports fashion attributes will usher in another wave of growth in the second half of the year. Mid-to-high-end men’s and women’s clothing may continue to recover in the second half of the year.
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