The macroeconomic downturn has slowed the growth of the textile and apparel industry. This year, Canudi Road, a high-end menswear manufacturer that has landed on small and medium plates, has achieved high growth. According to the company, the net profit in the first three quarters increased by 61.8% year-on-year, which is obviously better than the market expectation.
Current accounts receivable and inventory increased significantly from the end of the previous year. The company said that due to the company’s store additions and adjustments to the franchisee’s credit policy, analysts cautioned against the need for vigilant channel inventory, bad debt losses, increased financial costs, and tight funding links. Etc.
The macroeconomic downturn has slowed the growth of the textile and apparel industry. This year, Canudi Road, a high-end menswear manufacturer that has landed on small and medium plates, has achieved high growth. According to the company, the net profit in the first three quarters increased by 61.8% year-on-year, which is obviously better than the market expectation.
From the end of September, there was a wave of upswing on Kanudi Road, but it has been adjusted continuously this week. On October 26, Canoudi Road closed at 37.93 yuan, a week-long decrease of 7.49%.
In fact, while the rapid expansion of Canudi Road led to high growth in performance, both accounts receivable and inventory experienced a "higher-than-highest" situation, indicating that operating efficiency has declined. So, how do you think about the value of Kanudi Road?
Low-base three-quarter revenue exceeded expectations
The third quarterly report shows that the company realized operating income of 395 million yuan from January to September, an increase of 38%, net profit attributable to shareholders of listed companies 93,330,000 yuan, an increase of 61.8%, equivalent to earnings per share of 0.93 yuan, slightly higher than the company's mid-year report Expected growth rate of 40%~60%.
Among them, the company achieved revenue of 109 million yuan in the third quarter, an increase of 68.1%, net profit of 16.4 million yuan, an increase of 136%.
“The first three quarters of the year saw good growth, which is related to the high-end positioning of Canudi Road. We have seen many textile and garment companies facing the low-end market have increased their inventories and decreased their gross margins. The enterprises facing the high-end market have performed well and have come to China. It is said that this area is in its infancy. "said Liu Fei, a manager of management consulting firm.
He believes that Kanudi Road is an extension type of expansion. After the listing, the expansion of stores is fast. A large number of new stores have boosted the growth of the business. In particular, the rapid development of franchise stores may make the growth of the book higher than that of terminals. The increase in actual sales.
According to reports, the low base figure for the same period last year was the main reason for the company’s surge in revenue in the single quarter exceeding expectations. In the third quarter of last year, the company’s single-quarter revenue was only 64.88 million yuan.
In addition, the expansion of channels is also the main reason for the company’s revenue growth. As of the end of the third quarter, the company's net increase in stores from 89 to 497, of which, direct sales increased by 54 stores, 35 stores.
In addition, the company expects net profit attributable to shareholders of listed companies for the entire year of 2012 to increase by 40% to 60%.
Data shows that the company’s single-quarter revenue in the fourth quarter of last year was the highest in the year. Therefore, analysts expect the company’s fourth quarter of this year due to the high base of the same period last year, so the growth rate may not be as fast as three quarters.
The company positioned high-end men's wear, and the gross profit rate of products was always higher. In the first three quarters of this year, the company's gross profit margin increased by 4.47 percentage points from the same period of last year to 67.43%. From a quarterly perspective, the company's gross profit margin in the third quarter was even as high as 70.07%.
“Over the next three to five years, terminal expansion will continue to be the main driving force for the growth of the company's performance, but growth will gradually slow down. Due to the expansion of expansion costs and possible price cuts, the gross margin will decline.†Liu Fei believes that this is the general law of the development of the chain brand apparel industry.
Operating cash flow dropped by 500.81% year-on-year
From the company's three quarterly reports, the most obvious addition to the high net profit growth, we can see that the company’s operating cash flow has dropped by 500.81% year-on-year. According to the company, this is mainly due to the expansion of the company's operating scale, the increase in store costs resulting in an increase in stocking costs and operating expenses, as well as the company's adjustment to the franchisee's credit policy, increased credit lines, and extended credit period, the relative decrease in operating activities cash inflows.
In addition, due to the adjustment of the franchisee’s credit policy, the company’s accounts receivable at the end of the third quarter increased by 108.06% from the end of the previous year. The company’s inventory also increased by 73.15% from the end of the previous year.
Wind statistics show that the number of accounts receivable for Canudi Road in 2009, 2010, and 2011 was 24.02 days, 23.1 days, and 27.58 days, respectively, and it rose to 31.42 days and 39.21 days respectively in the first quarter of this year and the first half of this year. However, in the third quarter of this year, it rose sharply to 46.96 days.
From 2009 to 2011, the company's inventory turnover days were 257.42 days, 257.94 days, and 261.8 days respectively. In the first quarter and first half of the year, it was 242.85 days and 284.72 days, basically stable, and it was in the first three quarters of the year. The indicator soared to 419.45 days. It can be seen that the company needs more than a year to digest one inventory.
“The company’s listing has provided support for the adjustment of distributor’s credit policy, which is conducive to the rapid and rapid expansion of dealer stores. However, this is a double-edged sword. With good use, leverage can be maximized and business expansion can be promoted quickly, but Poor use may result in overstocked inventory, bad debt losses, increased financial costs, and tight funding linkages, which will inflict damage to the normal business operations, Liu Fei said.
Zhu Qingyu, a light industry researcher at China Investment Advisors, stated that this practice is a very effective strategy for the current situation. Due to the current downturn in the macroeconomic situation, the franchisee’s cost is tight, and the company’s adjustment of the franchisee’s credit policy can ease the franchise’s repayment. The pressure to promote the enthusiasm of franchisees, from Kanoudi Road's sales performance in the first half of the view, this adjustment has produced a good effect. The main risk is that there may be a break in the capital chain and drag on the company's overall operations.
Beware of high inventory traps
In fact, the rapid and slow expansion of branded clothing chain companies is a matter that is not easy to grasp. Recently, Meibang Apparel was exposed to issues such as inventory.
“Despite the rapid expansion of channels in Maybond apparel before 2008, inventory and inventory turnover rates did not encounter significant problems. The recent outbreak of inventory problems in MB is the result of the company's aggressive expansion from 2008 to 2011, particularly Yingpeng store accounted for a large part of Meibang apparel inventory, dragging down the company's performance.†Liu Fei believes that, in contrast, Kanudi Road is in a high growth period, the market space is large, first and second tier cities are leading the transformation of consumer demand There will be no problem with the scale of expansion of more than one hundred stores per year. Properly maintaining a rapid expansion scale will help increase market share.
However, at the same time, he also believes that the problems that arise in companies such as Smith Barney's clothing are of significance to Kanudhi Road. The development of the industry has a cycle. When the transition from growth to maturity, these common problems are bound to emerge.
Zhu Qingxi said that the US state apparel can bring lessons to Canudi Road. In the early stage of expansion, credit adjustment strategies can bring more obvious benefits to the company, but in the later period, if the risk breaks out, it will bring serious obstacles to the company. Kanudi Road can summarize the experience of Smith Barney and make appropriate strategic adjustments to minimize the company's risk and avoid the risk of repeating the high inventory of Smith Barney.
“Branded chain companies like Kanudi Road will raise capital quickly after opening a listing and their performance will improve in a short period of time. Such companies’ sales of goods to franchisees can often confirm revenue, and in the end it is ultimately sold. Consumers still have some uncertainty, so they need to be carefully observed,†said a private equity person in Shanghai.
The macroeconomic downturn has slowed the growth of the textile and apparel industry. This year, Canudi Road, a high-end menswear manufacturer that has landed on small and medium plates, has achieved high growth. According to the company, the net profit in the first three quarters increased by 61.8% year-on-year, which is obviously better than the market expectation.
From the end of September, there was a wave of upswing on Kanudi Road, but it has been adjusted continuously this week. On October 26, Canoudi Road closed at 37.93 yuan, a week-long decrease of 7.49%.
In fact, while the rapid expansion of Canudi Road led to high growth in performance, both accounts receivable and inventory experienced a "higher-than-highest" situation, indicating that operating efficiency has declined. So, how do you think about the value of Kanudi Road?
Low-base three-quarter revenue exceeded expectations
The third quarterly report shows that the company realized operating income of 395 million yuan from January to September, an increase of 38%, net profit attributable to shareholders of listed companies 93,330,000 yuan, an increase of 61.8%, equivalent to earnings per share of 0.93 yuan, slightly higher than the company's mid-year report Expected growth rate of 40%~60%.
Among them, the company achieved revenue of 109 million yuan in the third quarter, an increase of 68.1%, net profit of 16.4 million yuan, an increase of 136%.
“The first three quarters of the year saw good growth, which is related to the high-end positioning of Canudi Road. We have seen many textile and garment companies facing the low-end market have increased their inventories and decreased their gross margins. The enterprises facing the high-end market have performed well and have come to China. It is said that this area is in its infancy. "said Liu Fei, a manager of management consulting firm.
He believes that Kanudi Road is an extension type of expansion. After the listing, the expansion of stores is fast. A large number of new stores have boosted the growth of the business. In particular, the rapid development of franchise stores may make the growth of the book higher than that of terminals. The increase in actual sales.
According to reports, the low base figure for the same period last year was the main reason for the company’s surge in revenue in the single quarter exceeding expectations. In the third quarter of last year, the company’s single-quarter revenue was only 64.88 million yuan.
In addition, the expansion of channels is also the main reason for the company’s revenue growth. As of the end of the third quarter, the company's net increase in stores from 89 to 497, of which, direct sales increased by 54 stores, 35 stores.
In addition, the company expects net profit attributable to shareholders of listed companies for the entire year of 2012 to increase by 40% to 60%.
Data shows that the company’s single-quarter revenue in the fourth quarter of last year was the highest in the year. Therefore, analysts expect the company’s fourth quarter of this year due to the high base of the same period last year, so the growth rate may not be as fast as three quarters.
The company positioned high-end men's wear, and the gross profit rate of products was always higher. In the first three quarters of this year, the company's gross profit margin increased by 4.47 percentage points from the same period of last year to 67.43%. From a quarterly perspective, the company's gross profit margin in the third quarter was even as high as 70.07%.
“Over the next three to five years, terminal expansion will continue to be the main driving force for the growth of the company's performance, but growth will gradually slow down. Due to the expansion of expansion costs and possible price cuts, the gross margin will decline.†Liu Fei believes that this is the general law of the development of the chain brand apparel industry.
Operating cash flow dropped by 500.81% year-on-year
From the company's three quarterly reports, the most obvious addition to the high net profit growth, we can see that the company’s operating cash flow has dropped by 500.81% year-on-year. According to the company, this is mainly due to the expansion of the company's operating scale, the increase in store costs resulting in an increase in stocking costs and operating expenses, as well as the company's adjustment to the franchisee's credit policy, increased credit lines, and extended credit period, the relative decrease in operating activities cash inflows.
In addition, due to the adjustment of the franchisee’s credit policy, the company’s accounts receivable at the end of the third quarter increased by 108.06% from the end of the previous year. The company’s inventory also increased by 73.15% from the end of the previous year.
Wind statistics show that the number of accounts receivable for Canudi Road in 2009, 2010, and 2011 was 24.02 days, 23.1 days, and 27.58 days, respectively, and it rose to 31.42 days and 39.21 days respectively in the first quarter of this year and the first half of this year. However, in the third quarter of this year, it rose sharply to 46.96 days.
From 2009 to 2011, the company's inventory turnover days were 257.42 days, 257.94 days, and 261.8 days respectively. In the first quarter and first half of the year, it was 242.85 days and 284.72 days, basically stable, and it was in the first three quarters of the year. The indicator soared to 419.45 days. It can be seen that the company needs more than a year to digest one inventory.
“The company’s listing has provided support for the adjustment of distributor’s credit policy, which is conducive to the rapid and rapid expansion of dealer stores. However, this is a double-edged sword. With good use, leverage can be maximized and business expansion can be promoted quickly, but Poor use may result in overstocked inventory, bad debt losses, increased financial costs, and tight funding linkages, which will inflict damage to the normal business operations, Liu Fei said.
Zhu Qingyu, a light industry researcher at China Investment Advisors, stated that this practice is a very effective strategy for the current situation. Due to the current downturn in the macroeconomic situation, the franchisee’s cost is tight, and the company’s adjustment of the franchisee’s credit policy can ease the franchise’s repayment. The pressure to promote the enthusiasm of franchisees, from Kanoudi Road's sales performance in the first half of the view, this adjustment has produced a good effect. The main risk is that there may be a break in the capital chain and drag on the company's overall operations.
Beware of high inventory traps
In fact, the rapid and slow expansion of branded clothing chain companies is a matter that is not easy to grasp. Recently, Meibang Apparel was exposed to issues such as inventory.
“Despite the rapid expansion of channels in Maybond apparel before 2008, inventory and inventory turnover rates did not encounter significant problems. The recent outbreak of inventory problems in MB is the result of the company's aggressive expansion from 2008 to 2011, particularly Yingpeng store accounted for a large part of Meibang apparel inventory, dragging down the company's performance.†Liu Fei believes that, in contrast, Kanudi Road is in a high growth period, the market space is large, first and second tier cities are leading the transformation of consumer demand There will be no problem with the scale of expansion of more than one hundred stores per year. Properly maintaining a rapid expansion scale will help increase market share.
However, at the same time, he also believes that the problems that arise in companies such as Smith Barney's clothing are of significance to Kanudhi Road. The development of the industry has a cycle. When the transition from growth to maturity, these common problems are bound to emerge.
Zhu Qingxi said that the US state apparel can bring lessons to Canudi Road. In the early stage of expansion, credit adjustment strategies can bring more obvious benefits to the company, but in the later period, if the risk breaks out, it will bring serious obstacles to the company. Kanudi Road can summarize the experience of Smith Barney and make appropriate strategic adjustments to minimize the company's risk and avoid the risk of repeating the high inventory of Smith Barney.
“Branded chain companies like Kanudi Road will raise capital quickly after opening a listing and their performance will improve in a short period of time. Such companies’ sales of goods to franchisees can often confirm revenue, and in the end it is ultimately sold. Consumers still have some uncertainty, so they need to be carefully observed,†said a private equity person in Shanghai.
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