“No business is the main business†has become the main profitable way of clothing brands. Youngor Group Co., Ltd. (hereinafter referred to as “Youngorâ€) recently released its 2016 annual results announcement and first-quarter profit warning. Last year, Youngor’s net profit fell nearly 20%. At the same time, Youngor also expects the company's net profit to fall by more than half in the first quarter of 2017. Youngor said that the main reason for the decline in profits was the decrease in the income realized by the investment business. It is reported that in recent years, real estate and financial investment have gradually become the main source of Youngor's income, and the apparel business sector is gradually “marginalizedâ€, but it is not known whether this model can continue.
Net profit continues to decline
The local menswear brand Youngor did not have a spring of performance. Recently, Youngor released the 2016 annual express report, the company achieved operating income of 14.895 billion yuan in 2016, an increase of 2.53%; net profit of 3.674 billion yuan, a year-on-year decrease of 15.97%. For the main reason for the decline in performance, Youngor said that the main gains from the investment business were reduced.
At the same time, Youngor also expects that the net profit attributable to shareholders of the company in the first quarter of 2017 will be reduced by 50%-60% compared with the same period of the previous year. For the reason of the sharp decline in the first quarter results, Youngor said that due to cyclical factors, the income and profit of the current property transfer project decreased, and the company changed the Lianchuang electronic accounting method to achieve a net profit of 932 million yuan. There is no such income in this period, so the net profit has decreased.
Cheng Weixiong, a senior observer in the apparel industry and general manager of Shanghai Liangqi Brand Management Co., Ltd., told the Beijing Business Daily that the problem of Youngor is obvious. Brand aging, channel aging, and product innovation are not enough. This is the fatal point of brand reorganization. Brands, products, channels, etc., and the existing consumption upgrades and lifestyle restructurings have severely mismatched demand patterns, which are leading to a decline in corporate performance. The fatal factor.
Transformation sequela
Youngor, who is trapped in the decline of the main business, has been trying to expand from the clothing business whose profit margin is gradually compressed, and instead seeks a higher-yielding business segment, and gradually focuses on the development of real estate, finance and other investment businesses, clothing. It turned into a sideline business.
In order to make up for the decline in the operation of the apparel sector in recent years, Youngor has operated a number of business segments including real estate and equity investment. It is these cross-border investments that have driven the operation of Youngor’s funds. In the view of independent clothing designer Ma Gang, Youngor Group has always adhered to the diversified development strategy of clothing, real estate and investment troika. In the context of the current sluggish clothing industry, investing in some high-quality projects can achieve asset appreciation and help the Group. Better return to the clothing business.
The Beijing Business Daily reporter found that in 1993, Youngor initially began to enter the financial investment market and the real estate market. In 2007, Youngor earned 1.6 billion yuan from the sale of more than 40 million shares in the current period. In 2010, Youngor’s revenue on real estate was as high as 6.85 billion yuan. According to the 2016 semi-annual report data, during the reporting period, Youngor's apparel segment achieved operating income of 2.214 billion yuan, a decrease of 7.2% year-on-year, net profit of 395 million yuan, a decrease of 24.91% year-on-year; real estate development business realized operating income of 6.345 billion yuan, a year-on-year increase 2.29%, net profit of 1.169 billion yuan, an increase of 163.34%; investment business realized investment income of 2.373 billion yuan, an increase of 26.39%, net profit of 1.39 billion yuan, a year-on-year decrease of 28.7%. In terms of operating income ratio, the real estate development business contributed 58.04% of operating revenue. In comparison, the apparel sector achieved operating revenue of only 20.25%. On January 10, 2017, Youngor issued a notice saying that the company used idle funds raised 100 million yuan to purchase guaranteed-type wealth management products. According to incomplete statistics, Youngor has used more than 8 billion yuan to purchase wealth management products.
From the past clothing industry to the nowadays “marginalized†clothing business, if it is not supported by investment and real estate, Youngor has been difficult to resist the chill of the clothing industry. According to the financial report data of the third quarter of last year, as of September 30, 2016, Youngor’s sales outlets were 3,124, a decrease of 113 from the beginning of the year.
Return to the main business pressure
In the face of sluggish performance, Youngor is looking forward to returning to the main business. At the end of last year, Li Rucheng, chairman of Youngor Group, issued a declaration of “Recreating a Youngor in five yearsâ€, reshaping brand advantages, implementing supply-side reforms, and transforming business models. Youngor said that in the next five years, it will return to the main business of clothing, and will invest 10 billion yuan to strengthen fabrics, crafts, brands and sales channels. "We believe that with the channel adjustment, the rebranding of the main brand Youngor and the continued growth of sub-brands, the decline in the menswear sector will gradually narrow, and the performance is expected to pick up in 2018."
At present, Youngor has the main brand YOUNGOOR and the four sub-brands MAYOR, Hart Schaffner Marx, GY, HANP. It is reported that Youngor's four sub-brands have been launched around 2009, but as of June 30, 2016, the four major sub-brands achieved a total operating income of 230 million yuan, accounting for only 10.92% of sales.
Cheng Weixiong said that Youngor’s apparel business sector is relatively embarrassing in the real estate and finance-led industry modules. Finance and real estate have the advantage of first-mover advantage, but financial and real estate investment are policy-oriented, and have nothing to do with consumption upgrades. It is normal for income to narrow. The commercial revolution brought about by the consumption upgrade is especially obvious for the apparel industry. Only money and capital can only solve the hardware problem. After all, clothing is the foundation of Youngor’s business. The problem of the brand is the problem that local clothing operators must face.
Beijing Business Daily reporter Sun Yixiang Lin Shan
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