Industry Review And Prospect: Where To Go In 2017

According to the World Clothing, Shoes and Hats Network, 2016 has passed. Standing at the door of 2017, we not only felt the chill of industrial operation in the clothing industry in 2016, the twists and turns on the road of transformation, but also smelled the flavor of the era of technological change, consumption upgrading and capital blowout in 2017. In 2017, the clothing industry needs to stabilize its body and mind in an uncertain situation, do well in itself, and embrace the new future of big capital and big fashion.

　 1、 Review of fashion industry in 2016

As the saying goes, look up at the sky and walk with your head down. While firmly optimistic about the future prospects of the fashion industry, we should also see the reality and take a good road. If you want to review the 2016 clothing and fashion industry, you should see that the overall color is cold. The general message of garment enterprises is that the garment business in 2016 is not easy to do.

（1） Review of main clothing business: retail terminals are depressed, and clothing enterprises generally feel pressure

Let's start with the typical men's clothing industry. 2016 men's wear Industry, shuffling, restructuring, huge losses and other scenarios have been staged.

Dayang Chuangshi was delisted. In October 2016, Dayang Chuangshi was backdoor and renamed by Yuantong Express, making it the first A-share express. Li Guilian, chairman of Dayang Chuangshi, and four senior executives resigned from the listed company. Dayang Chuangshi has since retired from the capital market.

Busen Co., Ltd. plans to divest its men's clothing business. In December 2016, Burson announced that the company planned to divest the original clothing assets at an appropriate time. Busen said that at present, the retail market of domestic terminal clothing brands has not improved significantly, and clothing enterprises are facing greater operating pressure.

The bird that gives good news loses first. In the first half of 2016, the performance of Baoxibird suffered its first loss since its listing. In the first half of 2016, the company realized an operating revenue of 925 million yuan, down 7.90% year on year, and the net profit attributable to shareholders of listed companies was -97.44 million yuan, down 229.58% year on year. Baoxiniao said that the decline in performance was due to the continued decline in the prosperity of terminal retail.

Xinur's house sales boosted performance. According to the 2016 interim report of Sinovel, the operating revenue in the first half of the year was 351 million yuan, down 30.68% year on year; The net profit attributable to the shareholders of the parent company was 27274300 yuan, up 421.94% year on year, and the actual loss of net profit after deducting non profits was 21108800 yuan, down 617.39% year on year. The reason is that Xinur sold a real estate in Beijing and earned a net profit of 47.025 million yuan. Shinur said that, influenced by the external environment, the prosperity of the traditional men's wear industry continued to decline, and the terminal retail was weak as a whole.

These men's clothing listed companies have said that the market is not good, terminal retail is depressed, and the market is weak. Such expressions are common in the announcements of clothing enterprises, not only for men's clothing, but also for casual clothing, women's clothing, shoes and clothing, luxury goods, not only A-share listed companies, but also Hong Kong stock companies, even American stock companies, not only in the mainland market, but also in Hong Kong market, even worse.

Taking Hong Kong stock clothing enterprises as an example, Lippon issued a loss warning in June 2016, saying that the retail market in Hong Kong and Macao continued to slow down due to the reduction of Chinese tourists and the downturn in local consumption, which affected the performance of the Group; However, the situation in the mainland market of China is becoming more and more serious due to the general price reduction promotion and weak consumption desire. The performance of Li Bang shows that as of June 30, 2016, the loss in the half year exceeded 200 million Hong Kong dollars (the loss in 2015 was 47.412 million yuan), and 19 mainland stores were closed. In December 2016, Li Bang announced that it would sell 20% of Ferragamo's equity to Salvatore Ferragamo, at a cost of about 125 million yuan, and is expected to obtain a revenue of 16.3 million yuan.

Another company, YGMTRADING, announced that the company had realized revenue of about HK $341 million in the six months ended September 30, 2016, a year-on-year decrease of 21%; Gross profit was about HK $191 million, a year-on-year decrease of 25.8%; The operating loss was HK $71.054 million, an increase of 40.5% year on year. YGMTRADING previously said that the retail market in which the Group operates its main business has shrunk, especially in Hong Kong and the mainland, resulting in a significant decline in retail and wholesale sales of branded clothing, leather goods and apparel. In October 2016, YGMTRADING announced that it planned to sell the manufacturing and sales business of "Aquascutum" brand products and related intellectual property rights, with a proposed cost of 120 million US dollars (about 930.7 million Hong Kong dollars).

As high-end ready to wear retailers, Lippon and YGMTRADING both suffered huge losses in 2016, and they also intend to sell their brand businesses. Reflecting the downturn in retail market in 2016, it is "the same hot and cool world".

（2） Review of transformation of garment enterprises: transformation is generally in the input stage, which has dragged down the financial performance of enterprises

Huashanghui once counted only a dozen listed service enterprises with double growth in revenue and net profit in the first half of 2016 (see Huashanghui Watch 83 Inventory of 10 Clothing Enterprises with Double Growth in Revenue and Net Profit in the First Half of 2016 for details). These ten or so enterprises, including Sima Garments, Home of Hailan, etc., have performed relatively stably in the main clothing business in the past two years, and have also achieved phased growth through diversified business expansion, such as Souyute's supply chain management business, and Meisheng Culture's animation management business, which have promoted the phased growth of enterprises' revenue.

However, the transformation of more garment enterprises is still in the stage of "only pay, no gain", which has dragged down the performance of garment enterprises.

In the outdoor industry, Toread's announcement in the third quarter of 2016 showed that the company's operating profit showed a certain decline in the reporting period due to the overall downturn in market consumption, intensified industrial competition, increased Toread's investment in user service functions, transformation and upgrading of travel service business and other factors.

The announcement shows that Toread's operating income in the first three quarters was 1699980300 yuan, a decrease of 12.43% over the same period of the previous year; The net profit attributable to shareholders of the listed company was 100.3486 million yuan, a year-on-year decrease of 31.51%. Toread said that the decline of the company's outdoor and tourism business led to a decrease in the overall operating revenue, especially in the tourism sector. The operating revenue in the first three quarters fell by about 20% year on year.

In the home textile industry, Luolai Life realized an operating income of 2.155 billion yuan in the first three quarters of 2016, a year-on-year increase of 5.34%, and a net profit attributable to shareholders of listed companies of 259 million yuan, a year-on-year decrease of 19.88%. The company said that in the initial stage of the company's transformation to home furnishing, the cost input was large, but the output was relatively lagging.

In terms of footwear and clothing industry, the third quarter report released by Guirenniao showed that the company's operating income fell by 1.68% year-on-year to 1.378 billion yuan, and the net profit attributable to shareholders of listed companies fell by 12.93% year-on-year to 178 million yuan. In the first half of this year, Guirenniao closed 152 stores. While the performance declines, Guirenniao is also constantly seeking to transform sports industrialization. In 2016, the company successively acquired 50.01% of the equity of offline retail channel seller "Jiezhixing" and 51% of the equity of online retailer "Mingxieku", and obtained the brand authorization of international famous basketball brand AND1 in Greater China, with active investment action.

However, in January 2017, Guirenniao announced that it planned to cancel its holding subsidiary, Xiang'an Insurance. Xiang'an Insurance was jointly invested and established by Guirenniao and Xiamen Rongyi Network Technology Co., Ltd. in April 2016, with the intention of laying out the sports insurance field. Guirenniao said that this was to reduce the company's operating costs and foreign investment risks.

Companies such as Pathfinder, Luolai Life and Guirenniao all have frequent transformation actions and are more representative in the process of transformation and upgrading of the clothing industry. However, the performance of these enterprises in 2016 shows that transformation is not easy.

（3） Review of garment industry development: sportswear and children's wear are still highlights

Although clothing enterprises generally feel the pressure of the retail market and the transformation process, from the perspective of market segmentation, sportswear and children's wear are still the highlight areas of the clothing industry. Taking Hong Kong stock clothing enterprises as an example, Huashang Watch mentioned in "Sports and Children's Wear Business Becomes the Performance Highlights of Hong Kong Stock Clothing Enterprises" that Anta, Li Ning and other sports clothing enterprises generally showed outstanding performance in 2016, while children's wear business is in the growth cycle.

Li Ning recovered. Li Ning announced in October 2016 that franchisees' orders for Li Ning brand products at the order meeting had achieved year-on-year growth for 12 consecutive quarters. The order of the second quarter of 2017 order meeting held in September this year was increased by a high number of units annually. The announcement disclosed that as of September 30, 2016, the number of outlets of Li Ning brand in China totaled 6247, with a net increase of 114 so far in 2016, and a net increase of 78 compared with the end of the previous quarter.

Belle International's performance is supported by sports and clothing business. Belle International released its semi annual report for the fiscal year 2016/17, which showed that the sales revenue of footwear business decreased by 12.7% and the sales revenue of sports and apparel business increased by 14.9% in the six months ended August 31, 2016 compared with the same period last year; Overall sales revenue increased by 0.9%, operating profit decreased by 19.8%, and profit attributable to equity holders of the Company decreased by 19.7%. The company said that the sports and clothing business benefited from the substantial growth of consumers' demand for sports and fitness, and continued to maintain a good growth trend. The footwear business continued to show a decline in sales and profitability in the same store due to the decline in passenger flow and the change in consumer preferences.

In the medium term, the core operating profit of Libiao brand doubled, saying that children's clothing is the engine of future growth. The Libiao brand announced in November 2016 that in the six months ended September 30, 2016, the company had achieved a turnover of 1.844 billion US dollars, up 15% year on year, core operating profit of 78 million US dollars, up 129.9% year on year, and the adjusted net profit attributable to shareholders increased by 344.2% to 44 million US dollars. The company predicts that although its children's wear business is relatively mature in the U.S. market, Europe and Asia will also usher in encouraging growth opportunities. Benefiting from China's implementation of the two child policy, it is believed that the main growth force of the Group's Asian market is children's clothing.

Anta's financial report shows that as of June 30, 2016, there were 687 FILA and FILA children's clothing stores in China in terms of the rapidly growing FILA brand business. The company plans to have 700-750 FILA and FILA children's clothing stores by the end of 2016. It is estimated that the revenue of FILA brand will increase by more than 30% year on year in 2016. In the first half of 2016, Anta children's clothing contributed more than 30% of the revenue year-on-year, accounting for about 10% of the total revenue.

　 2、 Prospects for the development of fashion industry in 2017

The clothing industry in 2017 can be expected to continue the trend of 2016. The main clothing industry needs to improve operating efficiency, create branded and textured products, and improve the success rate of transformation and integration in terms of transformation and upgrading. With China's economy in an L-shaped development trend and retail market channels in a stage of transformation and upgrading, garment enterprises need to better respond to market changes and improve the competitiveness of their main businesses. At the same time, we can also see that behind the dilemma, the power of some changes has become more and more obvious. In 2017, the trend of these changes will further increase.

（1） The power of technological change will further change the fashion industry

At present, Tencent is the largest enterprise in China in terms of market value, pushing ICBC, which has been ranked first before, to the second place, and Alibaba is also in the forefront. From a worldwide perspective, the market value of Amazon has exceeded the total market value of major retail giants in the United States. According to US media reports, as of January 3, Amazon's market value had reached 358.1 billion US dollars, exceeding the total market value of major listed retail stores in the US by about 297.8 billion US dollars. As we all know, Wal Mart ranks first in Fortune Global 500 all the year round, but at present, the combined market value of Wal Mart and the remaining physical retail enterprises in the United States is not as good as Amazon.

These landmark events show that the new economy replaces and transforms the traditional economy faster than people expected. It is reported that Amazon has announced that it will open a physical store in Seattle that does not need to queue up to check out. The store will use technologies similar to driverless cars, including computer vision, sensors and deep learning, which will bring new competition to the physical supermarket industry and even e-commerce. According to statistics, clothing is the category with the highest online shopping penetration rate in the U.S. retail industry, and Amazon has occupied a leading position in the online clothing retail market. Amazon has already launched 7 private fashion brands in 2016. In addition, in 2017, it was reported that many companies, such as Amazon and fast fashion brand Forever21, are considering making an offer to purchase the bankrupt American clothing brand AmericanApparel.

Li Ning, whose performance recovered, also stressed that the growth of his own performance was largely due to the rapid growth of e-commerce business. The company said that e-commerce business is no longer just used as online sales and marketing channels, but to explore and practice in the direction of digital operation. In the future, it is planned to optimize online and offline shopping experience and improve multi-channel and cross platform user experience by using the mobile terminal network platform to close to the target consumer groups.

It is reported that Pablo, CEO of Inditex Group, Zara's parent company? Isra believes that the growth of performance in recent two years is due to the fully integrated business model of online and offline. "Driven by technological innovation such as mobile payment, the group's online business and traditional physical store business can be seamlessly connected, and we will continue to promote these innovations." Previously, Inditex announced that from September 1, 2016, all its brand stores (Zara, MassimoDutti, Stradivarius, Bershka, Pull&Bear, ZaraHome, Oysho and Uterq ü e) will open the mobile payment function. This business will be implemented from domestic stores in Spain and then extended to other countries.

With mobile shopping becoming the mainstream shopping mode, O2O mode will become more common. On the official website of Uniqlo Tmall in 2016, a special area for store self selection of goods was opened, with a total of 13 styles of clothing, and the same price online and offline. Uniqlo said that for the support of self withdrawal in stores, consumers are allowed to place orders on the official website and pick up goods from stores through SMS vouchers. From the Double 11 Carnival, we can see that the new retail model with online and offline integrated omni channel retail, consumption experience scenario and efficient supply chain as the core competitiveness is emerging, and the fashion industry needs to cope with this trend.

（2） The tide of consumption upgrading is coming, and fashion brands will become more lifestyle oriented

In 2016, in the process of transformation and upgrading of the clothing industry, many clothing enterprises chose cross-border diversification, or downsized to change their main business. At the same time, many clothing enterprises around the clothing main business, with capital as the link, extended to the upstream and downstream of the industrial chain, especially to the downstream logistics, channels, retail, services and other industrial chain links, and extended to multi brands, multi categories Product+service lifestyle brand transformation. In the context of consumption upgrading, this is a mainstream trend and an important mode for garment enterprises to strengthen and expand their main garment industry.

Shopping centers integrating shopping and leisure as well as large stores integrating products and services will be more popular. In 2016, Youngor spent 30 million yuan to decorate a store and hired the international designer Philip Handford team, who had designed the interior space of the store for luxury brands such as Burberry. In September 2016, La Chapelle injected capital and established a joint venture with Hongche Industry to create a "LifeCircle" lifestyle brand. The senior management of La Chapelle said that the joint venture's establishment of the "LifeCircle" brand would create a home furnishing series and cater to the Group's strategic concept of creating a "La Chapelle lifestyle".

In December 2016, Muji announced that the world's first Muji flagship store, restaurant and hotel three in one project was settled in the city. The hotel is expected to open in the second half of 2017, the first Muji hotel in China. As someone imagined, in the future, you will wear MUJI's clothes, walk into MUJI's coffee shop, look at MUJI's books, drink MUJI's tea, go to MUJI's restaurant when hungry, go to MUJI's hotel when tired, and sleep on MUJI's sheets... This is MUJI's ambition.

Lifestyle includes the subdivision of fashion products and the subdivision of the market. In addition to the first and second tier cities and the "middle class" that everyone is targeting, the consumption potential of the third and fourth tier cities will be further released, and "fashion to the countryside" will become a trend. Adidas announced at the end of June 2016 that it has reached cooperation with Wanda Group. The former will sponsor the triathlon of the latter, and the latter will provide more extensive store opening support for the former. In Adidas' plan, the company plans to open an additional 3000 stores by 2020.

It is also reported that Edited, a fashion big data company, based on a survey of more than 520 million online products worldwide, predicted the main trends of retail and fashion brands in 2017 and gave several keywords: artificial intelligence, sustainability and lifestyle. Edited's customers include Ralph Lauren, eBay and Asos. According to the chief analyst of the agency, in 2017, retailers will further penetrate into niche markets and small-scale markets to cater to the lifestyle of consumers. Retailers will also expand the quality services of physical stores, such as providing coffee and beauty services, so that consumers are willing to stay in the store longer and provide more differentiated services.

3、 The capital blowout will force the fashion industry to accelerate the process of integration and optimization

In recent two years, there are two very popular Contradictory words: "capital winter" and "asset shortage". This actually means one thing. More and more capital is seeking for good industries and projects while avoiding risks. Under this trend, the role of capital in promoting the transformation and optimization of the clothing industry will be more obvious.

In 2016, overseas mergers and acquisitions by Chinese capital reached another peak. It is reported that from January to October this year, Chinese domestic investors made non-financial direct investment in 7020 overseas enterprises in 162 countries and regions, according to the data on foreign investment of Chinese enterprises released by the Ministry of Commerce. The total investment was 961.93 billion yuan, an increase of 53.3% over the same period. According to relevant data, the most important parts of overseas M&A of Chinese enterprises in the 20 years from 1990 to 2014 were energy and resources. By 2015, the top three were respectively transformed into high-tech, manufacturing and consumer industries.

Another opportunity comes from the rapid development and reform of the capital market. On January 7, the official of the CSRC disclosed that in 2016, IPO、 Refinancing (cash part) totaled 1.33 trillion yuan, up 59% year on year. The number of IPOs and financing amount reached a new high in recent five years, and the scale of refinancing reached a new record. The number of companies listed on the NEEQ nearly doubled to more than 10000, raising 140.5 billion yuan throughout the year. M&A and restructuring of listed companies were relatively active, involving a transaction amount of 2.39 trillion yuan, which strongly promoted the transformation and upgrading of industries and the reform of state-owned enterprises. Financing in the bond market of Shanghai and Shenzhen Stock Exchanges also increased significantly, and non-financial enterprises issued bonds totaling 2.87 trillion yuan in the whole year, up 1.7 times year-on-year.

It can be predicted that the size of the capital market will further expand in 2017. According to the data of PwC IPO market outlook in 2017, there were 227 IPOs in Shanghai and Shenzhen stock markets in 2016, with a financing scale of 150.4 billion yuan. It is estimated that there will be 320~350 A-share IPOs in 2017, with a financing scale of 2200~250 billion yuan. There is no doubt that there will be more garment enterprises landing in the capital market in 2017.

With the expansion of the scale of the capital market, the institutional reform of the capital market itself will also be carried forward, which will change the current investment structure dominated by retail investors, promote China's capital market to move towards a mature capital market dominated by institutional investors, thus changing the current phenomenon of "stock speculation" in the capital market blindly chasing themes, and paying more attention to the quality of enterprises themselves. Small and medium-sized garment enterprises with potential will be able to find effective ways of blood transfusion through direct financing, or realize.

The new third board market is an example. The development speed of the new third board is amazing. At present, there are more than 10000 listed enterprises, but it needs to further improve the quality of companies, improve market liquidity, and improve financing functions. In 2016, while more and more small, medium-sized and micro garment enterprises were listed on the New Third Board, more and more garment listed enterprises laid out the New Third Board market through overall mergers and acquisitions, participation in fixed increase, shareholding increase in the secondary market, holding, equity participation, capital increase, and listing of spin off subsidiaries. The New Third Board market will become a "M&A pool" for listed garment enterprises. This in itself will promote the development of the new third board market to a more mature and dynamic direction.

Money never sleeps. The transformation of garment enterprises, first of all, is the transformation of financing methods, which is also a microcosm of the transformation and development of China's industrial economy. The garment fashion industry in 2016 is still hard and the transformation is still on the way. However, on the way of transformation and upgrading, the clothing industry has caught up with an era of technological change, consumption upgrading and capital blowout. The clothing industry in 2017 may not mean everything, but it still needs to hold on... because as long as it holds on, it will usher in the future of a big brand, big capital and big fashion.

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