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Urban Beauty Will Get Into A Performance Dilemma And Will Change To CEO In The Next Few Months.

2019/7/4 10:10:00 19

Wei Ming

The fashion retail environment continues to shake. Following the myth of the underwear industry, the Chinese version of "Wei" has begun to encounter bottlenecks.

According to the fashion business news, the urban beauty released its first profit warning in nearly a year last week. It is expected that net profit will exceed 80% over the first half of 2019, and gross profit margin will also decline due to the rising cost of raw materials. However, urban beauty is still the highest brand of underwear in China and has about 8000 stores nationwide.

Last year, the performance of urban beauty was also strong. In the year ended December 31, 2018, the income of urban beauty increased by 12.2% to 5 billion 96 million yuan, operating profit increased 15.4% to 484 million yuan, net profit increased 19.31% to 378 million yuan, gross margin fell to 41.7%.

It is noteworthy that the original spokesperson of the urban beauty is Lin Chiling, now replaced by Guan Xiaotong. This underwear giant's determination to completely reverse the stereotype of the consumers is more and more obvious.

   At present, the overall style of urban beauty continues to move towards young consumers.

The city beauty was founded in 1998. It was influenced by the successful mode of the United States in the United States. It was positioned as "the first fast fashion underwear brand in China". Its products are mainly targeted at young women. In 2012, Lin Chiling became famous as a spokesperson for the city beauty.

In June 26, 2014, the city beauty (China) Holdings Limited was listed on the main board of Hongkong, and was called "the first Chinese underwear". After entering the capital market, the urban beauty ushered in the first small peak. The annual revenue increased by 1 billion to 4 billion 8 million yuan in one year, and further increased to 4 billion 953 million yuan in 2015.

However, with the change in the definition of "sexy", the urban beauty suddenly encountered challenges in 2016, and revenue dropped to 4 billion 512 million yuan, and net profit plunged 55% to 242 million yuan. In the same year, the performance of the company began to deteriorate and targeted the Chinese market. It opened all kinds of stores in major cities such as Shanghai, Beijing, Chengdu, Hangzhou and Guangzhou, and even moved the 2017 annual show to Shanghai. But the final response was flat, and its performance has not recovered yet.

In order to better consolidate the market, in May 5, 2017, the city beauty offered shares to Fosun international. The latter subscribed 240 million shares to HK $2.5 and became the second largest shareholder of urban beauty, accounting for 11.18% of the shares. Fosun shares also signed a performance bet agreement with four major shareholders of urban beauty, including the revenue requirement. The urban beauty grew by not less than 3% in 2017, and not less than 6% in 2018.

In February 7th last year, the city beauty announced the establishment of a partnership fund with Jingdong's company, which is mainly used for mergers and acquisitions and resource integration suitable for group business. According to the main provisions, the target size of the cooperative fund is expected to be 1 billion yuan, and the scale of the fund will be expanded according to actual needs. The initial investment is expected to be no less than 350 million yuan, of which the Guangdong urban beauty invested 250 million yuan, while the Jingdong invested 100 million yuan.

Some analysts point out that the strong penetration of brand and the substantial increase in online sales of urban beauty are important reasons for Jingdong's willingness to cooperate with them. Since 2014, the online sales of urban beauty have maintained double-digit growth, and increased by 137%, 78.9% and 73% respectively in 2015, 2016 and 2017.

In April last year, consortia made up of Windcreek, image architecture investment, vip.com and QuickReturns also signed subscription agreements, which raised HK $509 million net. The funds were mainly used for urban beauty sales distribution channels reform, potential merger, acquisition and cooperation projects and general liquidity funds.

After the capital is in place, the urban beauty has become more and more bold in its own reform. First, the CEO Sharen JesterTurney was first served as the chief strategy officer, and then appointed Wacoal's largest underwear retailer, Wacoal's former research and development minister, as chief technology officer, and at the same time increased investment in upstream suppliers.

Among them, Sharen Jester Turney, which has rich experience in the European and American underwear industry for nearly 20 years, is regarded as the key leader in the strategic transformation of urban beauty. Under her leadership, the income of LBrands, the parent company of the parent company, increased from $4 billion 500 million to $7 billion in the 10 years from 2006 to 2016, and its sales increased by more than 70%. In 2009, she herself was awarded third of the 25 highest paid female executives by Fortune magazine for $20 million 300 thousand in 2009.

After joining the urban beauty, the first gun of Sharen JesterTurney was put on the line. In November last year, the first flagship store for Gen-X was set up for the city beauty. Located in Shenzhen Imperial Court Square, besides selling, the shop also had "sexy girls" fitting room, rabbit playing card wall and other net red elements, so as to cater for the preferences after 90 and 00. At present, the official website of urban beauty has adopted a completely new design layout, and the overall style is constantly approaching young consumers.

In the first half of last year, the city beauty refurbished 98 self operated stores and 634 franchised stores. At the same time, it also worked with Tencent and WeChat to reach new smart retail business, aiming to achieve all-round innovation from inside to outside.

In June 14th, the city beauty said its wholly-owned Guangdong city beauty has entered into sixteen joint venture cooperation agreements with its respective controlling shareholders of the sixteen existing suppliers. According to the cooperation agreement of the joint venture company, the contractual partner carries on the business cooperation activity through the established joint venture company (holding 19.99% stake by the Guangdong urban beauty, and the remaining part held by the controlling shareholder of the respective supplier).

It is alarming that urban beauty releases earnings early warning after the agreement is reached, which means that its actual sales performance and profitability are vulnerable. As with Zara, H&M and other fast fashion, too radical expansion strategy and nearly 10000 stores have become the two major burdens of urban beauty development.

MatthewCrabbe, director of Mintel, a market consultancy, has also talked about the development prospects of China's high-end underwear market. Local brands are facing competition from overseas brands, not only in terms of quality, but also in innovation.

In order to restore its performance as soon as possible, city beauty announced that it would increase product research and development efforts, launch more new quality products in the market, launch more new advertising and promotional activities around the new spokesperson Guan Xiaotong, and plan to appoint a new CEO with rich experience in the garment industry within a few months, but did not disclose specific candidates.

As the global fashion industry starts a new round of shuffling due to the change of the millennial generation and Z generation consumption habits, the underwear industry is also at the crossroads of reform. The domestic underwear brands represented by urban beauty are faced with enormous challenges, whether brand vitality or product quality.

At the end of the year, the price of urban beauty fell 3.03% to HK $1.6, which has fallen by nearly 38% since the beginning of this year, and its market value is HK $3 billion 600 million.

Source: Fashion headline writer: Zhou Huining

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