From Semir, Smith Barney To La Natsu Bell, The Pain Of Clothing Brand Inventory

In the information age, the speed of fashion changing is faster and faster. Not only is the latest popularity of each quarter, but also users are increasingly pursuing their own style.

Naturally, clothing brand demands higher inventory management capability.

In the long run, clothing business is a combination of fashion, quality, price and continuity. However, a clothing company often has problems in inventory.

"To see who can make money in this industry is to see who has a cleaner inventory." It is the universal law of this industry.

The appearance of vip.com stock sale represents the long standing problem of this industry. As early as 2012, Lining, Anta, XTEP, XTEP, PEAK and other 42 listed clothing enterprises total inventory amounted to 48 billion 300 million yuan.

Now, inventory is still the bomb that these companies embezzle profit margins.

The latest research of Dongfang securities shows that most apparel enterprises have more than 150 days' stock days, and very few enterprises can control the stock days in less than 100 days.

From the perspective of professional data analysis, this paper will interpret the recent earnings reports of apparel listed companies and deeply analyze the impact of inventory problems on enterprises.

Inventory is the life and death war of enterprises, which is a long-term game between efficiency and cost.

　　 A time bomb

In June 13th, Semir costumes issued a notice on the record of investor relations activities. In response to questions raised by investors about controlling inventory risks, Semir said in its announcement that the problems faced by Semir brands are mainly to take account of high-speed development at the same time, accurately predict market demand, balance the relationship between production plans and actual sales needs, and keep inventory within controllable limits.

This move is due to the increase in stock days since 2018, which has affected the rapid development of enterprises to a certain extent. At the same time, the apparel industry has reached the inflection point of the industry. Under the condition of insufficient consumption, it can only reduce costs and increase profits through meticulous management of inventory in the form of Semir. Semir hopes to find a breakthrough through self transformation.

As a matter of fact, Semir is a company that maintains better inventory turnover days. The problems faced by other enterprises are even more serious.

The Oriental Securities report shows that most apparel enterprises have more than 150 days' stock days. Very few enterprises can control the stock days in less than 100 days. IRMAN, a professional investment relations website in Japan, once exposed a data in September 2018. From the days of inventory turnover, the good plan is 81 days, which also includes products with relatively long storage life.

Inventory mainly affects the company's sustainable development in two ways.

1, warehousing costs, along with the manpower and transportation costs, will directly bring down profits. This is also a major reason why domestic apparel retailing has such a high profit margin. High profit is to cover inventory risk.

2, clothing will gradually reduce the price cut, the inventory cycle extended every 1 years, will lead to clothing can not sell prices, eventually leading to a decline in profit margins.

Cleaning up inventory is bound to face a discount, but a large discount to users will damage the brand image and become a cheap discount brand. Therefore, faced with the backlog of inventory, H&M has adopted a very extreme processing method.

Denmark's "Operation X" has revealed that H&M regularly incinerate stocks on the basis of moldy or inconsistent safety and quality standards, and incinerate 12 metric tons of unsold clothes every year. For this reason, H&M also admitted regularly burning clothes.

From last year to this year, many garment brands terminated their cooperation with China due to poor sales performance. From the British fast fashion brand Topshop, which has fallen sharply in turnover and profits, to the British clothing brand NEW LOOK announcing the complete withdrawal from the Chinese market, Forever 21 also announced that it had closed all domestic stores and withdrew from the Chinese market.

There are more or less the shadow of inventory problems.

Two, paradox: rapid updating of styles and slowing market growth

Compared with the traditional clothing brand, fast fashion brand has a new speed, and every time the new depth is relatively shallow. In principle, there should not be such a serious backlog problem. However, the market has become saturated and the brands of competition are also increasing. At present, the growth of almost all fast fashion brands is slowing down, which is an inevitable trend.

The reason behind this is very simple: the consumption is cold, the market demand is insufficient, and the number of people buying is less. Then the problem of inventory turnover was introduced, and the number of days of inventory turnover was prolonged. The enterprises needed to pay the warehousing costs, and the cash flow was also under pressure. Fast fashion brands could not be spared.

Therefore, the clothing industry is in a structural crisis. High debt and high inventory will be enough to drag enterprises into bankruptcy and reorganization.

The example of H&M, a fast wear clothing company, may illustrate the problem.

According to H&M's first half year (December 2017 ~2018 May) earnings report, its sales were flat compared with the same period last year. But in the first half of the year, the total number of H&M group stores increased by 62, and the increase in stores did not increase. This shows that as the fast fashion market competition accelerates and market consumption shrinks, the sales of H&M are under pressure. In the past six months, the group's tax sales volume is 114 billion 17 million kronor (about 12 billion 700 million US dollars), which is flat compared with the same period last year.

In parallel with the increase in sales and management costs, H&M sales and management fees increased by 5% in the first half of 2018, accounting for 39.5% of revenue, compared with 37.8% in the same period last year, up 1.7 percentage points over the same period last year. Meanwhile, the operating profit in the first half of the year was 7 billion 215 million Swedish kronor (about US $800 million), a decrease of 33% compared with the same period last year, with a profit margin of 7.3%, compared with 11% in the same period last year, down 3.7 percentage points from the same period last year.

H&M's sales growth has stagnated, which has further expanded the H&M's inventory. In the first half of this year, H&M stock reached 36 billion 333 million Swedish kronor (US $4 billion), an increase of 13% over the same period last year. It has accounted for 31.9% of H&M sales, compared with 28.2% in the same period last year. Under such circumstances, sales can only be discounted.

2018 in the first half of the year, its gross margin was 53.2%, down 1.5 percentage points from 54.7% in the same period last year. Obviously, H&M lowered its selling price.

Another typical example is the wedding bird.

In 2019 and February 23rd, the newsletter announced that it had "stabilized and returned to the blood". However, we should pay close attention to the announcement of its asset impairment provision and verification of assets in 2018. Its high inventory and receivables should be noted.

The announcement shows that the 2018 plan to reduce the value of 171 million assets. It is worth noting that in 2016, when the birds first fell into a deficit, their assets impairment losses had reached 300 million yuan, and this figure also reached 160 million yuan in 2017.

In addition, 171 million of the estimated amount is 6.6 times the net profit attributable to 2017. In the 10 proposed assets, stocks, marketable financial assets, accounts receivable and equity investments accounted for 95% of the four major categories. Take the inventory with the highest amount and occupy 54 million 940 thousand of the inventory as an example. According to the three quarterly report last year, the inventory of the birds has reached 895 million 800 thousand, which has increased by more than 100 million yuan compared with 707 million of the half year report, and the proportion of the total assets has also exceeded 20%.

Not only is the backlog of goods increasing, but also the net cash flow of the good news birds is also grim.

In the first two quarters of 2018, its net operating cash flow was negative, and expanded from 2 million 730 thousand to 65 million 150 thousand until the third quarter. At the same time, the accounts receivable balance at the end of 2018 was up to 519 million 900 thousand yuan, while the accounts receivable before six months ago were only 424 million yuan.

High inventory and accumulated risk of accounts receivable are common faults in traditional clothing industry. The slowdown in market demand will greatly magnify the pain in this industry.

Three, solve the pain of the industry

Inventory is not only a problem of head brand, but the whole industry is faced with the suppression of stock lifeline. Under the huge inventory, business management cost and cash flow turnover efficiency will become the burden of sustainable development of enterprises.

How to solve inventory problems or become a century problem for all retail brands? Many solutions have been born in the industry, from stalls to Ole, and then to the electricity supplier. All channels can not escape themselves at the end and become the fate of inventor makers.

Generally speaking, although the brand side is willing to lower the inventory at lower prices, they must guard against the impact of low price commodities on agents, terminal retailers and even the brand itself, such as price system and brand positioning.

Due to China's special WeChat ecosystem and the booming demand of sinking users, inventory management can also be solved by relying on social networking providers and other supply chain management techniques.

The S2b2C social business model, such as love inventory, is a high-speed and effective solution to inventory. Love inventory can enhance the control capability and flexibility of the whole chain of supply chain.

The S2b2C social business model, which is created by inventories, connects the upstream and downstream distributors and reaches the terminal consumers by distributors. The WeChat group and circle of friends, which are released by distributors, are a relatively closed environment, so the sale will not affect the prices of the commodities.

This is also the most unique advantage of Chinese enterprises compared with foreign enterprises. In China, WeChat and other social networks have become one of the important channels for clothing sales. The third party electricity supplier based on WeChat ecosystem can empower the brand clothing enterprises and bring about reshaping of the supply chain. The real advantage of social business is socialization, data and systematization. Enterprises can also achieve inventory management capabilities.

According to Tencent's "family smart consumption report" released by China, the demand for smart home, maternal and infant health and infant education is booming. The users of the 345 tier cities also prefer to buy high-end home textile products. The sales volume of the four home textile brands, such as fuanna, Luo Lai, mercury and Bo Yang, increase year by year.

This is largely due to brand sales, which brings more brands to the 345 tier urban users, thereby helping the low tier cities to enhance brand awareness.

The development advantage of love inventory is not only a hard demand for Chinese enterprises to eliminate inventory backlog, but also a platform that controls the two dimensions of brand "quality" and "price excellence", and caters to the consumer psychology of the waist users in the sinking market.

For example, genuine product protection, in addition to strict scrutiny of suppliers, AI inventory also established a set of its own quality control system, and the introduction of the third party professional inspection agency HQTS, directly to the brand side of the warehouse for on-site quality inspection.

At the same time, love inventory has opened up the data between the three. On this basis, it has provided a complete set of inventory solutions for brands to achieve five days' settling in, seven days' repayment, and daily sales of commodities to break millions of pieces, and to efficiently stock up.

The S2b2C social business model, which loves inventory, has been recognized by both capital and market. In a short span of 3 months, it broke through the bottleneck period and entered the fast lane, and sales increased by leaps and bounds. In just one year, GMV (total transaction volume) reached over 400 million yuan from the 60 time of the internal survey. And financing within a year 1 billion 500 million.