Apparel Enterprise: Listing "lost"

Whether a garment company is listed on the stock market is not the threshold for the CSRC to increase the listing of such companies, but it should be a more stringent review of possible problems in the chain business model.

In 2010, Caesars shares, Hinnor and many other apparel companies listed on the “One-Ma Pingchuan” cluster became a major highlight of the capital market. However, in 2011, Chinese apparel companies have become the hardest-hit areas for the A-share IPO applications. According to statistics, a total of 11 IPO applications for apparel companies took place this year, of which 6 were denied and only 45% had passed.

Concern about inventory turnover Ping An Securities, an investment banker believes that the rapid decline in inventory turnover or lead to sales and financial risks is also an important reason for this type of business IPO applications were denied.

Since 2010, the cost of China's apparel companies has generally risen sharply. Dajian Consulting Managing Director Cheng Jianhui pointed out that the rising costs of apparel companies are reflected in many aspects: On the one hand, the emergence of "labor shortage" and rising wages and benefits have led to rising labor costs; on the other hand, commercial rent increases and transportation prices. The upward adjustment caused a rise in the commercial costs of clothing companies. At the same time, the rising prices of water and electrical resources led to a rise in manufacturing costs. In addition, under the credit tightening policy, the cost of clothing companies has also increased.

In order to ease the pressure of rising costs, such enterprises began to increase their sales prices by a large margin, by about 10% to 20%. This led to a substantial increase in the inventory of clothing companies that are pursuing gross margins, and the inventory turnover rate has dropped significantly. With greater sales risks, continued profitability is further affected. The apparel companies that have been denied IPO applications this year have basically had such problems.

Take Weisman Garment, which was denied in 2011 as an example. According to its prospectus, 8 out of the company's nine types of raw materials have experienced significant increases last year; at the same time, the company will be the main brand of women's clothing last year. The price has increased by 10.9%. The same situation occurs in the other Wignes fashion that has been denied.

However, the sharp increase in prices of the two companies' products has led to a rapid decline in inventory turnover. According to statistics, from the year of 2008 to last year, Weissman's inventory turnover rate was 4.4, 3.29, and 2.88, respectively; during the same period, Vignes's inventory turnover rate was 2.23, 2.19, and 1.36 times respectively.

“The IPO applications of the two companies’ A-shares were all rejected this year. One of the important reasons for being rejected is that the rapid decline in inventory turnover may lead to sales risks and financial risks,” said one investment bank analyst at Ping An Securities.

In fact, of the other four clothing companies (women's housing, Rifui, Shulang and Nochi) whose IPOs were denied this year, except for Libre and Nochi, the remaining two have different levels of inventory turnover last year. The degree of decline: The turnover rate of the ladies' house and Shulang's inventory fell to one and 0.49 times respectively. This is a far cry from the average inventory turnover rate of about 2.4 times for the currently listed apparel companies.

Facts have proved that the rapid decline in inventory turnover has a greater impact on the stable operation of the company. After Vignase's product price hike last year, the main business gross margin increased by 70%, operating income increased by 56%, output increased by 28%, and sales expenses increased by 125%, but sales decreased by 7%.

Although the company’s profits and revenues have maintained growth, output and sales have run counter to it. A large number of sales promotion expenses have not achieved the desired results. If the company is successfully listed, the use of raised funds will be very efficient. The big question is that higher inventory and lower production and sales rates will put the company's business at greater risk.

Continuing Profitability With regards to the IPO of this apparel company, Cathay Capital Partners and President Xu Hao believe that “there are more problems in the profitability, competitiveness, and future development of the company itself.”

At present, the competition in the Chinese garment industry is very fierce, and the entry threshold for the industry is also relatively low. Therefore, whether or not it possesses a strong core competitiveness determines the market prospect of apparel companies to a certain extent.

An investment banker of Haitong Securities suggested that R&D design and marketing channel construction is the two core competitiveness of apparel companies. 'The apparel companies that intend to be listed should increase the investment in R&D and design'. On the other hand, they should increase single store sales. Outlets) average sales volume and sales capacity.

Taking Li Burui as an example, one of the main reasons for its IPO is that it only provides OEM business, lacks independent R&D capability, its core competitiveness is difficult to sustain, and it also involves insufficient motivation for listing. Single-market customers rely heavily on deeper issues. Simply looking at the ability to quickly respond to international apparel brand orders, Rebecca's average 30-90 days lead time is significantly inferior to Jin Fei Da and Jiangsu Sanyou's fast delivery capabilities. R & D and design capabilities are related to the product positioning and fashion capture capabilities of apparel companies, and are related to the company's development potential and sales potential. Therefore, apparel companies planning to market need to increase their investment in R&D.

In addition, in the process of building marketing channels, apparel companies should also comprehensively balance speed and benefits. Taking Schrunn Garments as an example, its prospectus (pre-disclosure) shows that the company's marketing channels expanded rapidly during the reporting period. From the end of 2008 to the end of 2010, the number of directly operated stores increased from 183 to 492, with a compound annual growth rate of up to 63.97%; but at the same time, the company's capital chain is also extremely tight. In 2010, the net cash flow from operating activities was -39.9827 million yuan, and the debt ratio at the end of 2010 was as high as 72.78%. In this regard, the aforementioned Haitong Securities investment bankers pointed out that the phenomenon of tightening the capital chain caused by excessive channel construction indicates that the company’s management capabilities still need to be improved, and the profitability of single stores needs to be improved; the apparel companies planning to go public in the design of the investment project , but also from its own management capabilities and resource replication capabilities.

In fact, judging from the reason and feedback disclosed by the China Securities Regulatory Commission's issuing and approving committee in 2010, the regulatory authorities emphasized that the company's sustainable profitability should be emphasized for landing on the Shanghai Main Board and the Shenzhen SME Board. The GEM Approval Committee is Focusing on continuous profitability, we will also incorporate corporate growth into the focus of attention.

After a more rigorous review of the conference, whether the apparel companies' IPOs have been consecutively linked to 'clothing' has nothing to do with the 'clothing', but Li Jiaqing, managing director of Legend Capital, believes that it is true for any retail chain consumer brand companies to go public. The sustainability of sexuality, normativeness, and profitability will all get more and more attention. The barriers and thresholds for listing will also increase. The requirements of regulatory agencies in this area are much higher than those in Hong Kong and the United States.

Li Jiaqing himself pays a lot of attention to the apparel field. He had previously invested in the chain of women's brand Lachabel and the Amoy brand's Women's Seven Pug.

According to reports, during the two sponsor representative training conferences conducted in April and June 2011, relevant supervisors focused on chain-operating companies, and sponsoring agencies had more and more dispersed chains involving dealers. The operating companies not only pay attention to their top 5 customers, but also use information systems and other methods to investigate more than 80% of customers during due diligence. For franchisees of such enterprises, sponsors are required to check each franchise as much as possible and to see if they have the ability to continue operating.

In fact, due to the problems concerning the authenticity of revenue recognition, the regulatory authorities have tightened their review of IPO companies adopting the two models of franchising and distribution.

If the enterprise adopts the joining mode, the appraisal committee shall check and report the financial indicators such as the three-year report period, the revenue and net profit of each franchise store; if the distribution mode is adopted, the reporting period shall be provided for three years and the terminal of each dealer. Customer details. Since most apparel companies involve joining or distribution models, the above review of new standards is not limited to an industry "earthquake."

At the same time, the investment of the apparel companies that are applying for listing is focused on the expansion of production capacity and marketing network construction. After many apparel companies are listed, the terminal channels have expanded too quickly and the marketing network has expanded, but due to the low efficiency of single stores, the average income has decreased. It is doubtful whether investment funds have played a full role.

In addition, looking at several clothing companies that have been denied, their revenues are mostly between several billion and one billion yuan, and their profits are mostly tens of millions of yuan. The scale is not very large.

The lack of scale is probably one reason why they are not. Li Jiaqing believes that the ideal state before the listing, especially for low-end and mid-to-low-priced clothing brands, is that, before and after the listing, there are hundreds of millions or billions of sales and billions of profits. Second, network coverage. Wide enough, it is a relatively national brand; Third, it has a long history, and it can be seen how the internal operational efficiency is raised step by step.

"This kind of apparel company is more practical to market listing," said Li Jiaqing.

Therefore, in the view of a VC, whether these apparel companies were listed on the stock market was not a matter that the CSRC raised the threshold for the listing of such companies. Instead, it should be “a more stringent review of possible problems in the chain business model.”

Why centralized listing?

In fact, these six clothing companies have been denied, from the perspective of shareholding structure, how much the family business temperament. Is it true that some people have said that this is an entrepreneurial impulse?

Li Jiaqing does not agree with this point. He believes that the key reason for centralized listing is that the apparel industry is a trillion market in China, but the current real brand size is still small, but in the next 3-5 years, the industry will enter a very rapid growth phase, and will focus Large enterprises are getting bigger and bigger. Therefore, for many small and medium-sized garment enterprises, these are very important for the past few years. If there are not enough resources, including funds, they are likely to be eliminated.

For a long period of time, Yang Tao, the CEO of the Hangzhou women's clothing brand, was concerned about the IPO and was not positive.

In May 2007, Belle International listed on the Main Board of Hong Kong, ** nearly 8.7 billion Hong Kong dollars, quickly afterwards in the industry to initiate mergers and acquisitions, and now is the domestic female footwear giant. In August 2008, Mebon apparel landed on the Shenzhen Stock Exchange, raising nearly 1.4 billion yuan, and is currently the leader in the field of domestic leisure apparel.

These two incidents were "very stimulating" to Yang Tao. He also changed his views on the market. "If a brand of a size similar to ours is listed first, they will have a magic weapon. If that comes to strike me, then I will Will be more passive."

The founder of Aokang, Wang Zhentao, once told the media that no and morning markets were an important reason why Wenzhou shoe companies were quickly overtaken by a group of listed Fujian shoe companies such as Anta. Therefore, he bluntly stated that for Aokang, “No If you go public, you don't raise the bar, you just wait for it."

Branding takes a long time to accumulate. In the process, continuous financial support is a necessary prerequisite. When branded apparel companies are combined with the capital market, a steady stream of high-quality capital can stimulate the rapid development of brands with a relatively large growth space. As a result, a number of brands with international competitiveness and brands that help companies master the advantages are cultivated at home. Resources.

In addition, through the process of the capital market, listed companies can quickly complete the upgrading of their own industries and form a competitive advantage. If the number of listed companies taking this route increases, the competitiveness of the entire apparel industry in China can also be improved.

However, a series of events made it clear that the road to listing of Chinese apparel companies has not gone smoothly. In addition to the difficulties in listing approval, there are many companies who have discovered through painstakingly successful IPOs that their gains are not as large as they originally thought. In fact, listing is not the end of the company's development, but only a "weapon" on the way to the enterprise's campaign.

With the increase of macroeconomic uncertainties and rising costs of various types, coupled with the "contrast effect" of similar listed companies, the difficulty of the IPO of second and third tier garment companies may increase.

However, the lower meeting rate did not affect the IPO enthusiasm of such companies. It is reported that many clothing companies such as Delphi, Haishu House, Jordan Sports, Elegant Birds, Fiennes Handbags, Zhejiang George White Apparel and Zhejiang Meisheng Cultural Ideas have submitted A-share IPO applications and are waiting in line to be reviewed. .