Taiping bird transformation faces pains, gross profit rate declines

On October 29th, Taiping Bird disclosed its third quarterly report. Although its operating income and net profit both achieved different growth in the first three quarters, its sub-brands such as women’s wear, men’s wear and children’s wear all showed a decline in gross profit margin.

According to its quarterly report, the company achieved operating income of 4.88 billion yuan in the first three quarters of 2018, a year-on-year increase of 13.14%; net profit of 282 million yuan, an increase of 69.72%; gross profit of 2.657 billion yuan, gross margin of 54.35%.

It is worth noting that its sub-brands such as women’s wear, men’s wear and children’s wear all showed a decline in gross profit margin.

The income from Taiping Bird’s women’s wear increased by 9.33% year-on-year to 1.827 billion yuan, while the operating cost increased by 18.31% year-on-year to 831 million yuan. Therefore, the gross profit margin decreased by 3.45% over the same period of last year.

The business income of Taiping Bird Men’s Wear increased by 19.22% year-on-year to 1.666 billion yuan, and the operating cost also increased by 20.09% year-on-year, resulting in a 0.3% decline in gross profit margin;

The operating income of the children’s wear brand of Taiping Bird also increased by 24.16% to 561 million yuan compared with the same period of last year, but the operating cost also increased by 38.13% to 282 million yuan, and the gross profit margin decreased by 5.08% compared with last year.

In addition, the operating income of other clothing brands of Taiping Bird increased by 22.94% year-on-year, the operating cost increased by 50.01%, and the gross profit margin dropped by 11.22%.

In this regard, Taiping Bird said in the announcement that children’s wear grew faster but the gross profit margin declined mainly due to increased online sales and accelerated processing of off-season inventory. The increase in other parts of the cost and the decrease in gross profit margin were mainly due to the increase in the number of breeding brands such as Betty Children’s Wear and Taiping Bird’s Nest.

As the first clothing brand born in China, the 23-year-old Taiping Bird has experienced too much. In 1996, the creation of the Taiping Bird costume, and positioned in the “mid-class casual men’s clothing”, opened the voyage of the brand. In 2001, the Taiping Bird Women’s Wear was established. With the advantage of the men’s wear channel, the women’s wear also achieved certain results, and then the Taiping Bird expanded its business to youth and children’s wear.

In 2010, the company established the Lecho Apparel Division and independently operated the Lecho brand. The brand grew rapidly and the sales scale continued to increase. In 2011, the company established the Mini Peace children’s wear brand, which was operated and managed by the Taiping Bird Children’s Wear Division, and the sales scale continued to grow rapidly;

In 2013, the company cooperated with ICL-Material Girl Limited to introduce MATERIALGIRL, a New York urban dirndl brand, which was operated by the Martilil business unit. In 2014, the company created the AMAZING PEACE men’s clothing with a light luxury style. Cultivate development.

After 20 years of hard work, the Peace Bird Group successfully listed on the Shanghai Stock Exchange on January 9, 2017, with a market capitalization of 14.3 billion. However, enterprises that have achieved a certain degree of scale will fall into a certain bottleneck period, and the financial report of Taiping Bird seems to have revealed this information.

It has previously developed a diversified development and expansion plan, which brings about a sharp increase in costs and a decline in gross profit margin. This result is obviously contrary to its original intention.

In the 2017 annual financial report, Taiping Bird said that around the company’s strategic goals and business strategy, it plans to achieve an operating income of 8.4 billion yuan in 2018, a net profit of 650 million yuan, and plans to expand 600 stores in 2018. In this case, Taiping Bird indicated that it should adjust the expansion plan formulated at the beginning of the year, appropriately control the scale of opening stores, and continuously optimize the channel structure.

At present, the company’s number of offline stores is 4,431, an increase of 6.18% over the same period of the previous year, including 1,407 direct stores, 3,007 franchise stores, and 17 affiliated stores.