The Risk Of CABBEEN Being Too Single

China clothing Designer Brand CABBEEN Clothes & Accessories (hereinafter referred to as "CABBEEN") listed on the Hong Kong stock market dust settled.

In October 21st, CABBEEN completed the stock offering, which was 6 times as large as the public offering in Hong Kong, and nearly 3 times the international placement, which resulted in over 10 times the total purchase of the prospectus. According to the prospectus disclosed by CABBEEN in the HKEx, the CABBEEN offered 175 million shares, of which 157 million shares were used for international placement, and the remaining 0.175 shares were offered for sale in Hongkong. CABBEEN will raise HK $354 million at the median selling price of HK $2.53 per share.

As a leading designer brand in China, CABBEEN's performance in the past three years is commendable in the downturn of the garment industry. In the first half of 2010-2013 years, CABBEEN realized revenue of 292 million yuan, 890 million yuan, 940 million yuan and 335 million yuan respectively. But at the same time, because of over reliance on CABBEEN brand, CABBEEN admitted in the prospectus that if it fails to maintain or promote the brand, it may have a significant adverse impact on the company.

CABBEEN's frequent stock pressure in the domestic apparel industry also plagued the apparel industry. At the end of 2010, the stock of CABBEEN was 93 million 764 thousand yuan. Although the stock amount was reduced by half by the end of 2012, the pressure still existed. "At present, the inventory of our channel is very healthy, and the inventory is declining continuously, and the sales revenue is also very real. Orders in the fourth quarter of 2013 and the first quarter of 2014 have seen double-digit growth." Zhang Caili, head of CABBEEN clothing brand promotion department, told the times weekly.

　 There are only 2 self-stores in 915 retail stores.

This "most valuable Chinese designer brand" will be tested by the two level market. In October 28th, CABBEEN will be listed on the main board of the HKEx. The stock code is 2030, which will be traded on 1000 shares per hand. Prior to the market news, CABBEEN had already subscribed to a basic investor in Hongkong when it offered shares in the stock market. The subscription amount was HK $140 million, accounting for about 26% of its fund raising.

According to CABBEEN prospectus, about 40% of the fund-raising will be used to enhance the design and R & D capabilities; about 20% will be used for brand promotion and marketing; about 20% will be used to set up additional self retailing stores; about 10% will be used to improve and enhance the company's ERP system; about 10% will be used for working capital and general corporate purposes.

With regard to the 20% of the amount raised for self retailing, CABBEEN further explained that "the group plans to open 15-30 self operated retail outlets since the end of 2013-2014, and to set up a total of no more than 50 self operated retail outlets by the end of 2017".

It is understood that CABBEEN's sales channels are mainly distributors. At present, CABBEEN's first tier distributors and two level distributors operate 913 retail outlets in the mainland, while its self retailing stores in the mainland are only 2. "CABBEEN's self operated stores are mainly set up standards for retail operation, store layout and retail store image. We will guide all of our distributors through these standards. Zhang Caili said that the establishment of self run stores will play a benchmark role in the operation of distributors so as to promote the efficiency of distributors.

The establishment of CABBEEN self shop may be aimed at reducing the excessive dependence of distributors. In the prospectus, CABBEEN acknowledges that the company relies mainly on third party distributors to sell products. If the distributor terminates or does not renew the distribution agreement or the volume of purchases of distributors decreases significantly, it will adversely affect the company's business, financial position, business performance and prospects.

As a designer brand, "design research and development" is still the main brand after CABBEEN's listing. Zhang Caili said: "we plan to increase the building of new buildings to expand the area of R & D centers, and at the same time we will buy relevant R & D software and equipment to improve the efficiency of the whole design and research. We will continue to deepen the design and research capabilities from the aspects of fabric research and development, product categories, product technology and production process."

At present, CABBEEN owns two brands Cabbeen Lifestyle and Cabbeen Urban, and the former has high-end subsidiary brand Cabbeen Chic. Zhang Caili told times weekly that 95% of CABBEEN's revenue came from Cabbeen Lifestyle.

"CABBEEN brand is good, original and attracting consumers. This is its advantage. But at the same time, this is also a weakness. Too much business will bring some risks to CABBEEN. " A famous designer of men's clothing in Hunan told times weekly. CABBEEN is also aware of this. It admitted in the prospectus that if it fails to maintain or promote CABBEEN brand, it may have a significant adverse impact on the company.

Performance continued to rise in the past 3 years.

Throughout Garment industry In a downturn, CABBEEN's performance is an important reason why the market is promising. According to CABBEEN prospectus, from 2010 to the first half of 2013, the company achieved 292 million yuan, 890 million yuan, 940 million yuan and 335 million yuan respectively.

Meanwhile, CABBEEN's gross profit margin has also risen. In 2010, the gross profit margin of CABBEEN was 21.2%, and by the end of 2011, the gross profit margin had increased to 31.9%. Subsequently, the average wholesale price of CABBEEN rose from 133 yuan to 162 yuan, making CABBEEN's gross profit margin increased to 40.5% in 2012. In the first half of this year, the gross profit margin of CABBEEN increased to 43% because of the sales rebate amount to distributors.

According to Frost Sullivan, a well-known market research firm, CABBEEN's market share of casual men's clothing in 2012 was 2.7%, with a profit of 210 million yuan, ranking third. The number one brand is JACK&JONES, with a yield of 550 million yuan, a market share of 7.1%, and the left bank ranking second, with an income of 250 million yuan and a market share of 3.3%.

"In our region, the average annual sales volume in these three years is around 10 million yuan." The two tier distributor of CABBEEN in Hubei told the times weekly that the sales of their city ranked the top five among the CABBEEN distributors in Hubei. "CABBEEN should be able to say that our men's clothing sales NO.1", when it comes to this, the distributor is very confident.

Although the performance is brilliant, the pressure on CABBEEN stock is still not to be underestimated. At the end of 2010, the stock of CABBEEN was 93 million 764 thousand yuan, which increased to 128 million yuan in 2011. Subsequently, CABBEEN took a series of adjustments and measures to the continuous rising stock level. At the end of 2012, CABBEEN's stock amount dropped to 41 million 25 thousand yuan. In 2013, CABBEEN postponed the launch time of the spring series to give distributors more time to digest seasonal products. By the first half of this year, the amount of inventory dropped to 21 million 322 thousand yuan quickly.

But in the second half of this year, the stock of CABBEEN increased again. As of August 31st, its stock amount increased to 48 million 512 thousand yuan, double that of two months ago.

"With the economic downturn and the reduction of consumer demand, the whole industry is facing the pressure of inventory." The designer said reluctantly. She told times weekly that during the 14 spring and summer subscription conference, many companies were throwing away the old ones, and even her company would conduct a special sale during the Dragon Boat Festival, the Mid Autumn Festival and the Spring Festival in the past few years to clean up the stock.

"At present, the inventory of our channel is very healthy, and the stock in the off-season is declining." Zhang Caili is more optimistic about CABBEEN's inventory. She thinks CABBEEN as a designer brand, pays attention to the experience of retail and terminal consumers, and uses the ERP system to supervise and manage the operation data of the sales outlets. The situation of high inventory industry is a good opportunity for CABBEEN.

　　 The way to survive in winter

In fact, the overall decline of the garment industry is far more than the pressure of inventory. Many garment listed companies failed to turn the tables in the first half of 2013. According to the 2013 semi annual reports of the companies, the seven wolves achieved a business income of 1 billion 423 million yuan, down 4.27% from the same period last year, and the basic earnings per share declined by 12.82% compared with the same period last year. The US state clothing business income was 3 billion 738 million yuan, down 18.74% compared with the same period last year. The net profit attributable to the stock market of the listed companies was also down 48.52%. The net profit of Semir clothing although the operating income and attributable to the shareholders of the listed companies increased slightly compared to the same period last year, its total assets fell by 5.48%, and the net assets attributable to the shareholders of the listed companies decreased by 4.92% over the same period last year.

"On the one hand is the rise of domestic rental, labor, transportation and other costs, on the other hand, the economic crisis has caused long-term shortage of international demand, and the volume of clothing exports has declined sharply." The designers analyzed the times weekly.

The strong rising electricity supplier is also slowly eroding the traditional clothing retail channel. Many garment enterprises are trying to get the market cake by increasing the electricity supplier. In October 18th, Smith Barney announced that it would withdraw the state purchase platform that had previously been stripped of listed companies. The controlling shareholder of the company, "Shanghai Huafu Investment Co., Ltd.", intends to transfer the BNN domain name to the company without compensation, and its wholly owned subsidiary, "Ai Shang Bang" will no longer operate the e-commerce business related to this. Mei Bang apparel said it will fully integrate the physical shops and Internet business operations, providing consumers with interactive experience of life scene shopping and Internet shopping.

"Our clothing enterprises are basically transforming into electric business or adding e-commerce departments to the company, and some slanting policies are also following up." Qiu Wanru, director of Shishi Electronic Commerce Association, told the times weekly. This is located in the southeast coast of Fujian province of China. Spin Clothing production base and distribution center is experiencing an electricity supplier storm.

As a clothing company of Shishi, CABBEEN entered the Taobao Shishi hall together with the stone lions men's clothing brands including the awaiting, rich birds and left banks in April this year. It became Taobao's first exclusive clothing channel named after the region. There are 44 merchants in Shishi hall, with an average monthly turnover of around 330 thousand. The average daily sales volume is 13 thousand and 400 yuan, with an average daily visit of more than 2500 people, with an average of 234 orders per day. Qiu yuan explained further to the times weekly.

In response, Zhang Caili said: "CABBEEN now has independent distributors selling off-season products on the Internet. Although online sales are indeed a sales trend in the future, the experience of consumers in real store consumption can not be replaced by electricity providers. In the future, we will continue to focus on the business operation of our electricity supplier. "