On March 31, the veteran lingerie leader Urban Beauty (02298. HK) released its 2021 results report. For the whole year of 2021, the company's revenue was 3.36 billion yuan, an increase of 9.7% year-on-year, and a loss of 496 million yuan.
This is already the third year of urban beauty performance loss. These three years are also the three years when the domestic retail market has set off a big storm. Channel reform diverts offline passenger flow, new retail species continue to rise, this former offline retail giant with thousands of stores woven up a network, but stumbled the pace of corporate transformation. Catalyzed by the epidemic, the rising cost of raw materials and weak consumer demand have added some uncertainty to the development of urban beauty.
Image source: Per reporter Zhu Wanping photographed (data map)
The "Daily Economic News" reporter found that in 2021, urban beauty relied on a large number of marketing promotions to achieve revenue growth, but large sales expenses continued to encroach on gross profits, so that the underwear business with a gross profit margin of more than 40% still fell into losses. So, is this business model healthy and sustainable? In an interview with reporters, Zheng Yaonan, chairman and CEO of Urban Beauty, said frankly: "The original marketing expense structure is somewhat unreasonable, although it cost a lot of money, but the strength is not focused enough. ”
However, despite three consecutive years of losses, Zheng Yaonan still believes that "underwear is not a difficult business". For the loss, he was "anxious" and "took the initiative to admit the problem", and also shared with reporters the "combination fist" of future inventory, channel optimization and other reforms.
Continued losses in 2021
Costs are rising and expenses are high
In 2014, Urban Beauty landed on the Hong Kong Stock Exchange as the "first stock of underwear", and in 2017, it successively introduced star shareholders such as Fosun, JD.com and Tencent. After experiencing these highlight moments, in 2019, Urban Beauty suffered its first loss after listing, and continued to this day, achieving a net profit of -1.298 billion yuan, -118 million yuan and -496 million yuan from 2019 to 2021, respectively. The dismal performance has also encountered the "voting with the feet" of the capital market, and at present, the total market value of Urban Beauty has fallen to less than HK$1 billion.
After founding Urban Beauty in 1998 and leading the company to a successful listing, Chairman Zheng Yaonan took a back seat in 2019 and hired a professional manager as CEO. However, in the case of weak performance, Zheng Yaonan also had to return to the front line in the second half of last year and personally serve as CEO. He understood that his children still had to be raised by himself.
"After years of losses and team adjustments, there was anxiety within the company, there was blame, there was noise, and even a lack of confidence. After my return, I took the initiative to acknowledge the problems and actively solve them. Referring to the "frustration" of the past few years, Zheng Yaonan said.
The "Daily Economic News" reporter studied the financial reports of the past three years and found that in 2021, the urban beauty stopped the decline of nearly 20% in operating income for two consecutive years, and achieved a 9.7% income growth. However, urban beauty still loses money, and rising costs and high expenses are the two major reasons for losses.
The financial report pointed out that in 2021, the economy will decline, and raw material prices will continue to rise. Among them, the price of cotton, the main raw material, rose by 44% in 2021, resulting in a 6.7 percentage point decline in the gross profit margin of Urban Beauty to 42.1%. On the other hand, the emergence of e-commerce intimate clothing brands has also made the industry more competitive.
In order to achieve revenue growth in 2021, Urban Beauty has significantly increased various expenses, such as improving the incentive program for franchisees and employees, launching extensive promotional activities, and adding a number of executives. "However, this expenditure did not end up as planned, but it seriously affected the Group's operating results." Urban Beauty said in the earnings report.
From the specific data, sales expenses account for most of the total expenses, and the growth rate is larger. In 2021, Urban Beauty's sales and marketing expenses increased by about 13.6% to about $1.539 billion, while the gross profit after deducting costs was only about $1.4 billion. Sales and marketing expenses alone are enough to cost the company money. The company said that the increase in selling expenses was mainly due to the increase in commissions generated by consignment sales in franchise stores during the year due to increased efforts to promote the direct-to-consumer sales model.
For the high sales costs, Zheng Yaonan said in an interview with the "Daily Economic News" reporter: "The original marketing structure is somewhat unreasonable, although it cost a lot of money, but the strength went out, not enough focus, there is no 'one shot to break'. Our marketing was done, but not well. He said that in the future, marketing will tend to be precise and better converted into profits.
Reform Path:
Adjust the product structure and improve the fast reaction mechanism
Turning around losses is already a must-answer question in front of urban beauties.
Since his return, Zheng Yaonan has also repeatedly thought about this issue. He analyzed that increasing profits is not simply to reduce marketing expenses, but also to come from changes in the entire sales structure. "To let the best-selling, high-margin products have more sales opportunities, better sell-out rates, get more gross profits, and at the same time reduce the release of some unsalable products, reduce the discount, reduce the discount, reduce the discount will increase the gross profit."
In fact, for a long time, apparel companies need to fight against low-price promotions and inventory impairment problems caused by slow sales. In recent years, the inventory problem of urban beauty is more prominent, and from 2019 to 2020, the company has set off a large-scale inventory cleanup work, trying to get rid of the burden and go light.
Image source: Urban Beauty official website
According to the 2019 financial report, Urban Beauty suffered a huge loss of 1.298 billion yuan due to a one-time impairment of inventory and accounts receivable, while in the 2020 financial report, the company said that it had cleared about 61.5% (at cost) of the old inventory in 2019 and before, and said that the inventory volume has gradually recovered to a healthy level.
In 2021, however, the inventory problem is making a comeback. According to the financial report, as of the end of 2021, the carrying amount of Urban Beauty's inventory reached 964 million yuan, an increase of 170 million yuan over the end of 2020 (794 million yuan), and the inventory impairment provision for the whole year was about 146 million yuan.
For the reasons for the recurrence of the inventory problem, Zheng Yaonan responded to the reporter: "Our original management team overestimated the sales in 2021, so the goods that were difficult to clear in 2020 came back last year. Once the forecast is wrong, the franchisee does not take the goods, the company can not sell, it will become inventory, so we only forced our own reform this year. ”
He detailed the path of reform. "It turns out that many traditional brands adopt the futures system, and may start to prepare products from half a year to nine months ago, and all products are produced, and once the products are sold well or unsalable in the middle, there is no way (rapid adjustment). However, the approach we have taken since the fourth quarter of last year is that although a lot of design and development has been done in advance, the main category of bras and underwear has adopted the spot system, 40% of the products have been ordered directly, and 60% of the products have prepared raw materials and rapid response, and the current effect is good. ”
Zheng Yaonan also mentioned that last year, Urban Beauty made an attempt to "front store and rear warehouse" in Jiangxi - one store in every 10 to 15 stores, with an area of about 120 to 150 square meters, 50% is a warehouse, 50% is a store. "Put all the unsalable, color-deficient and missing code goods in the more than a dozen stores covered into this 'front store and back warehouse' store, sorted out by this warehouse, originally in a single store is missing color and code, concentrated together may become a uniform code, and returned to the original store." This can solve the problem of lack of color, lack of code, and slow sales. ”
Offline channels are irreplaceable
I won't open a store as hastily as I used to
In recent years, the retail industry has undergone a wave of reconstruction, the wave of "going online" has gradually weakened, and the call for "returning to offline" has risen again. In the past, Urban Beauty opened a large number of offline stores in pedestrian streets and business circles, but in recent years, with the decline in efficiency, the speed of opening stores has also slowed down. At present, the number of stores remains at the level of 5,000.
So, how will urban beauties make good use of the "touchpoints" of this line?
Zheng Yaonan believes that offline stores are an irreplaceable scene for the underwear industry. "Online can be some new products for trial sales, planting grass for brands, while offline stores can allow consumers to touch underwear, employees can be the first time to try on and communicate with customers." Underwear is a relatively more private thing, and the return rate online is high, and the return rate of live broadcasting should reach 30%. It is easier to choose the right underwear offline, so the offline return rate is very low. Through this method (online and offline collaborative drive), we hope to give offline partners more tools and better convert sales. ”
Image source: Per Warp Infographic
According to the financial report, in 2021, the offline channels of Urban Beauty, especially the self-operated retail channels, achieved greater sales growth, and the channel achieved revenue of 1.781 billion yuan, an increase of 54.74% year-on-year. For the planning of future self-operated channels, Zheng Yaonan said: "We will not open many stores in the country as before, but open stores in the main and core markets, and open stores with more brand image and brand power." ”
According to the financial report, in 2022, Urban Beauty will expand its business territory in the blank market in the low-line areas, continue to seek opportunities to open stores; retain old stores with development potential and stores that strive for rent reduction and optimization of poor performance, continue to establish "front store and back warehouse" to clean up old goods; in 2022, establish a new brand and new image of "pure cotton habitat" to enter the shopping center.
In terms of online channels, Urban Beauty achieved e-commerce sales of 832 million yuan in 2021, an increase of 8.90%. The company said that in the future, in addition to the major e-commerce platforms such as Taobao, Tmall, JD.com and Vipshop, it will continue to make steady efforts on the Douyin, Kuaishou and Pinduoduo platforms; continue to develop and launch new online products, such as upgrading V Bra bras, Small Flower Heart series, etc.
Despite the obstacles to the transformation, Zheng Yaonan is still full of confidence in the future. He said: "I think the underwear business is not difficult to do, underwear is currently a category that is still growing in the apparel industry. Urban Beauty has been doing professional underwear for 24 years and has more than 400 patents, which is a very valuable asset for us. Although [these years] have been stressed for various reasons, I am still confident about the future. ”
Reporter | Wang Fan
Editor| Dong Xingsheng, He Xiaotao, Du Bo
Proofreading | Wang Yuelong
| the original article of the daily economic news nbdnews |
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