Text | Jiang Xiaoqiao
Over the past few years, Local Chinese menswear brands seem to be a little bit unhappy collectively.
In 2019, Zhou Jianping, chairman of Heilan Home, was furious at the annual shareholders' meeting. Some minority shareholders questioned the inventory scale and business model of Heilan Home, and Zhou Jianping "hardened" on the spot, "This problem has been heard and the ears are cocooned... No one is allowed to question Heilan's inventory problem, and our ping efficiency can even surpass Zara and Uniqlo. ”
Two years later, because of "unhappiness", a wave of existence was replaced by Zhou Jianping's Fujian family. On May 27, 2021, Seven Wolves Shares (002029. Zhou Shaoxiong, chairman of SZ), personally wrote a "letter to a friend who cares about the seven wolves" in response to reports of being accused of being mired in performance and premature cross-border. Zhou Shaoxiong strongly emphasized in the open letter that the seven wolves have "shown a new development trend" in the past five years.
The greater unhappiness comes from the difficulties of the growth of Chinese men's clothing.
Lilang, who just issued the 2021 financial report, the annual net profit fell by nearly 16%; youngor's net profit in the third quarter of 2021 fell by 21.05% year-on-year; even Heilan Home, which has the largest market share, although it began to transform after Zhou Jianping handed over zhou Lichen, is still considered by the media to have encountered a "mid-life crisis".
But at least it looks like Zhou Shaoxiong should not have to write an open letter this year. Seven Wolves' latest financial report shows that in 2021, it achieved revenue of 3.514 billion yuan, an increase of 5.52% year-on-year; achieved a net profit of 231 million yuan, an increase of 16.13% year-on-year. Compared with the difficult year of 2020, the seven wolves have finally taken a small step from the quagmire of the epidemic in 2020.
Seven Wolves Annual Report 2021
But this result is not a pass.
Previously, Orient Securities predicted that Seven Wolves' full-year revenue in 2021 would increase by 8.3% year-on-year to 3.607 billion yuan, and net profit would increase by 25.6% year-on-year to 277 million yuan. While the operation of seven wolves did not meet expectations, its revenue and net profit did not exceed the 3.623 billion yuan and 347 million yuan in 2019 before the epidemic.
Obviously, this small step is not enough for the seven wolves to run on the vast land again as they used to be – in the past decade, seven wolves have been a very interesting presence in The Chinese men's wear brand, and after reaching a revenue peak of 3.477 billion yuan in 2012, the revenue level of the seven wolves has been like the Shanghai Composite Index can not avoid the "3000 points", and has been standing still in the same place.
In fact, since 2017, in the secondary market, the net assets per share of the seven wolves are more than 7 yuan, according to the 2021 financial report, the net assets per share of the seven wolves are 7.95 yuan, but now the stock price has been hovering around 5 yuan for a long time, that is, the price-to-book ratio is only 0.7 for a long time - investors seem to conclude that the seven wolves are not worth investing?
Ten years later, the seven wolves took a small step
There are hundreds of menswear brands in China, but there is only one Chinese men's wear museum.
The Seven Wolves Chinese Men's Wear Museum in Jinjing Town, Jinjiang City, Fujian Province, has a very creative pattern - the first old factory building at the beginning of the business, with the latest craft equipment production workshop, the two through the seven wolves chairman Zhou Shaoxiong's home in the 90s of the last century, organically connected, showing a rich sense of time.
The museum is finely arranged, and the vein clearly combs the history of the development of Chinese men's clothing. Through the construction of the museum, the seven wolves have sought a historical position for themselves, and then built their legitimacy as the head brand of Chinese men's wear, making themselves a specimen of Chinese men's wear.
Judging from the history of the development of Chinese men's clothing, the seven wolves deserve it. Founded in 1990, Seven Wolves is a pioneering brand of Menswear in China.
In 1991, Seven Wolves launched a "color-changing jacket" that changes with light and viewing angles, and with this innovative product, Seven Wolves became a hit in the country, officially leveraging the Chinese menswear market.
After that, the double-sided jacket and classic plaid jacket launched by Seven Wolves led the Chinese market, and the market share has always ranked first. In 2004, Seven Wolves landed on the Shenzhen Stock Exchange, becoming the first listed men's wear company in China, and its main business has also expanded to men's clothing such as shirts, suits, jackets, and knitwear.
2012 was the highlight of the seven wolves, achieving revenue of 3.48 billion yuan, net profit of 560 million yuan, market value of up to 25.451 billion yuan, china's first men's wear brand was born.
But ten years later, the seven wolves have become invisible. Compared with the tens of billions of revenues of Heilan Home and Youngor, the revenue of Seven Wolves has been "standing still" around 3 billion yuan.
From the peak of revenue in 2012, the growth momentum of Seven Wolves was suddenly interrupted, and the revenue growth was negative for 3 consecutive years, until 2015, when it stopped the decline and returned to the growth range. Judging from the bubble chart of the seven wolves in the past ten years, the best year was 2012, when the revenue was 3.48 billion yuan, and nine years later, 2021 was only 3.51 billion yuan. Not only is the revenue growth only a few tens of millions of yuan, but the net profit is less than half of 2012, if not 2020 is at the bottom of the front, 2021 is directly the worst year of net profit in the decade.
Looking back at the historical revenue of Seven Wolves, the company first reached a revenue peak of 3.477 billion yuan in 2012, and then its growth momentum was suddenly interrupted, and there was negative revenue growth for 3 consecutive years, the lowest year was only 2.39 billion yuan in revenue, until 2015 to stop the decline and return to the growth range.
However, the seven wolves that returned to the growth range showed very weak revenue growth, until 2019, the seven wolves revenue finally broke through the peak set in 2012, reaching 3.62 billion yuan.
Just when the market thought that the seven wolves would return to the right track of development, the sudden impact of the epidemic made the company's revenue grow negatively again. The revenue of 3.514 billion yuan achieved in 2021 has not yet fully recovered to the pre-epidemic level.
The profitability of the Seven Wolves also continues to decline.
Since 2012, when the net profit attributable to the mother reached a new high of 566 million yuan, the profit of Seven Wolves has been in a continuous downward trend, and its profit level has always fluctuated around 300 million yuan. If not 2020 is at the bottom of the front, Seven Wolves 2021 is directly the worst year of net profit in a decade.
In fact, the gross profit margin of seven wolves sales is not low, and the gross profit margin in the past few years has basically stabilized at about 45%, which is similar to nike's gross profit margin, but the net profit margin has dropped from 16.27% in 2012 to 7.77% last year.
The reason for the divergence between gross profit and net profit, first of all, is the high cost of the period, which erodes the profit margin of the seven wolves.
According to the financial report, the company's expense ratio for the period in 2021 reached 27.88%, and the net cash flow from operating activities was only 545 million yuan, a decrease of more than 36 million yuan compared with the previous year. Its sales expenses for the period were $755 million, an increase of 2.06% year-on-year, and management expenses were $255 million, an increase of 6.1% year-on-year.
Not only in 2021, but in recent years, the sales expenses of the seven wolves have been relatively high, exceeding 20% for three consecutive years, and 21.5% after a slight decline in 2021.
But the biggest problem is inventory. Inventory turnover days is an important indicator of the apparel industry, high inventory will increase the company's manpower, transportation costs, and then affect the operation and profitability of enterprises.
Inventory has always been a common problem in Chinese men's clothing.
Last year, some media sorted out the business data of nine men's wear companies in China. Among them, the inventory turnover days of only red beans are 36 days, and the inventory turnover days of some men's wear companies are as high as more than 200 days, compared with the parent company of foreign fast fashion brand ZARA, which is only more than 80 days.
This is also the old problem of the seven wolves. Its inventory turnover days were only 114 days in 2012 and reached 211 days in 2016. The inventory cycle of China Lilang, which also does men's clothing, is only 66-160 days. In this regard, the seven wolves explained that the difference in business models led to a relatively higher inventory cycle than their peers.
In 2021, Seven Wolves reduced the number of inventory turnover days to 193 days, which is indeed an improvement, but it has to be said that turnover is still slow. In addition, the seven wolves of the long-term inventory has also increased, the data show that its 1-3 years of inventory of 11.2935 million pieces, an increase of 21.47% year-on-year, more than 3 years of inventory age products reached 7.6574 million pieces, an increase of 21.14% year-on-year, these long-term inventory products have formed a certain pressure on the funds.
That is to say, the double increase in revenue and profit of Seven Wolves in 2021 is actually insufficient, and the former first brand of Chinese men's wear has still not really come out of the growth dilemma.
Old men's clothes that want to catch young people
Meituan Wang Xing once mentioned a conclusion on the value of market consumption in the meal: girls> children> young women> old people> dogs> men. For a long time, men's dislike of spending money seemed to be the consensus of the market.
But it would be too simple to explain the inventory of the Seven Wolves in this way.
It is generally believed that the main driving factor behind inventory is to optimize the store mix, emphasizing original design and product rejuvenation. This is also the transformation trend of Chinese men's wear in recent years.
Let's start with the store. In 2021, Seven Wolves has made a lot of optimization adjustments to offline stores. Seven Wolves had 897 directly operated stores, a net decrease of 12 compared with the previous year, 116 stores closed during the period, and 979 franchised stores, a net decrease of 24 stores from the previous year, and 108 stores closed during the period. The closure of 224 stores, Seven Wolves, said it was due to the expiration of the lease period of the store and the failure to operate as expected.
By the end of 2021, there were only 1,876 Seven Wolves stores left, almost halving the number of 4,007 stores in 2012.
It must be objectively said that the number of stores does not mean everything. Since 2013, the Minpai men's wear, including Seven Wolves, has gradually entered the closure and adjustment cycle, and the channel strategy of various companies has shifted from "expansion" to "upgrading".
Seven Wolves is also upgrading stores, saying in its annual report that "e-commerce has greatly extended the reach of sales and brought new requirements to offline stores." The expansion of the number of terminal stores is no longer the first priority, and the service quality and customer experience of the terminal have become the core competitiveness. "Seven Wolves actively layouts digital stores, launches boutique club image stores, and strengthens the association and interaction between stores and customers through store broadcasts and other forms to achieve the integration of offline and online channels."
Although the terminal stores have been greatly adjusted, in 2021, the sales of the Seven Wolves offline channel increased by 10.77% year-on-year, but the online sales shrank slightly.
But the store is only a place to sell, which cannot solve the design problem of the product.
Over the years, compared with the blossoming of women's clothing, the design of Chinese men's wear brands has always seemed to be an awkward existence. The local men's wear industry continues to paste and copy European and American styles, Japanese and Korean styles, and British styles, staying in the initial stage of clothing production, and failing to form a fashion industry.
The double-sided jacket of the seven wolves was once a fashion item in the wardrobe of middle-aged men. In 2014, Seven Wolves invited Zhang Hanyu to endorse and put forward a brand declaration that "men have more than one side", which is considered to have created a methodology for observing men by publicly acknowledging the multi-faceted nature of men.
But consumers are increasingly buying this methodology. Although the Seven Wolves continue to invite Sun Honglei, Zhang Zhen, Hu Jun, Li Chen and other celebrities to endorse, the most recent one is the flying man Su Bingtian, but the strengthened brand image of the Seven Wolves does not seem to be able to capture the "man's heart" as before.
Marketing didn't work, and R&D didn't keep up. In fact, the overall research and development cost of Chinese men's wear brands is not high. Youngor's research and development expenses in 2020 are only 0.67 billion yuan, Heilan Home's research and development expenses have risen from 0.25 billion yuan in 2017 to 0.83 billion yuan in 2020, and the annual research and development expenses of Seven Wolves in recent years have remained at about 0.5 billion yuan, and in 2021, they have increased to 0.77 billion yuan, and the proportion of research and development investment in revenue is only about 2.1%.
Seven Wolves Annual Report 2021
Similar to the situation of many domestic men's wear brands, the clothing design of the Seven Wolves has never kept pace with the brand upgrade. As its main product, the jacket has a very limited incremental space, and the brand positioning can neither cut into the high-end track, nor can it win the favor of the "Z generation".
The seven wolves were not without trying to catch the young man.
Seven Wolves began to strengthen the promotion of live broadcasts and mini programs. In terms of marketing actions, seven wolves appeared in Shanghai Fashion Week, launched a designer joint model, and created a national tide style; cooperated with head anchors such as Wei Ya; carried out "planting grass" marketing on Weibo and Xiaohongshu; and engaged in "cross-border joint name" with Liepin, China Post, Ele.me, etc.
Seven Wolves has also tried to launch a young light luxury brand. In 2017, Seven Wolves spent 240 million yuan to acquire control of the chinese operating entity of the Famous Fashion Designer "Lafayette" of the same name, french luxury brand Karl Lagerfeld; The incubation launched the Italian fashion brand "Wolf Totem" h and the brand "16N" for young people.
But for the Seven Wolves brand, catching young people may be a congenitally inadequate proposition. Because since its inception, its consumer positioning is not young. Seven Wolves belongs to social clothing, and the core consumers are middle-aged men, even slightly younger in their 30s.
What the seven wolves must do is to introduce the post-80s into the core customer base, replace the loss of the post-60s, and in the future, introduce the retirement loss of the 90s to replace the 70s, otherwise it will inevitably be green and yellow.
However, in the eyes of the post-80s and post-90s, the seven wolves are worn by the elders, which requires the seven wolves to carry out "brand fashion", introduce the post-80s at the same time, retain the post-70s, and ensure the orderly advancement of brand transformation.
Li Ning and ANTA are a good example, positioning the brand as "fashionable, cool, global vision", providing more personalized and fashionable products, and with the help of the national tide, completed the transformation of consumer brand mentality.
Obviously, the Seven Wolves still have a long way to go.
The seven wolves continued to make up lessons
Exquisite writer Guo Jingming described his understanding of fashion in the 314 pages of the book "Your Life Is So Long": "I am in my second year of junior high school. I had my first pair of LINING sneakers. I began to feel that Giordano and Benny Road were designer clothes. At that time, there was no Metsbonwe, and there was no Semir. I used the pocket money I had saved for a long time to buy a vest for Giordano's 98 yuan. ”
In 2008, Xiao Si had already arrived in Shanghai, and he was still in love with Giordano and Benny Road.
In "The Little Times 1.0 Origami Era", he poured out his emotions, "The flagship stores on Nanjing Road Giordano and Benny Road flashed huge electronic screens. In the gold and silver buildings full of streets, the gold chains are thicker than one. Countless pedestrians held up their cameras, and the flashes clicked and flashed. ”
But what he didn't know was that a few years later, the era of Chinese clothing brands was as fragile as paper.
In 2012, the peak number of Benny Road mainland stores reached 4,044, but in the next six years, a total of 3,000 stores were closed, and due to continuous losses and no hope of transformation, they were sold by the parent company for 250 million yuan in 2016.
Giordano's performance peaked in 2013 with revenue of HK$5.848 billion and has since fallen all the way, with sales down 5% in 2014 and 3% year-on-year in 2015. By 2021, it will finally turn a profit.
After 2012, the Chinese menswear collective entered a difficult period. Affected by international FMCG clothing brands such as Zara and H&M, chinese consumers' fashion choices have doubled, coupled with the rise of online shopping, the local men's wear road is getting slower and slower.
The root cause is that Chinese men's wear has not established its own fashion system. The fashion system is a complex system that integrates the production, sales and promotion of clothing. It also means not only business, but also the subtlety of culture. Fashion is only called fashion if it reacts to the era and society in which it is located, otherwise it is just a trend without a soul.
Japan is a good example. Before 1960, Japan was also a fashion desert. But now, Yohji Yamamoto, Rei Kawakubo and Issey Miyake... Japan's fashion aesthetic has influenced global fashion trends.
Looking back at the history of modern Japanese menswear, we will find that every wave of clothing revolution, including jeans revolution, Yankee style, ancient fashion, etc., is accompanied by textbook fashion education.
While importing and imitating, Japanese men's wear companies continue to internalize and create, taking American clothing items as prototypes, dismantling them one by one, patiently studying, and then innovating. For example, Full Count jeans founder Tsujida Kanharu, carefully studied every detail and every stitch of Levi's vintage jeans, and found that the cotton fiber of the old jeans was longer, which was the top raw material that industrial spinning technology could not afford, thus inventing high-grade denim fabric.
In China today, there is men's clothing, but there is a lack of men's clothing culture. Looking back at the development of Chinese menswear, in addition to the pursuit of commercial success, it seems that establishing its own fashion system has never been its goal.
Shanshan clothing "not doing business", turned to the development of lithium batteries, investment in private hospitals, but also want to develop cultural tourism towns in Turpan, Guilin Yaoshan and other scenic spots; Youngor invested in real estate, but also opened a zoo in Ningbo.
Since 2013, many domestic garment groups have chosen the "industry + investment" two-wheel drive and interdependent business structure. The Seven Wolves also gradually began to develop content other than their main business, such as investment.
In 2014, Seven Wolves took back the original externally authorized knitting trademark and began to make men's underwear, underwear, socks and knitted products. The second is the horizontal expansion of cross-field, which has opened up the operation mode of "industry + investment", one of the important means is real estate operation. In addition, Seven Wolves has also entered the venture capital industry, and it is also doing a good job, and public data shows that Seven Wolves has set up 6 investment companies, such as Xiamen Seven Wolves Equity Investment Co., Ltd.
In the first two years, the diversification of the seven wolves also played a good effect, men's underwear, underwear, socks and other products contributed more than 1.1 billion yuan of revenue to the seven wolves, accounting for 36.34%; the real estate sector revenue accounted for the highest proportion of the main business income of the seven wolves reached 58%, even more than the main business of men's clothing income.
However, in the past few years when the diversification of seven wolves has been booming, China's men's wear market has undergone profound changes, and although seven wolves have seen the opportunity of fast fashion, seven wolves have not had the ability to optimize and regulate efficiently like ZARA, Uniqlo, and H&M.
The general process of the product cycle of the global apparel industry is: market feedback, concept, demonstration, development, testing, mass production, promotion, listing, life cycle assessment, fast as 4 months, slow as one year, and fast fashion brand ZARA can reach 2 weeks. During these years, the Seven Wolves gradually degenerated from one protagonist to a marginal role.
The continuous decline of the main business has also made Zhou Shaoxiong, the founder of Seven Wolves, begin to reflect. In 2018, Zhou Shaoxiong said that after nearly 30 years of development, the seven wolves, after going through many detours, realized that only by returning to their old business was the most correct choice.
There are already too many lessons for the seven wolves to make up, but fortunately there is still space and time.
The scale of China's men's wear market is growing steadily, and there is considerable room for growth of fashion casual men's wear brands in the future. According to the report of the China Research Institute of Industry, according to the statistics of retail sales, the size of the men's wear market in mainland China in 2020 was 510.8 billion yuan, down 12.02% year-on-year. After the epidemic, the men's wear market will maintain a stable growth trend, and it is expected that the Chinese men's wear market will reach 657 billion yuan in 2025, with an average annual compound growth rate of 3.26% in 21-25 years.
Seven Wolves is also working hard to reverse the brand image, in addition to expanding online channels, store digitalization, new media marketing, internal brand incubation, in 2017, it spent 320 million yuan to acquire Karl Lagerfeld, the designer brand of "Lafayette", making the brand image more international may be the most important step.
Although from the perspective of brand development, it is not in line with the original value route of Seven Wolves, the original brand image and culture of Seven Wolves, and most importantly, the accumulation and experience of its business management and market development, have certain differences with light luxury brands, how to continue to eliminate this difference, across the obstacles of transformation, is still a long-term proposition of Seven Wolves.
But after a series of losses, Karl Lagerfeld finally achieved profitability for the first time in 2021. From the financial report data, Karl Lagerfeld brand sales revenue in the reporting period of 279 million yuan, to achieve "double" growth, to achieve a net profit of more than 11 million, year-on-year turnaround, the business is seven wolves to open the window in the field of light luxury clothing, is expected to create a new incremental space.
"Men have more than one side, how many sides do you have?"
As the helmsman of the Seven Wolves, Zhou Shaoxiong should be the last person to make a decision on this slogan. To that question, his answer was, "There are at least two sides." Rigidity and softness go hand in hand. "The next step is to see how the seven wolves continue to be tough and soft.