Reporter | Sun Yi
Edit | Chen Feiyi
ANTA Sports (2020. HK) announced its latest operating performance for the third quarter, with the sports giant's major brands having mixed retail flows. Among them, anta (ANTA) main brand retail turnover is relatively stable, the third quarter of the retail sales amount recorded a low-end positive growth of 10-20% year-on-year; FILA brand growth slowed down, the third quarter of retail sales only recorded positive growth in the number of units; other brands (including DECENT and KOLONSPORT) still maintained rapid growth, the third quarter of retail sales recorded a positive growth of 35-40% year-on-year.
Overall, the growth rate of ANTA Sports's performance in the third quarter fell significantly compared with the first half of the year, especially the FILA brand fell by about 30 percentage points. Since July, Anta Sports's stock price has shrunk by more than 30%, has it been adjusted in place?
<h3>The high-growth engine slowed down</h3>
In 2007, FILA transferred its interest in China (including Hong Kong and Macau) to Belle International, which in 2009 sold this interest to ANTA Sports for RMB332 million.
After Anta Sports took over, it was not until 2015 that FILA achieved a turnaround. After 2016, the FILA brand began to show explosive growth, becoming the largest growth engine of ANTA Sports in recent years. In 2019, ANTA Sports began to disclose FILA brand data separately, and FILA's revenue in that year was 14.7 billion yuan, with a growth rate of 74%. Affected by the epidemic in 2020, the sportswear industry has a low degree of prosperity, but FILA still achieved revenue of 17.4 billion yuan, an increase of 18% against the trend, and the proportion of revenue also reached 49%, supporting half of ANTA Sports.
In the first half of this year, FILA continued to play a pillar role in performance, with revenue of 10.8 billion yuan during the period up 51% year-on-year. The number of FILA brand stores increased to 1979, and nearly 200 stores have been expanded against the trend in the past two years. According to the "2021-2027 China Sports Footwear and Apparel Industry Development Dynamic Analysis and Market Prospect Planning Report" released by Zhiyan Consulting, the FILA market share in 2020 has reached 6.4%, which is comparable to Li Ning's share, second only to Nike, Adidas, and ANTA main brand (ANTA).
From the perspective of the development process of the domestic sports shoes and apparel market, after the annual sales volume of a single brand reaches or exceeds the range of 10 billion to 20 billion, the growth rate generally slows down. Even the better-performing ANTA main brand (ANTA) has only maintained a growth rate of 10%-20% in recent years, while Nike and Adidas are even lower.
"When will FILA stop high growth" has become the sword of Damocles hanging over the head of Anta Sports, and now this sword is about to fall. Judging from the latest operating performance of ANTA Sports in the third quarter, the GROWTH RATE OF FILA brand revenue was about 5%, which was lower than market expectations for the first time in the past five years.
ANTA Sports said that FILA's third quarter performance was partially affected by the epidemic, flood conditions, overheated weather in September, and high base, and from the perspective of the discount rate of key indicators of sales, FILA's third quarter discount still maintained a healthy level of 86%, reflecting that the sales environment did not deteriorate significantly. With the cooling of the south in October, FILA flow is expected to improve sequentially.
But in fact, it is not advisable to be too optimistic about FILA's year-round sales. From the perspective of the core indicator of sales prosperity, the offline library-to-sales ratio of FILA brand in the third quarter reached 6-7 times, and the inventory was higher than in the first half of the year, compared with the 5-6 times library-to-sales ratio of FILA's high-speed growth period. Horizontally, according to Xtep International (1368. HK) latest results announcement, Xtep brand retail inventory turnover in the third quarter was only 4 months.
At the online communication meeting on operating performance in the third quarter, the management of ANTA Sports reminded the market to rationally view the future growth rate of FILA, pointing out that it is difficult to maintain more than 30% growth in such a volume. It is estimated that FILA's annual retail turnover growth rate will fall to around the 20%-25% region, from high-speed growth to medium-speed growth.
<h3>Is an ANTA Sports' stock price adjusted in place? </h3>
Anta Sports' performance relies on the support of the two brands of ANTTA and FILA, and it basically "accounts for half of the sky" from the perspective of revenue proportion. With the growth of the FILA brand changing speed, the annual growth rate of ANTA Sports has fallen back to a certainty. By lowering market expectations for FILA growth, ANTA Sports' management has guided investors to focus on the revival of the ANTA brand and the rapid growth of DECENT and Kolon.
DESCENTE positions professional sports brands, including high-performance sporting goods for skiing, comprehensive training and running, KOLON positions outdoor lifestyle products, and in the ANTA sports product matrix, DESCENTE and Kolon belong to the high-end market & professional brands. In 2019 and 2020, the growth of THE retail sales of DESCENTE and Kolon remained above 30%, and the growth rate of the retail turnover of the two brands reached 90% in the first half of 2021, and the incubation of new brands was recognized by the market.
However, decentre and Kolon sales are small, and they are far from the "picking the beam" stage in the ANTA Sports product matrix. In the first half of 2021, the operating income of all other brands of ANTA Sports (including DECENT and KOLON) was 1.41 billion yuan, accounting for only 6% of ANTA Sports' revenue.
FILA growth has changed speed, and new brands are difficult to replace into new engines in the short term, which may also be the reason for the continuous correction of ANTA Sports' stock price since July. Anta Sports is currently 129.3 Hong Kong dollars / share, and the cumulative correction at the higher point is more than 30%. At present, the company's valuation is close to the historical pivot level, the latest PE (TTM) 40 times, close to the median price-earnings ratio of the past three years 36 times; PB (MRQ) 10.9 times in the past three years median price-to-book ratio between the median and 75 quantiles.
From the perspective of market performance, ANTA Sports fell first and then rose on October 19, and the low level shocked on October 20. Most brokers believe that anta sports' current stock price has reflected the slowdown in growth, but there are also JPMorgan Chase, ICBC International, BOCOM International and other institutions that have lowered their profit forecasts and target prices.