The stock price of sports brands fell significantly, and inventory was under pressure
2023, with weak consumption, can hardly be called a good year for sports shoes and clothing, and one sign is the dismal performance of listed companies in the secondary market. Throughout the year, Xtep International's share price has fallen by nearly 50%, and Li Ning's stock price has fallen by nearly 70%. For example, the growth of Li Ning is slowing down, and after the national tide is over, the main brand stall exposes the risk of Li Ning's single-brand strategy, and Li Ning urgently needs a reliable new growth point, but the peers who adopt a multi-brand strategy do not mean that they can sit back and relax. Xtep's second curve still needs to be consolidated, the proportion of acquired brand revenue is still small, and it still needs to prove itself; Amalfen, which was acquired by Anta at a high price, has broken the circle of its Arc'teryx and Salomon, but the proportion of Amalfen's revenue is still not high, which is not enough to make up for the liabilities caused by the acquisition, but fortunately, the independent listing process of Amalfen has made substantial progress at the beginning of 2024.
But there seems to be the same shadow behind the lack of confidence in the capital market - the inventory problem. In the second half of 2022, from Nike, Adidas to domestic brands, sports brands began to collectively discount. Corresponding to the collective increase in the inventory turnover days of brands this year: Anta's inventory turnover days increased by 11.2 days, Xtep increased by 12.9 days, and Li Ning increased by 3.9 days. In 2023, the inventory problem has not eased. In the first half of the year, ANTA's inventory turnover days decreased by 21 days from 124 days compared to the previous year, but the inventory value reached RMB6.5 billion, while the on-board inventory of Li Ning reached RMB2.120 billion, a year-on-year increase of 7.25%, and the inventory turnover days increased from 55 days in 2022 to 57 days. At the end of the third quarter, Li-Ning's omni-channel inventory-to-sales ratio increased from 3.8 months in the second quarter to about 5 months, while Xtep's channel inventory turnover remained at 4.5-5 months in the third quarter. In 2023, the intensifying discount war has already made a difference.
The inventory problem of Chinese sports brands is part of the global inventory crisis. In 2023, FT issued an article saying that there are signs of excess inventory in the global manufacturing industry. Inventories of major companies reached $2.12 trillion at the end of September, 30% higher than before the pandemic. While supply chains have normalized, destocking in many industries has been slow due to China's economic slowdown, among other reasons, and the time it takes to digest inventories has been historic.
Inventory problems are always cyclical, and the last inventory crisis after the Beijing Olympics is still fresh in our minds, and Chinese sports brands have tried their best to get out of the mud. In the context of the economic downturn, whether Chinese sports brands can avoid repeating the mistakes of the past and digest inventory as soon as possible in 2024 will determine the direction of the industry in the new year.
Carbon plate running shoes sink
With Nike's two-way plan, carbon plate running shoes have become a trend that has swept everything since 2019. As an epoch-making product, carbon plate running shoes have entered the Chinese market with a very high attitude, because the production capacity cannot keep up, and the price of running shoes was once unattainable. In 2019, Li Ning launched the first pair of domestic carbon plate running shoes, and the price of Feidian was more than 2,000 yuan. In the market cultivation stage, the sales of carbon plate running shoes were not large, and the brand did not make any money.
However, in order to keep up with this epoch-making technology, domestic brands have made huge investments, and brands need carbon plate running shoes to bring real benefits, on the other hand, the strong supply chain of China's footwear and clothing industry has made the cost of manufacturing a pair of carbon plate running shoes drop again and again. This makes the sinking of carbon plate running shoes inevitable. In fact, from the spark of carbon plate running shoes to the powder keg of China's production capacity, the sinking has begun, but in 2023, the pace of carbon plate running shoes sinking will be further accelerated, and the price war has become the main theme of the domestic carbon plate running shoes market.
Now there is a lot of room for folding in all aspects of making a pair of carbon plate running shoes, such as in the midsole, there are many operations that can reduce costs in foaming materials and foaming methods. Taking Li Ning's carbon plate running shoe midsole technology - 䨻 as an example, there are high and low configurations, PEBA materials are used for high and low configurations, and cheaper TPU and TPEE materials are used for medium and low configurations. For the giants, carbon plate running shoes have also been able to achieve price sinking through matrix methods, that is, to launch a variety of carbon plate running shoes, in the middle of each running shoe to open the differentiation, sink to all levels of runners and different use scenarios. A typical example is that when it was released this year, Li Ning distinguished the Feidian 3 into three products - Ultra, Elite and Challenger. Among them, the most affordable Challenger3 is now priced at more than 500 yuan in the official store.
Industry insiders told Lazy Bear Sports that carbon plate running shoes will continue to sink in 2024, and at the same time, a number of small brands and even Tao brands will enter the game to further reduce the price of carbon plate running shoes, and the track will become a red sea at that time. Another noteworthy track in the new year is ANTA's running action. In 2023, ANTA reorganized the product line of the C202 series, among which the C202 5th generation GT PRO frequently made the podium this year, forming the product matrix of ANTA's C family racing running shoes. From a series of actions in 2023, it can be seen that ANTA's main brand will become a key variable in the running track in 2024.
The national fashion fades, and the brand favors specialization
Not long ago, Guochao was still a lever for sports brands to leverage sales, but in 2023, the national tide trend is accelerating the fire, and China Li Ning, which once used Guochao as a signboard and used it as a high-end fulcrum, will also stumble in 2023. China's Li-Ning's loss of momentum dragged down the share price of Li Ning, which fell by 20.7% the next day in its third-quarter financial report released on October 25, and Li Ning could only buy back shares for two consecutive days thereafter.
The loss of Guochao and China's Li Ning shows that the limelight of sports fashion is waning, and some vigilant brands have taken a new round of "return to professional sports" in various ways in 2023.
In 2023, FILA will make significant efforts in the professional sports vertical, closely following the needs of high-net-worth users in first- and second-tier cities, focusing on tennis, golf and elite running.
With a new CEO, Adidas is focusing on professional sports, shifting from working with fashion icons to building more collaborations with sports stars, while Adidas is also aiming for the Paris Olympics, saying it will find a presence in niche sports such as cross-country, rock climbing, skateboarding and BMX. The same is true in China, FILA, which is benchmarked against China's Li Ning, has always been a representative brand of sports fashion, after its revenue declined in 2022, and in 2023, FILA will return to the growth track after adjustment, and FILA, which has some feelings, has accelerated the pace of professional sports. Although the tone of the brand is still sports fashion, in 2023, the brand will be professional, and it will fully invest in the three professional sports fields of golf, tennis and skiing, especially the huge investment in the golf line, not only separately demarcating the FILA Golf Division, but also signing a number of athletes. Li Ning has also realized the importance of professionalism. In March last year, CEO Qian Wei said, "As long as there is a clear investment plan, there is no upper limit on the budget of the R&D and innovation team." In a financial report in 2023, Li Ning also mentioned that "the core of the company is to focus on the technology platform and be driven by science and technology", but there is a lag in research and development, and it will take time for Li Ning's specialization to bear fruit.
Therefore, if inventory is the sword of Damocles on the head of sports brands, then fashion is the "poisonous mushroom" of sports brands, which looks beautiful but will be poisoned if eaten improperly.
Sports brands accelerate the layout of outdoor tracks
In 2023, when the economy is weak, outdoor is still one of the few areas with relative certainty, so sports brands, including giants, are still trying to carve up this market in various ways.
One way is through investments and acquisitions. In December, private equity firm Lane Capital announced the acquisition of a 100% stake in outdoor brand Haglöfs AB from ASICS. Lane Capital and Li Ning are inextricably linked. In 2019, Li Ning Company said that it would jointly establish a private equity fund with Lane Capital, hoping to invest in suitable foreign consumer and sports brands through this fund. Therefore, although this acquisition is not a direct acquisition by Li Ning, it is also an investment by the Li Ning family in the outdoor field.
Channel brands are also taking to the table, and a landmark event is the heavy outdoor position of Taobo Sports in 2023. In June, Taobo announced its cooperation with two outdoor brands, HOKA ONE ONE and Kaile Stone, and invested in Lengshan Ski Equipment, one of the largest ski equipment retail chains in China, and Mounster Mountain Culture, an outdoor vertical content organization. Taobo's series of investment behaviors are similar to the purpose of its previous investment in e-sports, that is, to actively deploy in more areas in addition to the main business of sports retail.
Another way for sports brands to increase their outdoor size in 2023 is to bury their heads in hard work. In the outdoor sector, Anta established its advantage early on with the acquisition of Amalfen. In 2023, ANTA's main brand will also start to hold high and become a professional outdoor. On the product side, ANTA has launched a professional 1,000-yuan "Storm Armor" series of jackets, and ANTA's confidence in positioning 1,000 yuan is the "Anta Film" jointly developed by Anta and universities, which has an obvious intention to benchmark GORE-TEX waterproof technology. In terms of cross-country running, the main brand has launched three cross-country running shoes, Taihang, Hengduan and Qilian, forming a matrix from racing off-road to urban light outdoor off-road, catering to the rising status of this sport. In addition to products, ANTA is penetrating into the outdoor industry chain from multiple directions. In 2023, ANTA won the naming rights of the famous cross-country race Hong Kong 100, which is also the first time that the title sponsor has been changed since the establishment of the event. In the future, it is worth paying attention to whether ANTA, like Kaile Stone, will have its own event IP in addition to its products and form an ecological closed loop in a certain outdoor subdivided sport. How the "catfish" of Anta's main brand stirs up China's outdoor products industry will also become the suspense of the new year.
Foreign giants are also increasing their outdoor, and Decathlon acquired a European online outdoor e-commerce platform at the end of 2023.
Sports headphones continue to rise, and "open" products become a bright spot
In terms of sports electronic products, there are not many highlights in the main category of smart watches in 2023, and there are few breakthrough updates and iterations on products. Sports headphones have surprises. Although in-ear Bluetooth headsets have occupied the mainstream for many years, they have entered a bottleneck period. In contrast, in 2023, in-ear headphones will maintain rapid growth, among which the new category of open-back headphones has a particularly rapid upward momentum, and while the user base is snowballing, various brands are competing for this new track, the most representative of which is Shokz. Since its inception, Shokin has become somewhat synonymous with bone conduction headphones. In 2023, when people thought that Shokin would still bring a bone conduction product at this year's new product launch event, the brand handed over its first split non-in-ear headphone Shokin OpenFit at this time. It continues Shokin's advantages in products that do not fit into the ear, but this headphone, which is sold as comfortable to wear, has actually jumped out of the path of bone conduction technology, and is a true open-back headphone while ensuring excellent output of sound quality. These advantages determine that this product has the possibility of breaking the circle and moving from professional to popular, and the emergence of OpenFit also marks that Shokin is expanding to all scenarios.
The bigger picture requires the right marketing approach. On the one hand, Shokin's response is to increase the number of offline. Following the launch of its first store in Shenzhen, Shokin will continue to implement its DTC strategy in 2023, landing stores in many first- and second-tier cities in China, with directly operated stores and authorized stores forming its global layout of more than 20,000 offline stores, which is helping brands to show themselves more intuitively to end consumers. On the other hand, the sports crowd is still the most important niche for Shokin. Previously, Shokin has laid the foundation in the sports circle, and in 2023, it will continue to cultivate more projects and reach users offline in various ways. In 2021, Shokin signed Kipchoge as the spokesperson for Greater China. In 2023, Shokin renewed his contract and invited the marathon top runner to complete a huge trip to China. At the China Carnival in October, Kipchoge shared his running techniques and experiences on core strength training and running posture correction to runners and Shokz users, and at the subsequent meeting, he and Yang Yun, CEO of Shokz China, unveiled the Shokz Running Club, marking the establishment of the Shokz brand's independent community activities. Based on this, since then, Shokin has successively landed activities such as Shokin running bars, sports parties, cyclists, and campus trips in communities and universities. Coupled with continuous event sponsorship, Shokyin's presence in the sports circle has been further consolidated and enhanced. According to the "China Wireless Headset Market Quarterly Tracking Report" released by IDC, in the bone conduction headset market in the first half of 2023, Shokz alone accounted for 59.0% of sales, ranking first. OpenFit comfort zone will account for 36% of the sales of earhook ear clip-on headphones in 2023, and it will also rank first among similar products. In the past few years, when consumers' overall consumer demand for digital products has not been high, the category of in-ear headphones has bucked the trend. In the past few years, Shokin has shown us another way for product companies to break through in sports consumption.
Sun-protective clothing and jackets lead the year of large items
In 2023, the pan-outdoor crowd will continue to increase, and brands are still betting on the track, with the joint blessing of both ends of supply and demand, the outdoor field is increasingly showing the ability to give birth to large items, which can be seen from the explosion of sunscreen clothing in summer and jackets in autumn and winter.
"The biggest (outdoor) explosion in 2023 must be sun-protective clothing. An outdoor brand practitioner once told Lazy Bear Sports. After years of lay-out, sunscreen clothing, which is already a large category, has proved the strong malleability of category extension, and a series of reasons such as its further daily clothing make the popularity of the category in 2023 seem to be overwhelming. According to data from Vipshop, a week after the opening of 618, the sales of sunscreen clothing increased by 96% year-on-year, and according to Tmall data, the brands that entered the sunscreen category on the spring and summer platform were also 1.5 times that of last year.
In the second half of the year, the jacket took over, and the heat was even greater than that of the sun-protective clothing. During the Double 11 period in 2023, JD.com's jacket sales increased by more than 100% year-on-year. On Tmall, the sales of jackets increased by 90% year-on-year, entering the top three of the male consumption list. The jacket has a variety of functions, making it infinitely wide in application scenarios, and superimposed on the background of down jacket price increases in 2023, the jacket has become a functional and cost-effective choice for consumers. Different from sunscreen clothing, the popularity of jackets has quite a fashion color, and in recent years, Gorpcore has become popular, and the jacket, as a representative item of Gorpcore, has also had a popular fashion foundation. But from another point of view, the fashion of the jacket has also made it popular for how long it can become a suspense, a senior outdoor practitioner said to Lazy Bear Sports, "The jacket may be a gust of wind, and the repurchase rate is relatively low." ”
Two big items a year, so the suspense left for 2024 is, can the outdoor products industry, which is still the golden track, run the next big item?
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