Interface News Reporter | Alice Chu
Interface News Editor | Lou Jingqin
Peacebird failed to get off to a good start in 2024.
According to the financial report released by Peacebird on April 15, in the first quarter of 2024, Peacebird's revenue decreased by 12.92% year-on-year to 1.806 billion yuan, the net profit attributable to the parent decreased by 26.92% to 159 million yuan, and the net profit deducted from the non-attributable parent decreased by 39.22% to 108 million yuan.
After years of revenue growth and reaching a peak of 10.9 billion yuan in 2021, Peacebird's revenue declined sharply in 2022 and 2023, falling to 7.8 billion yuan in 2023, returning to the level of 2018.
The women's clothing business, including Peacebird Women's Wear and Le Town, has been the main reason for the drag of Peacebird in the past two years, while the men's clothing business has been relatively strong. From 2021 to 2023, the annual revenue of Peacebird men's clothing fell by about 9.7%, while the revenue of Peacebird women's wear, Le Town and children's clothing brand Mini Peace fell by 35.7%, 45.9% and 24.6%, respectively.
In fact, in 2023, the annual revenue of Peacebird men's wear has surpassed that of peacebird women's wear and become the number one brand under Peacebird.
The same is true for the latest quarter.
In the first quarter of 2024, Peacebird's men's clothing revenue decreased by 5.64% year-on-year to RMB770 million, accounting for 42.8% of total revenue, Peacebird's women's clothing revenue decreased by 12.98% to RMB651 million, accounting for 36.0%, and Le Town and Mini Peace decreased by 37.50% and 9.18% respectively, contributing 7.5% and 12.6% to total revenue, respectively.
Peacebird menswear is also the brand with the highest gross profit margin in the first quarter of 2024, reaching 59.70%, higher than Peacebird women's wear (54.03%), Mini Peace (55.71%) and Rakucho (43.12%).
Cheng Weixiong, an independent analyst of the fashion industry and founder of Shanghai Liangqi Brand Management Co., Ltd., told Jiemian News that the men's clothing market is more stable than women's clothing, mainly because of the differences in the demand for fashion between male and female consumers, such as male consumers' demand for clothing colors, versions and accessories is not as rich as that of women.
"As long as men's clothing generally grasps the direction and continues to do it unswervingly, it is generally more steady. Cheng Weixiong said.
One manifestation is that local men's listed companies will generally recover in 2023. SAINT ANGELO, Seven Wolves and China Lilang recorded revenue growth of 21.82%, 6.70% and 14.84% respectively in 2023, while Heilan Home, Youngor clothing business and Joeone recorded revenue growth of 13.85%, 12.83% and 9.57% respectively in the first three quarters of 2023.
Women's clothing, on the other hand, is more uncertain because it is more susceptible to trends and has regional aesthetic differences. Cheng Weixiong believes that this is why it is more difficult for women's clothing brands to become a national scale, and small and beautiful women's clothing brands have room for growth, because they can respond faster to fashion trends and have more advantages in price.
The decline in revenue of Peacebird, or Peacebird's women's clothing brands, is also largely affected by this. Cheng Weixiong believes that in recent years, the popularity of sports, outdoor, national fashion and other styles has had a greater impact on casual fashion brands such as Peacebird, and the online women's clothing market is also intensifying involution. Not only Peacebird, but also fast fashion brands have generally underperformed.
To add insult to injury, Peacebird's business strategy in the past few years has also begun to show shortcomings, which is not conducive to its response to changes in the market environment.
Interface Fashion mentioned in a previous report that Peacebird has implemented a popular product strategy on its products, which has boosted Peacebird's sales growth and the improvement of its brand awareness, but chasing popularity is not conducive to Peacebird's establishment of a highly recognizable brand image, and the large number of SKUs has also exacerbated inventory pressure.
In 2021, when Peacebird's revenue hit a new high, its inventory increased to 2.540 billion yuan, accounting for 23.3% of total revenue. For comparison, Uniqlo's parent company, Fast Retailing, and Zara's parent company, Inditex Group, have inventories-to-revenue ratios of 16.2% and 8.3%, respectively, in fiscal 2023.
In terms of channels, about 70% of Peacebird's revenue comes from offline, and it is mainly from franchise stores. In 2021, Peacebird expanded rapidly, with 598 net stores, bringing the total number of stores to 5,214, of which 69% were franchised stores. In order to attract franchisees, Peacebird also gave the latter a certain percentage of the right to return, which also increased the inventory risk to a certain extent.
Although the expansion of offline stores can bring revenue growth, it also means that the adjustment of offline channels will directly affect their revenue levels. In 2022 and 2023, Peacebird put the brakes on store expansion, closing 543 and 940 stores respectively. In the first quarter of 2024, the number of Peacebird stores continued to decrease to 3,671.
Since 2022, when the crisis first appeared, Peacebird has been taking measures to reduce costs and expand profits.
The aforementioned drastic reduction in stores is one of them. In addition, Peacebird has also managed to reduce inventory, control discount rates, etc. In 2023, PEACEBIRD's inventory decreased by 27.8% year-on-year to RMB1.59 billion, accounting for 20.4% of total revenue, a decrease of nearly 3 percentage points from 2021, and its gross profit margin also increased to 54.52%, while PEACEBIRD's gross profit margin from 2020 to 2021 has been lower than 54%.
The reform has also been further advanced to the organizational level. In 2023, Peacebird will start the "first year of major organizational change", shifting its organizational structure from the original business unit system to a functional department system, with the aim of realizing professional and centralized management of core businesses such as product development, retail operations, and supply chain.
Cheng believes that the change in organizational structure can change the situation of brands in silos, and help Peacebird to deploy and integrate resources in a unified manner and exert synergies.
One of the manifestations of the impact of the organizational restructuring on the business is that there is a trend of integration of Peacebird's men's and women's wear brands. The two jointly released a new product for the first time in 2023, and Peacebird also revealed in its financial report that it will pull through the style series and visual image of men's and women's clothing in 2024.
On the whole, Peacebird's transformation strategy in the past two years has pointed to the improvement of business quality, rather than the growth of revenue scale. This is also a common turn for apparel companies when they are in a growth dilemma.
Cheng Weixiong believes that returning to the pursuit of profit scale is the path of sustainable development of enterprises. From this point of view, the development of Peacebird in recent years is also a microcosm of the transformation of Chinese brands. "Blindly pursuing the growth of income scale is not long-lasting. Only when you can make money can you survive and do well in the Chinese market. ”
But improving margins may be just as difficult as revenue growth. Peacebird's net profit margin in 2023 reached 5.4%, a significant increase from 2.1% in 2022, but it has not yet recovered to the level of 6% or even more than 7% in 2021 and before. In the first quarter of 2024, Peacebird's net profit margin was 8.8%, down 1.7 percentage points from 10.5% in 2023.