Benefiting from cost reduction and cost control and production reduction and destocking, Peacebird (603877. SH) ushered in a temporary earnings improvement in 2023, which also regained investor confidence. However, the "black start" of the first quarterly report quickly brought back the dream of the short-term surge of the Peacebird.
Yesterday, Peacebird announced a financial report with both revenue and net profit declining. According to the financial report, the company's non-net profit in the first quarter of 2024 is the worst in four years, and at the same time, revenue has declined again, and before that, the company has had negative revenue growth for two consecutive years.
Simply "saving money" and "shrinking the balance sheet" to improve profitability is not a long-term solution. How far is the peacebird, which sacrifices growth but has not been able to find a sustainable profit growth point for a long time, and is all dependent on eating its old capital, to be abandoned by the capital market?
Continue to close stores and reduce costs and control costs
According to the first quarterly report, Peacebird's operating income in the current period was 1.806 billion yuan, a year-on-year decrease of 12.92%, and the net profit attributable to shareholders of listed companies also fell to 159 million yuan, a year-on-year decrease of 26.92%. After deducting non-recurring gains and losses, the net profit attributable to shareholders of listed companies was 108 million yuan, a year-on-year decrease of 39.22%.
Main financial indicators, source: first quarterly report
The reason for the decline in non-net profit was mainly due to the year-on-year decline in operating income and gross sales margin for the period, resulting in a decrease in gross sales profit.
The gross profit margin of the main business sales in the current period was 55.34%, a year-on-year decrease of 4.80 percentage points.
In terms of brands, the gross profit margins of the four main brands of Peacebird have declined to varying degrees, among which the gross profit margins of two women's clothing brands have declined significantly, and the revenue of PEACEBIRD women's clothing and LEDiN Rakucho girls' clothing has declined by 12.98% and 37.5% respectively.
This is the first quarterly financial report disclosed by Peacebird since the company underwent organizational changes and its net profit increased significantly in 2023. The outside world had previously been full of expectations for the company's return to growth this year. However, judging from the overall decline in the indicators disclosed in the first quarter, it is obvious that the performance in the first quarter did not meet market expectations.
In 2023, the company achieved operating income of 7.79 billion yuan, a year-on-year decrease of 9.4%, a net profit attributable to the parent company of 420 million yuan, a year-on-year increase of 127.1%, and a non-net profit of 290 million yuan, resuming growth.
It should be pointed out that the earnings surge in 2023 is based on a low base. According to the financial report data, 2022 is considered to be the worst year for Peacebird since its listing. This year, Peacebird's net profit decreased by 72.73% year-on-year, and the non-net profit was -26.84 million yuan.
In terms of Peacebird, the growth of last year's performance was attributed to the optimization of store closures and cost reduction.
In its 2023 annual report, Peacebird said that the company took the initiative to optimize and adjust inefficient stores last year. Although the annual retail sales declined, the retail discount rate increased significantly year-on-year, and the corresponding gross profit margin increased by 5.9 percentage points year-on-year.
In fact, back in 2022, the company closed 1,619 stores while opening 1,076 new stores, a net decrease of 543 stores.
Last year, Peacebird vigorously adjusted its inefficient stores, with a net closure of 940 stores for the whole year. As of the end of 2023, Peacebird has 3,731 offline stores, including 1,175 directly operated stores and 2,556 franchised stores.
In the first quarter of this year, Peacebird continued to optimize its stores, adding only 39 new stores and closing 99 stores during the reporting period, with a net decrease of 60 stores.
Regardless of whether active or passive, optimizing inefficient stores is indeed beneficial to reduce costs and increase efficiency, but does continuous store closure damage brand influence and market share?
Peacebird has said that it will change the past channel scale growth strategy, the company will focus more on improving the quality of store operation and profitability, vigorously close inefficient stores, and shift the focus of operation to improve the terminal brand image and store floor efficiency. At the same time, the value proposition of the channel and the key areas of business expansion are more clear, and the channel structure and channel strategic direction are adjusted for the company's future high-quality growth.
Judging from the performance of the first quarter, it is inevitable that Peacebird will suffer short-term pain.
Reduced production to inventory, how long can the old Ben eat
According to public information, Peacebird has four major product lines, including PEACEBIRD women's wear, men's wear, LEDiN girls' wear, and Mini Peace children's wear. In 2023, only Peacebird's men's clothing revenue will increase by 4.16% year-on-year, and the rest will all decline by double digits.
In the first quarter of 2024, the revenue of the above four major product lines will decline across the board. Among them, the decline of women's clothing brands was more dramatic, with the revenue of PEACEBIRD women's clothing and LEDiN Rakumachi girls' clothing falling by 12.98% and 37.50% year-on-year respectively.
It is worth noting that in the past 10 quarters, Peacebird has experienced year-on-year revenue declines in nine quarters, with the earliest decline beginning in the fourth quarter of 2021.
分季度表现，来源：Wind
Judging from the situation reflected in the financial report, cost reduction and cost control have an effect on the short-term gross profit improvement of Peacebird, but the company is still facing a continuous shrinking revenue. How to reduce costs and control costs without losing growth is a problem that Peacebird must face.
In the first three quarters of 2023, the company's net cash flow from operating activities increased. As for the reason, Peacebird explained that "it was mainly due to the decline in remuneration and other operating expenses paid from the beginning of the year to the end of the reporting period".
For the full year of 2023, the company's net cash flow from operating activities was RMB1.276 billion, a year-on-year increase of 220.01%, which Peacebird explained as "mainly due to the year-on-year decrease in inventory procurement and daily expenses paid in the current period".
It is reported that last year, Peacebird continued to promote inventory management. On the one hand, the planned control of commodity production and marketing has been strengthened, and the inventory of new products has been optimized; on the other hand, the special mechanism for the digestion and treatment of old products that have passed the season has been strengthened, and the inventory of old products has been improved. At the end of the reporting period, the original value of the company's inventory was 1.59 billion yuan, a year-on-year decrease of 610 million yuan, or 27.8%.
However, according to the observation of Titanium Media App, the decline in Peacebird's inventory last year was more dependent on active production reduction.
Judging from the disclosed data, the company's production and sales declined to varying degrees last year, and the overall output decline was significantly higher than the sales decline.
Taking thick coats as an example, last year's output was 3,143,600 pieces, down 28.88% year-on-year, sales volume was 4,017,200 pieces, down 16.04% year-on-year, and inventory was 1,510,400 pieces, down 36.80% year-on-year.
Production and sales analysis, source: 2023 annual report
However, since the beginning of this year, the improvement of cash flow by reducing fees and destocking has no longer worked.
In the first quarter of this year, the net cash flow generated by Peacebird's operating activities was 8.169 million yuan, a year-on-year decrease of 94.36%. The decline was mainly due to the decline in operating income in the current period and the year-on-year decrease in cash received by the company from the sale of goods.
To sum up, it may be possible to conclude that the methods of cost reduction and cost control and strategic contraction are gradually not working.
As of the end of the first quarter of 2024, Peacebird still has an inventory amount of 1.368 billion yuan, and it is speculated that most of it is inventory goods with reference to the annual report data.
Should we hope to continue to clean up outdated and obsolete inventory clothing to realize the dream of growth? Without growth and sustained profitability, can such a peacebird still be favored by the capital market?
As of the close of trading on April 16, Peacebird was reported at 14.99 yuan, down 10%.
(This article was first published on the Titanium Media App, by |.) Ma Qiong)