Author | Ou I, Moma
Edit | weber
The essence of business is to shape and lead people's lifestyles. In the era of national fitness, sports shoes and clothing brands that accompany running have naturally become the focus of attention in the domestic and foreign consumer markets.
Recently, Xtep International has completed the multi-brand strategic reorganization, and the fashion sports business that has "dragged its feet" has been successfully adjusted. As soon as the news came out, Xtep International's share price rose by more than 7% at one point.
Xtep International's privatization of KP Global, which belongs to the Gasway and Paladin brands, not only strengthens the running mentality of the Xtep brand in the minds of consumers, but also concentrates resources on the direction of the high-profit main brands, Saucony and Mellor, bringing strong growth to Xtep in the development of popular and professional sports.
From an industrial perspective, the development of Chinese sports brands is much more than just acquiring a few international brands. The uncertainty is that business diversification is only in the commercial sense, and it is easy to see results, while when it comes to the core direction of the enterprise, it is a strategic challenge.
On May 9, Xtep International announced on the Hong Kong Stock Exchange that in order to eliminate the continuous impact on the group's profitability and cash flow due to the losses of the "Gasway" and "Paladin" brand businesses, after full consideration, the controlling shareholder Ding family proposed to acquire KP Global, which owns the "Gasway" and "Paladin" brands, at a consideration of US$151 million. Upon completion of the disposal, the Board intends to declare a special dividend of approximately US$151 million to shareholders.
At the same time, Xtep International has also reached a supporting agreement with Hillhouse Capital to optimize its financial structure. Hillhouse Capital and Xtep International also agreed in the relevant terms and conditions that they will retain the right to purchase KP Global in the future. Xtep's choice to privatize KP Global is actually a strategic "slimming", divesting those non-core businesses that cannot bring long-term benefits, and "unloading the burden" in order to travel lightly.
It is worth noting that the adjusted KP Global remains an important asset for the Ding family. After privatization, the two brands of Gasway and Paladin have more opportunities to let go of their fists and feet, and if they make a profit in the future, Xtep International may also take it back.
Ding Shuibo, Chairman and Chief Executive Officer of Xtep International, said, "Following a comprehensive review of the Group's business strategy and financial objectives, we have made the decision to sell and privatize KP Global. ”
On the one hand, Xtep plans to pay a special cash dividend of US$151 million to shareholders; On the other hand, Xtep International has also reached a supportive agreement with Hillhouse Capital to optimize its financial structure.
After completing the strategic slimming, Xtep International, which has always been regarded as "one of the four major sporting goods in Hong Kong stocks", has made more precise efforts, continued to grow bigger and stronger in the running track, and maximized its advantages.
Xtep International's choice of business structure adjustment this time is not only to reduce risks, but also to re-carry out the brand layout, sort out advantageous resources, and continue to build product benchmarks and brand benchmarks in sports brands.
Ding Shuibo once pointed out at the performance meeting that Xtep's main brand is deeply involved in mass sports, and the new brand focuses on the high-end market and plays a differentiated combination in channel product marketing.
Saucony's brand positioning is to serve the running elite and social elites, which has formed a certain complementarity and differentiation with Xtep's positioning of the mass sports brand.
What is commendable is that Xtep has formed its own unique product strength and user mentality in the face of international giant competition and the trial of mass runners. The "niche" of the core products in the subdivided field has created a huge imagination space.
2024 is a veritable sports year, and it is a year for sports industry entrepreneurs to devote themselves to rapid development. The 33rd Summer Olympics in Paris, the Asian Cup of Football, the European Cup and the Copa America, the World Women's Volleyball League, the Athletics Diamond League and other world-class large-scale events have gathered, and the enthusiasm of the whole people for sports is high.
Top events have unique IP advantages in terms of influence and value potential, which is not only a feast for the sports circle, but also a consumption boom for national sports.
Taking advantage of this general trend, Xtep is expected to continue the previously proposed strategy of "World Running Shoes, China Xtep" and further expand its running territory to the global market.
Caption: Xtep's official website
Thanks to the explosion of the running market and Xtep's years of deep cultivation, Xtep's revenue and market value have grown steadily. In 2023, Xtep International's revenue will hit a record high, with annual revenue increasing by 10.9% to 14.346 billion yuan, and net profit increasing by 13.24% year-on-year to 1.033 billion yuan, ranking firmly in the 10 billion yuan annual revenue club.
These data are inseparable from years of brand management and accumulation, and also reflect Xtep's good reputation and brand recognition in the hearts of consumers. With a complete set of methodology, Xtep has successfully established itself as the "No. 1 running stock" among Chinese sports brands.
In recent years, the concept of "sports is fashion" has been deeply rooted in the hearts of the people, which has undoubtedly boosted the demand for sports and sports consumption. According to statistics, in 2023 alone, 18 brands in the Taobao Tmall sports fashion sports section will have a sales scale of more than 1 billion yuan.
In this big year of sports, whoever can keep up with the trend of sports consumption and continue to diversify and innovate the brand may be able to nugget the next "1 billion" player.
In 2023, the fashion and sports business where Gasway and Paladin are located will achieve a revenue of 1.6 billion yuan, a year-on-year increase of 14.3%, although it accounts for only 11.3% of the overall revenue of Xtep Group, but in terms of the fashion sports market, it is already a top player to be reckoned with. The China business of Gasway and Paladin soared by 2.24 times, accounting for nearly 20 percentage points of their global business.
How to take advantage of the momentum of the sports year to make a further leap is not very difficult for the current Gaishiwei and Paladin. It takes time to make a profit, and the current configuration shows the strategy and layout of Xtep's multi-brand strategy.
The "2024 Spring and Summer Taobao Tmall Sports and Outdoor Industry Trend White Paper" reveals three distinct trends of the sports crowd in 2024, namely the "younger" crowd, the "advanced" consumption, and the "diversification" of the scene. We have reason to believe that the once glorious Gasway and Paladin may run out of the dark horse.