An Advance Loss Of 500 Million Half A Year, 2400 Chinese ZARA La Chapelle Closed Its Stores For Survival

The problems accumulated by years of extensive development of La Chapelle finally broke out.

The latest performance forecast shows that the company closed more than 2400 stores in the first half of this year, with a year-on-year decline of more than 20% in revenue and an expected loss of 440 million to 540 million yuan.

Since 2018, Xing Jiaxing has led La Chapelle to try to reverse the crisis by reducing inventory, closing stores and going to direct marketing.

But for this clothing enterprise with more than 9000 stores and annual revenue of more than 10 billion yuan, it is not easy to turn around.

　 Performance plummeted

Once the loss gate is opened, it will be out of control.

In 2018, La Chapelle (603157. SH) ushered in its first loss after listing, and the net profit loss attributable to the parent company was 160 million yuan, which is further expanding.

The performance forecast shows that the company is expected to lose 440 million yuan to 540 million yuan in the first half of this year, down about 364.5% to 418.5% compared with the same period last year.

Xing Jiaxing, the founder and actual controller of La Chapelle, was born in clothing sales. He has always regarded himself as a disciple of ZARA and is determined to build La Chapelle into "China's ZARA".

Xing Jiaxing's pursuit of scale is almost crazy. Especially after La Chapelle's listing in Hong Kong shares and A-shares in 2014 and 2017, she raised more than 2 billion yuan, almost all of which was used for the expansion of stores - in the traditional clothing industry, Xing Jiaxing's approach to large-scale is not smart.

During the rapid expansion period, the company's main direct marketing mode has made the company's store opening strategy well implemented.

Data shows that the number of stores of the company has grown rapidly from more than 1800 in 2012 to more than 9400 in 2017, reaching its peak. The brand camp has also expanded from the past three to more than 20, covering women's clothing, men's clothing and children's clothing.

Correspondingly, the company's revenue scale increased from 2.91 billion yuan to 9 billion yuan, and exceeded 10 billion yuan in 2018.

However, the company's performance did not achieve significant growth with the doubling of revenue, and even recorded its first loss in 2018.

In the half year performance forecast, the company said that due to the continuous downturn of the domestic mass apparel retail market, the company took the initiative to close stores and optimize the channel structure. It is expected that the revenue in the first half of this year will decline by more than 20% year on year.

　 Accelerate store closing

The losses in 2018 poured cold water on La Chapelle. In that year, the company's store opening speed slowed down significantly, and at the same time, it increased its store closing efforts. The number of stores grew negatively for the first time.

At the beginning of this year, the company further increased the speed of closing stores. The total number of closed stores in the first quarter reached 1851, 235 new stores were opened in the same period, and 1616 stores were closed.

Zebra consumers noticed that the closing of stores almost involves all its brands, and the most closed stores are those of the main brand La Chapelle.

The first quarter report disclosed that due to factors such as the closing of stores, the revenue of all men's and women's clothing under the company declined significantly, and only children's clothing increased to a certain extent. However, the company's children's clothing business has just started, which is not enough to bear the heavy responsibility of stabilizing the overall situation.

The closing of the store continues. According to the performance forecast, in the first half of this year, the company's domestic offline stores decreased by more than 2400 net compared with the end of 2018.

According to the company, this is an initiative contraction strategy based on the market situation to focus on high-value businesses.

Major strategic adjustment

Due to the pursuit of scale in recent years, the inventory problem that generally puzzles garment enterprises has gradually become an obstacle for La Chapelle.

From 2014 to 2018, the company's inventory rose rapidly, from 1.327 billion yuan to 2.534 billion yuan, and the proportion of inventory in current assets rose from 26.42% to 48.58% in the same period.

By the end of the first quarter of this year, the company's inventory still reached 2.193 billion yuan, accounting for 50% of current assets.

In the generally depressed market situation of the clothing retail industry, the company has increased the discount and sales of goods in previous seasons in order to maintain the scale of revenue.

This directly led to the decline of the company's gross profit margin. In 2018, the average gross profit margin decreased from 67.73% of the previous year to 65.33%.

In the first half of this year, the company continued to increase the sales and processing of out of season goods, and the gross profit margin was further reduced.

In 2018, La Chapelle made a profound reflection on the past development strategy. The decline in performance fully exposed the company's lack of preparation and response to changes in the external market environment, and proposed for the first time that the "multi brand, all direct marketing" model needs to be adjusted.

Since the second half of last year, the company has gradually launched franchise, joint operation and other models on the basis of direct sales in the past, and said that it would accelerate channel transformation in 2019, hoping to completely transform the existing sales channels within 1-2 years, so that the proportion of franchise and joint operation will reach 50%.

On the investment front, La Chapelle is also selectively shrinking. In May this year, the company transferred its 54.05% stake in Hangzhou Anshan E-Commerce Co., Ltd. at a price of 200 million yuan. This e-commerce company, which was acquired in 2015, owned Qigege and other e-commerce clothing brands, and once undertook the task of introducing La Chapelle's products online.

In June, Laxia Enterprise Management, a wholly-owned subsidiary of Laxia Bell, transferred its 98.04% share of Tianjin Xingkuang Enterprise Management Consulting Partnership (Limited Partnership) with consideration of 275 million yuan. Since its establishment in 2015, the partnership has mainly invested in medicine, consumption, new energy and other industries.

The company said that this transfer will help improve the company's internal asset structure, provide financial support for the development of main business, and is expected to contribute 29 million yuan to the company's net profit.