La Chapelle loves to buy overseas loss-making companies

La Chapelle (603157.SH) wearing the "A+H Textile and Apparel Shares" aura has experienced a cliff-like decline in 2018. On the evening of April 10, its announcement received an after-the-fact review of the company's 2018 annual report. The inquiry letter involved more than 20 questions and asked the company to further supplement the disclosure.

What is remarkable is that La Chapelle opened the Romwe Promo Code store after the listing in September 2017. After the lack of money, he refinanced and opened the store. As of December 31, 2018, the number of stores reached 9,269. This simple and rude mode once let Laxia Bell quickly expanded the size of the company in a short period of time.

The ensuing blame is that this reckless model eventually lost itself. In 2018, the net profit after returning to the mother was -245 million yuan.

The domestic market is uncertain, and the superimposed capital chain is tight, but La Chapelle still intends to spend huge sums of money to acquire the continuously losing overseas Naf Naf SAS. What kind of medicine is La Chapelle's gourd?

Love to buy overseas loss companies

According to the financial report, La Chapelle achieved operating income (total method) of 10.176 billion yuan in 2018, down 2.58% year-on-year; net profit -1.66 billion yuan, down 132.00% year-on-year; net profit after deduction was -245 million yuan, year-on-year. The decrease was 164.43%; the operating cash flow was 158 million yuan, a year-on-year decline of about 70%.

For the decline in revenue, the company explained that the main women's clothing brands La Chapelle, Puella operating income decreased by 11.94%, 13.35%, respectively, reduced operating income of 309 million yuan, 284 million yuan, while women's clothing brand Candie's and children's wear, men's wear brand, etc. The growth of sales has not been able to make up for the decline of La Chapelle and Puella. At the same time, due to the slowdown in consumption growth and the decline in the flow of physical stores, the sales of direct stores in the second half of 2018 were lower than expected, and the revenue in the third and fourth quarters decreased year-on-year. In addition, the revenue of department store counters continued to decline. In 2018, the company's department store counter revenue was 4.893 billion yuan, a year-on-year decrease of 369 million yuan, a decrease of 7.02%, and the proportion of total revenue decreased from 50.38% to 48.08%; Finally, in the second half of the year, the company accelerated the adjustment of terminal channels and closed down the loss and inefficient stores.

The reporter noted that La Chapelle’s expenditure on three fees rose sharply in 2018. Among them, the sales expenses (under the new income standard) were 6.032 billion yuan, an increase of 230 million yuan over the same period of last year, with a growth rate of 4%; the administrative expenses were 504 million yuan. The increase was 115 million yuan, an increase of 29.5%; the financial expenses were 52 million yuan, an increase of 36 million yuan, an increase of 216.4%.

In addition, La Chapelle receives a considerable government subsidy every year. The government subsidy for the current profit and loss in 2018 is as high as 126 million yuan. In 2016 and 2017, it was 0.8 billion yuan and 129 million yuan respectively. This means that if there is no government subsidy, La Chapelle's operations will be even more difficult.

It is clearly stretched, but La Chapelle is still "tossing."

On April 10, 2018, La Chapelle announced that it intends to invest a total of 20 million euros to acquire a 40% stake in France's Naf Naf SAS and to complete a 40% stake on June 29, 2018 (French time). On November 26, 2018, La Chapelle announced that it intends to continue to acquire a 60% stake in Naf Naf SAS. Upon completion of the acquisition, Naf Naf SAS will become a wholly-owned subsidiary of La Chapelle. As of the end of 2018, the remaining equity delivery has not been completed.

Is Naf Naf SAS very profitable? I was so coveted by La Chapelle.

The announcement shows that Naf Naf SAS was founded in France in 1973 and is mainly engaged in the sale of women's products and accessories. As of September 30, 2018, Naf Naf SAS had 488 retail outlets in several countries, including 218 in France and 270 in other overseas regions. Overwhelming retail outlets, Naf Naf SAS lost 6.5 million euros in 2017, with a net asset of -101.7 million euros; a loss of 3.422 million euros in the first half of 2018.

Economic analyst and Tiangouwo general manager Liu Xiaofeng told the China Times reporter that as the only A+H-listed brand apparel company in the textile and apparel industry, La Chapelle’s revenue declined last year, and it was the first time that losses occurred. This company is already at a bottleneck stage of development. The reasons behind this are not only related to the external factors such as the weak growth of the industry, but also related to La Chapelle's own factors.

It also said that La Chapelle has nearly 10,000 stores, with annual sales of only 10 billion yuan. The average monthly sales of a single store is only about 90,000 yuan. It is obvious that the sales efficiency of single stores is low, and many stores are at a break-even point. Once the sales revenue declines, the store's loss will expand. In the face of this situation, La Chapelle did not make improvement adjustments, mainly to adjust the offline channels. The number of newly opened and closed stores last year accounted for 25% of the number of stores at the end of the previous year, which will undoubtedly lead to an increase in renovation and amortization. This caused the company to lose its business for the first time.

"Circle money" is indifferent

La Chapelle has always been obsessed with getting financing in the capital market.

According to public information, La Chapelle sprinted into the IPO in 2012, and experienced the 8th “closed gate” of the IPO. At the end of May 2013, he ended the paragraph with “terminate review”.

After the A-share listing was frustrated, La Chapelle turned his attention to the Hong Kong stock market. In November 2013, he submitted an IPO application to the Hong Kong Stock Exchange and listed it on the Hong Kong Stock Exchange in October 2014. However, the IPO of the Hong Kong Stock Exchange did not solve the urgent need of La Chapelle, that is, the initial public offering of funds was cold.

According to the results of the IPO announced by the La Chapelle Hong Kong stocks, the public offering part was subscribed for 115.565 million shares, equivalent to 95% of the total number of public offerings, and was not fully subscribed. The offer price per share was set at HK$13.98, which is the scope of the offer price. (13.98 Hong Kong dollars - 18.2 Hong Kong dollars) the minimum limit. After deducting the listing fee, the net proceeds raised were only HK$1,606 million, which was lower than the original planned fundraising amount (HK$1.7 billion to HK$2.21 billion).

The HKEx subscription was less than expected, and La Chapelle was listed on the Hong Kong stock market for about one year. It is easy to submit the A share prospectus again in October 2015, but there is no such thing as the final. After a long wait, La Chapelle re-cleared the A-share IPO in 2017. The fundraising and fundraising projects were the same as those in the 2015 prospectus. On September 25, 2017, La Chapelle’s final listing dream was finally raised. The capital is 461 million yuan and the net fund raising amount is 405 million yuan.

According to the announcement, as of December 31, 2018, La Chapelle’s Hong Kong stocks had only $107,400 in fundraising, and A shares had only 2,709,900 yuan.

Money spent "finished", and La Chapelle searched for the road to fundraising. On September 22, 2018, La Chapelle announced that it plans to publicly issue convertible bonds and raise another 1.53 billion yuan. However, after the scale was reduced to 1.17 billion, the fundraising continued to blow up, but its rapid speed announced on January 16 this year that it would issue medium-term notes or ultra-short-term financing bonds of no more than RMB 400 million. Such fast-paced continuous fundraising makes people worry about their financial situation.

It is worth noting that La Chapelle issued convertible bonds to raise funds for retail network expansion projects, store upgrade projects, smart store construction projects and logistics center construction projects. The total investment of retail network expansion projects is 661 million yuan. It was reduced to 406 million yuan, and the proposed investment was reduced from 520 million yuan to 330 million yuan. At the time of the IPO, La Chapelle invested 321 million yuan in the expansion of the retail network construction project.

Is it a step by step in the layout?

The listing of financing, crazy shop, lack of money, refinancing and then open the store, this simple and rude model has allowed La Chapelle to quickly expand the scale of the company. By the end of 2018, La Chapelle had a total of 9,269 stores, a decrease of 1.89% year-on-year. The number of La Chapelle stores, the main women's wear brand, has risen and fallen. In 2018, 189 new ones were opened and 198 closed. The Puella stores closed up to 338 in 2018. At the same time, only 129 new ones were opened. These two brands are the old brands of the La Chapelle family. They have survived in the market for nearly 20 years. Now they are suffering from Waterloo. It is embarrassing. In which part did La Chapelle go out?

In fact, the fast fashion brand Ulifestyle launched by La Chapelle in 2015 is gradually withdrawing from the market. According to the financial report, in 2018, Ulifestyle brought operating income of 365 million yuan to the company, down 30.17% year-on-year, and the gross profit margin was 53.19%, a decrease of 7.92% year-on-year. As of the end of 2018, Ulifestyle had only 105 stores left. Six new ones were opened in the same year, and 53 companies were closed. The company said it is actively reducing the number of outlets operated by the brand and reducing its business scale. Does this indirectly admit that its fast fashion layout is wrong?

"We are very passive, more civilian than civilians, Uniqlo; Europe and the United States, there are HM; more fashionable, ZARA; on the overall advantage of fast sales, there are UR, our family's fast sales have to withdraw from the market, the store name will be changed to La Chapelle "A Ulifestyle store staff in Shenzhen revealed to the "China Times" reporter.

Regarding the profitability, the employee said that at least the US (Ulifestyle) store was losing money, and other stores in Shenzhen were also selling.

During the period, “passive” is a word frequently mentioned by the employee. The annual unit price of clothes will increase with the increase of fabric cost at first, but due to competition, the unit price will come down and be passive.

"As far as I know, in addition to our decline in turnover, HM is also the same. However, Uniqlo is rising against the trend, not only because of the civilian price of its products, its marketing model is more praiseworthy, the QR code next to the fitting mirror Sweeping can directly place orders, etc., and a young and old can buy clothes in Uniqlo. But Ulifestyle can't do it, and considering that fast fashion goods, factories, and people have to invest a lot, it is really passive." Frankly.