This November, Xtep International (01368), which has always been highly sought after by funds, is a little special.
Since November 7, Xtep International's share price has been on a slide. As of November 29, the company's share price has fallen to 4HK$56, a new low since April 2021. In less than a month, the company's stock price fell by nearly 40%, leaving a market value of only 120HK$500 million, evaporating more than HK$7 billion. If you look at it for a long time, Xtep International has fallen by nearly 50% this year.
Behind the plummeting stock price, what happened to Xtep International?
Sales performance fell short of expectations, and management lowered revenue guidance.
According to Zhitong Financial APP, behind the decline in the stock price, it is related to the company's less-than-expected Double 11 performance, and the company's management has lowered its guidance for 2023.
It is reported that during this year's Double 11, Xtep International's cumulative online turnover (GMV) was 1.1 billion yuan, an increase of only 20% year-on-year. Among them, the sales of Xtep racing series running shoes increased by 90% year-on-year, Saucony increased by 98% year-on-year, Myle increased by 101% year-on-year, Gasway increased by 149% year-on-year, and Paladin increased by 114% year-on-year.
While new brand sales outperformed expectations, the main brand sales performance fell short of expectations, resulting in an overall performance that was lower than management's expectation of 20-30% growth. The company's total performance of the company's all-brand online channels on Double 11 in 2020 increased by more than 50% year-on-year to 5300 million yuan (RMB, the same below);In 2022, the cumulative online turnover of Singles' Day increased by 30% year-on-year to 9$100 million.
In fact, since the beginning of this year, with the relaxation of epidemic control, some online passenger flows have gradually returned to offline, and the overall sales of Double 11 have shown a certain decline.
According to Xingtu data, from 20:00 on October 31 to 23:59 on November 11, the cumulative sales of integrated e-commerce platforms + live broadcast e-commerce platforms reached 1,138.6 billion yuan, a year-on-year increase of 21%, although the sales of live streaming e-commerce platforms with a low base achieved 186% year-on-year growth to 215.1 billion yuan;However, the sales performance of integrated e-commerce platforms was not satisfactory, with a total of 923.5 billion yuan during the period, down 1. year-on-year1%γ
To add insult to injury, since the second half of this year, the growth rate of retail sales of clothing, shoes and hats, and knitted textiles in China has also slowed down significantly, which has brought certain growth challenges to sportswear brands.
According to the data of the National Bureau of Statistics, from July to October this year, the year-on-year growth rate of retail sales of clothing, shoes and hats, and knitted textiles in China was respectively. 9% and 75%, both of which recorded single-digit growth, compared to 32 in the month4% and 176%γ
Specific to Xtep International, since the beginning of this year, the growth rate of the company's core financial data has also slowed down compared with previous years. In the first half of the year, Xtep International's revenue was 652.2 billion yuan, a year-on-year increase of only 1476%, and the net profit attributable to the parent company was 66.5 billion yuan, an increase of 127%γIn the same period last year, the company's revenue and net profit attributable to the parent company achieved 3745% and 37A significant increase of 33%.
While the performance growth rate is slowing down, the high inventory pressure is also heavily pressed on Xtep International. Zhitong Financial APP noticed that in 2020, due to the disruption of the epidemic, Xtep International's inventory-to-sales ratio once climbed to 5-55 months, after which it has been repaired but has remained at 4-45-month range. Even in the third quarter of this year, the company's inventory pressure has not improved significantly, and the inventory turnover time of the company's main brand channel is still 4In 5-5 months, it can be seen that the improvement in end-user demand does not seem to be as optimistic as the market had previously expected.
Against this backdrop, Xtep International's management lowered its full-year guidance, expecting revenue and net profit to grow by approximately 10% year-on-year this year, compared to the previous FY2023 revenue growth guidance of 15%-20%.
The outlook is worrisome.
Affected by this, a number of investment banks and brokerages, including CICC and UBS, have lowered their target prices, expressing concerns about the development prospects of Xtep International.
UBS said that due to the weaker than expected sales on 11.11, Xtep's management lowered its full-year guidance, and now expects revenue and net profit to increase by more than 10% year-on-year this year, but stressed its target of inventory below 2 billion yuan in December, and guided Xtep's main brand to achieve double-digit year-on-year sales growth by next year. The bank set Xtep International's target price from 10HK$4 to HK$9HK$4 to reflect weaker-than-expected sales and profits due to weak demand in recent days.
Nomura pointed out that Xtep's sales in 2023 Double 11 will be sluggish, and the total GMV will increase by 20% year-on-year, but the year-on-year growth rate of its core brand is only in the high single digits, which is lower than the 16%-19% growth in the third quarter of this year, which is disappointing. The bank also expects competition to likely intensify, which will affect the performance of the fourth quarter of FY2023 and FY2024, while lowering the company's target price from HK$11 to HK$7HK$4.
Huatai** pointed out that Xtep's business model is mainly based on the wholesale model, and its revenue and profit are more stable than its peers who have more revenue from retail formats in the past. However, under the influence of the weak recovery of consumption, Xtep International's profit performance has been affected by its direct e-commerce and outlet channels, and the visibility of next year's performance may be affected to a certain extent.
Zhitong Financial APP noticed that Xtep International officially started the transformation from a single brand to a multi-brand in 2019, successively acquired four international brands, Saucony, Meler, Gasway and Paladin, and released the 5th "5-year plan" since the establishment of the brand in September 2021, planning to achieve the target revenue of the main brand and new brand in 2025 to reach 20 billion yuan and 4 billion yuan respectively, corresponding to a 5-year CAGR of 23%+ and 30%+ respectively.
In 2022, under the interference of external factors such as the epidemic, the turnover performance of the company's main brand slowed down significantly, of which there was a high-single-digit year-on-year decline in the fourth quarter of 2022, and the company also increased discounts in order to alleviate inventory pressure. It is reported that the discount rate of Xtep International's main brand during the period was about 7%, compared with 7The 5-8% discount has deepened.
However, with the recovery of social consumption scenarios and the rebound of people's willingness to consume, Xtep International's main operating data has begun to pick up since 2023. In the first quarter of this year, Xtep International's main brand retail sales growth achieved 20% year-on-year growth. In the second and third quarters of this year, the retail sales of Xtep's main brands all achieved high double-digit year-on-year growth. At the same time, the company's retail discount level has improved slightly to 7-7 this year5% off.
In terms of new brands, in the third quarter of this year, the company's four small brands, Saucony, Gasway, Merle and Paladin, are expected to grow by more than 1 time in the domestic market. According to the research report of relevant brokerages, Saucony, which is currently developing more prominently, is increasing its Chinese line products, and at the same time, the franchise channel is advancing smoothly, and it is expected to reach 100 stores by the end of the year.
On the whole, Xtep International's stock price is mainly due to the market's wait-and-see attitude towards the company's growth prospects.
Since the beginning of this year, under the background of pressure on consumer confidence and the off-season, the overall flow of the industry has faced certain pressure, which can also be seen from Xtep International's less-than-expected Double 11 performance. At the same time, under the pressure of high inventories, the company's continuous ** discounts have also directly affected the company's performance, and with the downward revision of revenue guidance, investor confidence has also been shaken.
At a time when the inventory of the main brand is under pressure and the new brand has not yet become a climate, Xtep International's performance prospects are still uncertain. At the same time, in the face of increasingly fierce industry competition in the future, how to maintain a stable market performance is an urgent problem for the management of Xtep International.