Behind the trendy toy business, the debt is 13.3 billion.
Author |Liu Junqun, Han Ling.
Editor丨Li Baiyu.
* |Bronco Finance.
During the festive season, merchants will launch a variety of discounts and limited products, and consumers' enthusiasm for "buying, buying, buying" is heating up again. In KKV, the Internet celebrity store under KK Group, there is an endless stream of customers recommended from Xiaohongshu.
Founded in 2015, this trendy retail company has developed into one of the leading players in the domestic trendy toy field in 9 years. In 2021, KK Group submitted the "Prospectus" to the Hong Kong Stock Exchange, and began to sprint to the "first stock of trendy retail" in Hong Kong stocks.
Now, it has been nearly 3 years since KK Group submitted its first form. Unfortunately, KK Group's first three attempts at Hong Kong stock IPO failed. On January 31, 2024, KK Group submitted its IPO listing application for the fourth time. According to the prospectus, as of the first 10 months of 2023, KK Group achieved revenue of 476.9 billion yuan, net profit of 20.9 billion yuan, operating profit of 37.6 billion yuan. This is the first time that the company has achieved positive operating profit since its listing.
What kind of "wealth code" does this KK Group, which is committed to building online celebrity retail stores, grasp behind it? And why did the three sprint IPOs not "land"?
Turn losses into profits in 2023
Gross margin increased to 472%
The whole store is mainly bright yellow, and the display of goods also makes full use of color aesthetics, white wall + macaron color matching products, forming a very impactful visual effect, full of ins wind.
The store uses high-value container scenes, a wide range of imported goods, and undisturbed "zero sense service" to allow consumers to get a relaxed and immersive shopping experience. Shopper Wang Meng said, "I saw that my favorite blogger recommended me to come here to visit the store, and by the way, I took a few photos while I was about to get off work**" Through the configuration of "aesthetics + retail", KKV has gradually become an Internet celebrity check-in place.
KK Group is engaged in the import trend retail business, founded in 2015, in recent years, with the consumption demand of young people under Generation Z, it has been out of the circle on the new retail track. Nowadays,KK Group, which has been established for nearly 9 years, has stores in more than 200 cities in China, and even opened in Indonesia, with a total of 800 stores as of January 23, 2024.
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Currently, KK Group has:Boutique collection store KK V and KK Pavilion, beauty collection store The Colorist (colorist) and trendy toy collection store X11,4 retail brands. And Wu Yuening, the founder of the company full of ins style in this store, is actually a post-80s generation from the IT industry.
After graduating from university, Wu Yuening worked as a product manager at Yiju.com. Soon after, he quit his job and returned to Dongguan to start his entrepreneurial career. Wu Yuening set his sights on the business model of O2O network-wide chain, and chose the hot import retail field. Then, he opened the first KK Pavilion in the community. Subsequently, in order to quickly enter the retail market through the community convenience store model, Wu Yuening opened three more stores.
But at the end of the year, Wu Yuening found that this convenience store model did not make money but lost money. So, he began to think about a location that could generate traffic, so he abandoned the community and moved to a shopping mall.
In April 2015, Wu Yuening established Guangdong Kuike Electronics Company. Eight months later, the first 2Version 0 kk hall store.
In order to make full use of the space and reduce investment costs, the KK Museum has been upgraded again, removing the book bar and catering projects, and has begun to focus on beauty, snacks, stationery and other categories that are popular among young people of Generation Z.
In May 2019, KK Group launched a new flagship brand of KK Pavilion - KKV and the first domestic makeup collection chain brand The Colorist; In 2020, with the hot sale of trendy toy products such as Bubble Mart, KK Group also launched its own trendy toy collection brand X11.
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The launch of its new brands and the "blooming" of stores have made KK Group's operating income grow, but in recent yearsKK Group's revenue growth slowed down significantly. According to the prospectus, from 2020 to 2022, KK Group will achieve revenue of 164.6 billion yuan, 352.4 billion and 355.1 billion yuan, a year-on-year increase of % and 1%. In the first 10 months of 2023, the company's revenue was 47700 million yuan, a year-on-year increase of 56%, rebounded.
In addition,KK Group's gross profit margin has also improved steadily。From 2020 to 2022, the company's overall gross profit margin is: 6% and 401%。In the first 10 months of 2023, it rose to 472%。In this regard, KK Group said that the increase in gross profit margin was due to the increase in revenue contributed by KKV and The Colorist stores.
However, in contrast to the continuous growth of revenue, the company's net profit in 2020 and 2021 will be -201.7 billion yuan, -568.1 billion yuan,The two-year loss was 769.8 billion yuan. Until 2022, the net profit turned into a profit of 618640,000 yuan, but the operating loss is still -32.3 billion yuan. In the first 10 months of 2023, KK Group achieved an operating loss turned into a profit: net profit of 20.9 billion yuan, operating profit of 37.6 billion yuan.
Industry insiders saidOperating profit was negativeThis means that "even after deducting lease costs, interest costs and attributable losses of the joint venture, the difference in prices earned by KK Group from the sale of goods alone cannot cover the company's normal sales and administrative expenses." In other words, the KK Group is now finally making money.
For the case of turning the operating profit into a profit. KK Group said that the main reason was the positive impact on business operations after China's gradual relaxation of epidemic control measures since the end of 2022. The previous losses in 2020 and 2021 were related to the investment in increasing the scale of the business and the store network.
Join the back of the ** camp
KK Group's debt is as high as 1330.9 billion
So, how does KK Group achieve its expanding layout?
First of all,It is KK Group that relies on big data operation to continuously expand the scale of its stores. KK Group analyzes the changes in the consumption preferences of different target groups through big data analysis, and adjusts the selection of its brand stores in a timely manner, and even the products on and off the shelves all depend on the capture of big data.
And,On the choice of ** chain,KK Group also has a methodology. The company provides partners with a background with zero fees, shortens the settlement period for the brand, and directly purchases goods from the brand in the "buyout system" mode, which reduces the procurement cost and can give profits to consumers in terms of product pricing. At the same time, this direct procurement model also makes it unnecessary for brands to send BA to the store, so that consumers can get a relaxed independent shopping experience, which can be said to be the gospel of contemporary social phobia, and "zero sense shopping" is also popular among young people.
Secondly,It is to master the traffic password of the shopping center site selection and creative store decorationmade its "debut at the peak" become an Internet celebrity store in the mall, which in turn provided traffic guarantee for the rapid expansion of the store.
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Even during the epidemic, KK Group opened hundreds of stores. According to the prospectus, from May 2020 to December 2020, KK Group successfully opened 354 retail stores, basically opening an average of one store per day.
In addition, the store pays attention to the appearance from decoration to display and product selection, and the products are uniformly placed according to the color system and type, and the color matching is harmonious and beautiful, which is very "eye-catching". Consumer Xiao He said that he was attracted by the store style of KTV in the mall at first. "The bright yellow color is so eye-catching, and there are so many types of imported sake in the store that I often come here to 'try it'."
In addition, in recent years, the "grass-planting" culture of Internet social platforms has gradually emerged, and the four brands of KK Group have attracted many consumers who come to the store to take photos and check in because of their high-value style, which has triggered a large number of users such as Xiaohongshu and Douyin to share their store visit experiences.
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In addition, KK Group has also carried out KOL and KOC refined placement on platforms such as Dianping and Weibo, doubling the marketing effect.
StillThe multi-channel delivery also caused KK Group to incur a lot of sales expenses. According to the prospectus, from 2020 to 2022, KK Group's sales and distribution expenses will be 39.5 billion yuan, 109.7 billion yuan, 13$1.3 billion; % of total revenue, respectively. In the first 10 months of 2023, KK Group's selling expenses further increased to 143.7 billion yuan.
Among them, the ad spend is 003.6 billion yuan, 03.3 billion yuan, 06.5 billion and 06.6 billion yuan.
*: Screenshot of the Prospectus.
KK Group has said that the company has incurred a lot of costs in marketing, including advertising on social platforms, as well as campaigns to attract more customers. If marketing and promotion activities are not effective, it will lead to a rise in marketing costs in the future and even affect the company's performance.
In addition, KK Group is also facing a shift in its operating model from light to heavy.
In the early stage of development, the company mainly promoted the franchise model, and the number of franchised stores increased from 53 in 2018 to 424 in 2020, accounting for nearly eighty percent of the overall stores.
However, since 2020, KK Group has gradually converted franchised stores into its own stores through asset and equity acquisitions. According to the prospectus, the number of franchise stores of KK Group decreased from 424 in 2020 to 114 in 2022, accounting for 76 of the total number of stores3% slipped to 161%。As of the end of October 2023, the number of franchised stores has further decreased to 109, accounting for 151%。
This may be related to the company's previous loans to franchisees. KK Group said in the prospectus that loans between companies that are not financial institutions may face a fine of one to five times the interest charged. However, citing the opinion of legal counsel, it believes that the financial support does not violate the relevant legal provisions and is less likely to be punished.
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This change has put KK Group on a lot of debt. From 2020 to 2022, the company's total liabilities were 582.4 billion yuan, 1383.1 billion and 137$6.2 billion; As of the end of October 2023, the total liability increased to 1330.9 billion yuan.
During the same period, the company's cash and cash equivalents were 16.8 billion yuan, 46.6 billion yuan, 24.8 billion and 80.6 billion yuan, although it is growing year by year, it is still not worth the high debt.
The total amount of 7 rounds of financing exceeded 4 billion yuan
IPOs are looking for direct financing
Behind the lack of money, KK Group is constantly financing.
According to public information, since 2016, KK Group has carried out 7 financings, with a total financing amount of more than 4 billion yuan. The most recent round of financing was a Series F round led by JD.com in July 2021, with a post-investment valuation of US$3 billion (about 19.1 billion yuan).
In the "capital group" behind KK Group, from the PreA round to the F round, Shenzhen Venture Capital, Bright Capital, Jingwei Venture Capital, Black Algae Capital, EWTP Ecology**, Hongtai**, Wuyue Capital, CMC Capital, Black Ant Capital, INCE Capital, Kamet Capital, JD.com and other well-known institutions and companies are all listed.
The KK Group's impact on the Hong Kong stock market listing will continue to provide the company with "blood transfusion", and at the same time, it can also increase the scale of stores and continue its expansion.
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With the support of financing, KK Group's KKV and colorist launched in 2019 have become rising stars. From the perspective of the group's revenue composition, KK has become the main profit force of KK Group in less than 6 years since its establishment. From 2020 to 2022, the company's revenue from the KKV brand was 83.5 billion yuan, 223.5 billion and 236.2 billion yuan, accounting for the proportion of total revenue. 4% and 665%；In the first 10 months of 2023, KKV contributed 32700 million yuan, accounting for 686%。
The Colorist brand, with a revenue of 4400 million yuan, a year-on-year increase of nearly 21 times; And in the first 10 months of 2023, the revenue reached 75.6 billion yuan, which is 1. % of the brand's revenue in 202071 times.
However, if KK Group wants to maintain the revenue growth of KKV and colorists, it also needs to strengthen cost management, especially the management of marketing expenses. Industry analysts pointed out that KK Group relies on a large number of marketing to drive the growth of performance, once the marketing is stopped or the marketing effect is greatly reduced, it may have a significant impact on the company's performance.
In addition, KK Group is an Internet celebrity retail store, although there are shopping malls with large passenger flow and INS style stores, it can easily attract many consumers to visit and take pictures, but how to retain consumers for a long time to shop needs to rely on products and ** to speak.
If the partners of KK Group's stores open their own offline stores, such as Perfect Diary, etc., then the minimum pricing of KK Group may be affected, and even the partners no longer need KK Group's "middleman" collection stores.
Compared with Bubble Mart, which relies on IP to speak, and MINISO, which relies on low prices and volume, it remains to be tested whether KK Group can stand the test of time and continue the fame of the Internet celebrity store.
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