The disclosure period of annual reports is approaching, and many listed companies have released performance forecasts in advance. However, not all performance growth can drive the stock price to "hear the voice", Giordano International (00709) is a typical example.
On January 5, the first working day after the announcement of the earnings announcement, Giordano opened down nearly 17%. Subsequently, the company fell more than once, and as of the 9th, the latest stock price was 202 Hong Kong dollars, 3 from the stage high 5 months agoHK$25 has fallen by nearly 40%.
Previously, since the end of 2022, Giordano's share price has risen from less than HK$1 to more than HK$3 in 10 months, and the performance and stock price have been both good, making many investors optimistic that this veteran Hong Kong-funded clothing leader has returned to the growth channel. And now the market's unoptimistic attitude seems to indicate that there are still deeper concerns behind the performance.
Behind the sharp increase in net profit, what is the real source of growth power?
In this performance forecast, Giordano handed over an answer sheet that exceeded expectations. According to the results forecast, for the year ended December 31, 2023, Giordano is expected to achieve a net profit attributable to shareholders of approximately 3.HK$2.5 billion to HK$3HK$4.5 billion, compared to a net profit of 2HK$6.8 billion increased by about 21% to 29%, which was significantly higher than last year's 12Net profit growth rate of 4%.
In this regard, the company said that the improvement in performance was mainly due to the improvement of profits in Greater China, the company's further streamlining of business, effective cost control and efforts to enhance the Giordano brand. But behind the brilliant net profit growth, there are still some details worth going deeper.
If the total profit for 2023 is divided into the first half of the year, for the six months ended June 30, 2023, Giordano achieved a net profit of 1HK$9 billion, while achieving a net profit of about 1HK$3.5 billion to HK$1HK$5.5 billion. Compared with previous years, the company's performance in 2023 has shown an unusual "top-heavy" situation.
Tracing the company's performance in 2021 and 2022, the net profit in the second half of the year is higher than that in the first half of the year: the net profit in the first and second half of 2021 is 0HK$600 million, HK$1HK$300 million, and the net profit in the first half of 2022 was 0HK$9.7 billion, 1HK$7.1 billion.
And why did Giordano's performance "shrink" in the second half of this year?If you want to go deeper into the business level, you may get a glimpse of this change from Giordano's previously disclosed third-quarter financial report.
According to Zhitong Financial APP, in the first three quarters, Giordano achieved a total of 28HK$3.9 billion, compared to HK$27.9 billion in the same period in 2022HK$5.5 billion increased slightly by 3% year-on-year.
From the perspective of channels, the company's sales are still mainly offline, and offline business accounts for about 7686%。Although the online business increased by 9% year-on-year9%, but only 1131%。It is worth noting that the company's authorized and franchise sales fell significantly by 176%。
In addition, same-store sales increased by 9%, ending inventories continued to decline, and the number of stores also fell to 1,793 from 1,908 in the same period in 2022, which means that 115 stores were closed in the first nine months of 2023.
It can be seen that the company's revenue growth in the first three quarters was not large, so the increase in net profit was mainly due to the cost reduction caused by store closures and cost reductions.
From the perspective of different markets, the company's overseas business recorded a higher year-on-year growth rate than the domestic business, and the company's overseas franchisee revenue increased by 11 in the third quarter8%, and Chinese mainland franchisee revenue fell by 319%, a total decline of 273%。
Observing Giordano's changes and transformations at the strategic level in recent years, store closures and going overseas are the two most eye-catching trends, and the company's financial report data undoubtedly reveals this.
The Chinese market is not moving, and there is no choice but to "survive with a broken arm".
In the memory of consumers in the decade, there are few casual clothing retail brands on the market, and Giordano is synonymous with high-end casual brands that young people like. Celebrity endorsements, large-scale advertising, and comfortable and durable brand positioning have all made Giordano popular all over the country, and once became the leader of domestic casual clothing brands.
As the saying goes, "there is no one-size-fits-all business in the world", with the continuous rise of local clothing brands and the shift of e-commerce to the consumption battlefield from offline to online, Giordano who cannot keep up with the trend is gradually left behind by consumers. Nowadays, it is difficult to see Giordano in first- and second-tier cities.
For third- and fourth-tier consumers who pay attention to cost performance, Giordano does not have much advantage over e-commerce clothing brands.
In 2020, the sudden epidemic became the last straw, and Giordano's revenue fell sharply by 35% year-on-year66%, the profit indicator fell below the red line, and the net loss attributable to the parent company during the year was 1HK$1.2 billion. The situation forced Giordano to start drastically closing stores, laying off staff and cutting salaries in order to cut costs.
According to Zhitong Financial APP, in 2021, Giordano will reduce operating expenses by closing 129 stores and successfully turn losses into profitsIn 2022, Giordano will have a net decrease of 182 stores, including 187 stores in the Chinese mainland marketAs of June 30, 2023, Giordano had 1,798 stores, a quarter less than the 2,426 stores in 2018.
The rapid pace of store closures has successfully led to a rebound in the company's profitability indicators, achieving a year-on-year growth rate of 41% in net profit in 2022.
However, as we all know, profit margins can be improved by reducing costs, and Giordano's net profit recorded in the second half of 2023 is lower than the first half for the first time, which seems to indicate that the company's measures to reduce costs and increase profits have begun to weaken.
But this does not mean that this old Hong Kong-funded clothing leader has no way out. Since it can't keep up with the "involution" of the domestic garment industry, it is the new tone set by the company's management to avoid its edge and seek new consumer groups in overseas markets.
Overseas business has become a new revenue pillar.
2023 has passed, but affected by many factors such as weak external demand, downstream brands going to the warehouse, and the year-on-year decline in cotton prices at home and abroad, the garment industry has not ushered in retaliatory consumption and full orders as expected, and the performance of most listed garment companies continues to be at a low ebb.
According to the monitoring data of the first textile network, in the first half of 2023, 121 textile and garment listed companies will achieve a total operating income of 140.2 billion yuan, a decrease of 282 compared with the same period last year2.1 billion yuan, a significant decrease of more than 40 billion yuan compared with the same period in 2021;Net profit attributable to parent company totalled 1367.6 billion yuan, a decrease of 16 compared with the same period last year5.7 billion yuan, a decrease of 42900 million yuan.
According to the data of the National Bureau of Statistics, from January to October 2023, the industrial added value of enterprises above designated size in China's garment industry decreased by 8 percent year-on-year5%, although the decline was 0 percent narrower than that from January to September3 percentage points, but it has not yet reversed the negative growth trend.
The growth rate of domestic sales in the industry has slowed down, and the export data is also under pressure. According to China Customs data, from January to October 2023, China has completed a total of 1,331 exports of clothing and clothing accessories600 million US dollars, down 87%, a decrease of 0 from January to September1 percentage point.
According to Zhitong Financial App, in order to offset the decline in revenue in the Chinese mainland market, Giordano began to lay out overseas markets as early as 2020 and developed key markets for developing economies. In 2020, the company's revenue in overseas countries in the Middle East accounted for 124%, more than the local market of Hong Kong and Macau, China116% of revenue. In the same year, the company opened offline and online sales channels in Kenya, Russia and Mauritius in Africa.
As of the end of 2022, Southeast Asia and Australia became the largest contributors to revenue (38%), while Chinese mainland (17.).6%) with the Gulf Arab states (167%), while Taiwan, Hong Kong and Macau together accounted for 198%。
The extensive business footprint not only dispersed the risk of declining performance in a single market region, but also drove the company's revenue to achieve 12. in 2022 and the first half of 2023, respectively4% and 495% year-on-year growth.
On the whole, after a wave of store closures and cost reductions, Giordano has now shown a slowdown in growth, and the performance in the second half of the year is less than expected is the most worrying factor for the market. Although the company's overseas business has shown positive momentum, there are still many uncertainties. If you want to convince investors to come up with real money** to enter the game, Giordano may need some more imaginative stories.