Edit |Yuer Lake
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Since the concept of "new domestic products" has become popular, the pattern of sports shoes and clothing has also been comprehensively rewritten. For example, domestic brands that were squeezed by foreign brands in the past began to stand out, and even some brands that were originally declining have also come back to life because of this national sentiment.
However, 361 degrees, a Hong Kong-listed company that is "not up or down" in terms of industry status, seems to be an outlier and does not belong to the first two. According to 361 degrees' financial report data, its revenue in the first half of 2023 will be 4311.5 billion yuan, a year-on-year increase of 18%, of which the revenue of children's business and the revenue of e-commerce business both handed over a brilliant report card, with a year-on-year increase of %.
Since then, 361 Degrees has announced its operating summary for the third quarter of 2023. During the period, the retail sales of main brand products increased by approximately 15% year-on-year; The retail sales of children's clothing brand products recorded a year-on-year growth of 25%-30%; The overall turnover of e-commerce platform products recorded a year-on-year growth of about 30%.
However, on the whole, according to the growth rate of 16% year-on-year growth rate of online retail sales of sneakers in the first half of 2023, 361 degrees can be described as decent. Moreover, there were many questions about the number of 361-degree offline stores, the stock price being overvalued, and the inventory scale increasing. So, the performance is still maintaining a growth of 361 degrees, what are the potential development problems?
The performance is up, the stock price is down, what are investors worried about?
According to **Tong data, 361 degrees has also reached its peak in stock price since the release of its semi-annual report in mid-August 2023. Since then, the stock price has been all the way down, and since its disclosure of operating data, 361 Degrees' stock price has not moved much, falling nearly 4% for four consecutive trading days. As of February 29, its stock price was 419 yuan shares, compared to its all-time high of 6HK$758 shrank by about 38%.
Since mid-August 2023, its stock price has also drawn a clear V-shaped curve. Moreover, its current stock price is still hovering around the ** equisection line. It can be seen that 361 degree investors seem to see some problems from the not too bad financial report.
Source: **Tong.
In fact, its share price has plunged sharply since the release of its mid-year earnings report. On the day of the release of the earnings report on August 15, the intraday decline was as high as 20%. According to analysis, the sharp fluctuations in its stock price may be related to the fact that the medium-term dividend ratio of 361 degrees is less than expected. On the other hand, it may also be because the inventory scale of 361 degrees is high during the reporting period, and investors are worried that 361 degrees will fall into a destocking cycle again.
According to the 361 degree financial report, in the first half of 2023, the inventory level of 361 degrees increased by 3 percent year-on-year06%, the inventory turnover days increased by 10 days, increasing for three consecutive reporting periods. From the perspective of the absolute value of inventory, the inventory data of 361 degrees is also at a high level compared with other head sports brands.
You must know that in 2012, 361 degrees had fallen into the "trough period" of destocking. At that time, due to the high inventory pressure, 361 was forced to close a large number of offline stores. Public data shows that from 2021 to 2018, the number of 361 degree stores has decreased from more than 8,000 to more than 5,500.
In 2022, the sports shoes and apparel industry has once again entered the destocking cycle, and frequent discounted sales of inventory products have become a daily routine. And 361 degrees, which has been focusing on the sinking market, may not be able to stand alone.
Therefore, when the inventory scale of 361 degrees is getting larger and larger, investors are also very worried about whether the future 361 degrees will repeat the mistakes of the past. Therefore, after handing over a fairly good report card from 361 degrees, investors' worries were also exposed.
Aiming at the sinking market is mixed, imagine the geometry of space?
As we all know, the business strategy of many enterprises is to first "win" the first- and second-tier cities with stronger consumption power, and then gradually penetrate into the sinking market to seize a larger market. However, there are also some brands that try to adopt the strategy of "rural areas surrounding cities", first "eating" the low-end market, and then attacking the mid-to-high-end market.
However, from the perspective of 361-degree positioning, its targeting of the sinking market may not be a strategy, but a helpless choice. On the one hand, the domestic sports market has long been dominated by brands such as Li Ning and Nike, and it is difficult for domestic brands to be tough in first- and second-tier cities due to the gap between them in product design, quality, positioning, etc., so keeping an eye on the sinking market is also an effective means to avoid the edge of giant brands.
On the other hand, from the perspective of product cost performance, the main footwear products of 361 degrees cover the low-end market of 200-600 yuan, focusing on the low-end market, which is more in line with the consumption level of third- and fourth-tier cities. Therefore, some people even attribute the performance growth of 361 degrees to the fact that 361 degrees has eaten the dividends brought by the trend of "consumption downgrade" after the epidemic.
However, the long-term deep cultivation of the offline market, while bringing steady performance growth to 361 degrees, also makes it limited by the low-end brand positioning and unable to extricate itself, and it has become extremely difficult to further penetrate the mid-to-high-end market.
Therefore, the industry generally believes that the brand positioning of 361 degrees is actually a double-edged sword, and the results are mixed.
On the positive side, since the Xinjiang cotton incident triggered a boycott of some overseas brands by young domestic consumers, the national self-confidence and brand self-confidence of domestic consumers have gradually returned, and when brands such as Hongxing Erke have generously donated money because of natural disasters such as ** in some areas, it has further deepened the good impression of young consumers towards domestic brands.
And 361 degrees is also attracting more and more attention from consumers because of the attributes of its domestic brand. These industry factors are obviously a rare positive signal for 316 degrees. There are even some that can be met but not sought.
However, it cannot be ignored that the resilience of the industry after the epidemic is not necessarily sustainable. Especially in the sinking market where there is still room for growth, but it is already very "involuted", the competitive pressure faced by 361 degrees cannot be underestimated.
According to Huajing Industry Research Institute, in 2022, the market share of 361 degrees will only be about 3%, which is even much lower than that of Xtep International. Compared with the market share of brands such as Li Ning and Adidas, which are more than 10%, 361 degrees is also far from these brands. For brands like Anta China and Nike, which have a market share of more than 20%, the gap between 361 degrees and Nike is more than just a star.
On the other hand, the sinking market is also a must for these brands. Therefore, the 361-degree misplaced competition strategy is also challenged. At the same time, its profitability is also very worrying due to its relatively low products for the sinking market and thin profits.
According to 361 degrees historical financial report data, in recent years, while its revenue has grown, its gross profit margin has stagnated, and even in some years, there has been a slight decline. For example, from 2018 to 2022, the company's gross profit margin were: 7% and 405%。
The shortcomings of brand power and product power are difficult to make up for by marketing
As the saying goes: man depends on his clothes, and his horse depends on his saddle. A person's dress is a symbol of his social status and family conditions. And looking at people first and looking at shoes is even an important principle in interpersonal communication for many people.
Therefore, some netizens ridiculed that today's clothing, shoes and hats track has gradually derived a chain of contempt for wearing shoes. is talking about those who wear Adinaike, look down on those who wear Li-Ning Anta, those who wear Li-Ning Anta, and look down on those who wear Xtep 361.
Speaking of this chain of contempt, a news item on the Internet in the early years can be described as very ironic. The content of the news is: "A 27-year-old boy still wears sneakers of the xx (a domestic sports shoes and clothing brand) brand to go on a blind date, do you think it is appropriate?" ”
An unintentional sentence made the domestic sneaker brand very hurt and embarrassed. Because for a long time, domestic sports brands have created the impression of low-end and rustic to consumers. Even "copycat" and "plagiarism" have become the labels of such brands.
However, 361 degrees, which originated in Jinjiang, Fujian, the shoe capital of China, obviously doesn't just want to be a general. It is understood that the founder of 361 degrees is Ding Jiantong, a native of Chendai, Jinjiang, who was born in 1940. Ding Jiantong, who started his business in the 80s, can be said to have gone through multiple industry cycles in the sports shoes and apparel industry, and has experienced the ups and downs of the industry.
Fortunately, although 361 has gone through decades of development since then, it still occupies a place in today's sports footwear and apparel market. This may also have something to do with 361's focus on R&D. According to the data, the R&D investment of Li Ning, Anta, Xtep, and 361 degrees has remained at 2 in the past three years1% (except 2021. 8% and above.
However, even so, due to the low-end brand positioning, there is still an obvious gap between 361 degrees and international brands such as Nike and Adidas in terms of brand power.
At the same time, its product strength and product quality are difficult to compare with these brands. For example, on social ** platforms such as Zhihu, it is not uncommon to see posts about complaining about the poor quality of 361-degree products and scrapping them in just a few months.
Source: Screenshot of Zhihu.
The brand power is not enough, and the marketing comes to make up. When Bee Flower took the lead in gaining the first batch of attention with the "79 yuan product set" and other related products, and achieved a breakthrough in sales, brands represented by Lotus MSG and Hongxing Erke also began to increase their marketing and went out of the circle.
However, 361 degrees, which is also a domestic brand, in addition to creating some heat through cooperation and co-branding in the early years, lacks a sense of existence in today's era of "national live broadcast". As a 20-year veteran, 361 doesn't seem to be getting the "attention it deserves".
It can be seen that 361 degrees, which used to be second to none among domestic sports brands, is now becoming more and more difficult to enhance its brand power with the help of marketing. And its original shortcomings of insufficient brand power and product power may be difficult to make up for in the short term.
Conclusion
The collective rise of domestic brands has given 361 degrees a chance to turn around. However, for more than 20 years, 361's hard wounds seem to have not changed much, so it has also increased the difficulty of its brand's re-emergence. For example, its product positioning is not high-end enough, betting on the sinking market is also facing fierce market competition, although the R&D investment is not low, but the product power has not been up.
It is not difficult to see through 361 degrees of repeated attempts to explore new categories such as children's clothing that it may never be willing to be a second-tier player with limited revenue scale and too ordinary stock price performance. It's just that when the new retail era and the new domestic era come, can this former big brand still maintain its enthusiasm and confidence to enter the market, or because of its weakness, it chooses to "put it badly" and lie flat? It is foreseeable that what 361 chooses in the future will also directly determine its future fate.