Big Loss 1 Billion! Mass Shoe King Daphne Closes 2395 Stores In 2019

In April 15th, Daphne International (00210) released its 2019 earnings report.

According to the announcement, Daphne achieved a turnover of HK $2 billion 126 million in 2019, down 48% compared to the same period last year, gross profit of HK $781 million, down 62% compared to the same period last year, operating loss of HK $1 billion 19 million, an increase of 30% compared to the same period last year, and shareholders' deficit of HK $1 billion 70 million, an increase of 8% over the same period last year.

The core business brand turnover decreased by 50% to HK $1 billion 883 million per year, accounting for 82% of the total turnover (86% in 2018), while the turnover of other brands declined 33% to HK $389 million, accounting for 18% of the total turnover (14% in 2018).

Daphne pointed out that in order to cope with the increasingly serious business environment and rising cost pressures, the group accelerated the pace of structural adjustment so as to achieve the "light assets" business model.

During the year, Daphne moved most of its direct stores to the "partner system".

In addition, a small number of new image shops for direct operation of the group have also actively promoted their layout in the shopping center to cater to the current shopping habits of young consumers and to convey young and fashionable brand images to the outside world.

Daphne believes that this will not only help alleviate the negative leverage effect caused by high fixed costs, but also help the group explore a road of sustainable development in the throes of structural adjustment.

According to the announcement, the total number of Daphne stores has shrunk from 2820 to 425, of which core brands have been reduced from 2648 in 2018 to 360, while other brands have been reduced from 65 in 2018 to 65, which means that Daphne has closed 2395 stores in 2019.

Daphne believes that the decline in the number of stores and the unsatisfactory performance of core brands is the cause of the decline in sales volume. In addition, the gross profit margin dropped to 36.7%, due to the decrease in sales and the increase in the proportion of over the quarter products in the sales mix. The gross profit margin of the group dropped to HK $781 million.

According to the announcement, in 2019, Daphne intensified its efforts to develop e-commerce business.

According to the characteristics of the electricity supplier operation, Daphne tailored its elastic supply chain management system. Through the "small single quick reverse" mode, it can respond quickly to the fast changing consumer habits.

In the past year, in addition to the new quarter, Daphne also said that it also caters to online consumer preferences. These products were warmly reacted by online consumers, and their contribution to the group's total turnover continued to improve and remained profitable.

In addition, Daphne said it would continue to strengthen cooperation with emerging e-commerce and social networking platforms to attract more young consumers. In addition to maintaining close cooperation with key online platforms, Daphne further expands strategic cooperation with online distributors to expand the business layout of the online market.

Daphne pointed out that in 2020, it will further optimize the "offline sales channel combination" based on the "partner system", supplemented by new image stores. At the same time, increase investment in the business of e-commerce, and regard it as a new business breakthrough.