Why Are Hong Kong Stocks Stronger Than A Shares In Apparel Sector? Look At The Logic Behind This

Food and clothing are the first. However, in the capital market, the clothing sector represented by "clothing" often accompanies the last one.

In the past two weeks, A-share has broken through 3400 points from 3000 points, and the upsurge of "nationwide stock speculation" is gradually rising, and SMIC international listing has attracted more and more attention. In contrast, the clothing sector, quietly, there is almost no discussion of the news.

Why is it always difficult for the clothing sector to appear in the public's view, and what are the similarities and differences between the clothing plate of Hong Kong stock market and that of a share? Today, "mantis finance" will talk to you about the internal logic of the clothing sector.

Low entry threshold, high threshold, clothing industry is difficult to win all

The biggest characteristic of the clothing industry is non-standard and the industry chain is trivial and lengthy. Compared with the standardized food and beverage industry, the clothing industry needs to push new products every season, and each new product needs to be prepared with various colors and sizes. Therefore, the clothing industry has a very significant characteristic, the entry threshold is very low, the threshold is very high. No one is particularly prominent, resulting in the entire plate no absolute leader, there is no winner take all phenomenon.

This can be confirmed by the market share of clothing industry. According to the report on China's clothing market in 2019, the top five brand clothing companies in China are Adidas, Nike, Hailan home, UNIQLO and Anta, with market share of 1.9%, 1.9%, 1.1%, 1.0% and 1.0%, respectively. The market share of top enterprises is very low, and there is no obvious difference between the top five. Taking the U.S. market as an example, in 2018, the market share of Nike ranked first was 6.3%, that of Old Navy ranked second was 1.8%, and that of Adidas ranked third was 1.2%. The head effect was relatively obvious.

In addition, the bigger the module is in China.

Women's wear industry is the largest module in the clothing industry, with a market share of about 48.1% in 2018. However, looking back on the financial reports of the clothing listed companies in Hong Kong and a in 2019, no women's clothing brand revenue exceeds 10 billion in 2019. The only women's clothing brand listed in Hong Kong and a has not only closed its stores, but also suffered losses in successive years, so it is possible to be put on the st hat at any time.

On the contrary, only 1.2 billion sports clubs have entered the market. Anta's annual revenue in 2019 is as high as 33.9 billion yuan. Relying on Anta brand with high performance price ratio and FILA brand with high fashion and high-end, Anta is ranked first among the major sports brands in China, and its market value is only lower than that of Nike and Adidas. Li Ning, another well-known sports brand in China, also recorded 13.9 billion yuan in revenue in 2019 with the help of "national trend".

In the clothing sector, leisure clothing that takes into account men's and women's wear and even children's wear performs better. The revenue of Hailan home, Senma clothing and souyute in 2019 exceeds 10 billion yuan. The phenomenon of leisure clothing leading from UNIQLO's parent company's fast sale is reflected incisively and vividly. UNIQLO holds the top position in the clothing sector of Hong Kong a and Hong Kong, with a market value of up to 450 billion yuan. The operation mode of UNIQLO has become a model for the fast thinking industry.

In general, the market recognized growth potential of clothing module is: Sports > children's wear > men's wear > women's wear. Corresponding to this, the performance of sports brand listed companies in Hong Kong and Hong Kong a is much higher than that of other brands. Among the top 15 listed companies in the market value of clothing brands in Hong Kong stocks, half of them are related to sports brands.

What is the secret of the emergence of sportswear brand?

Why can "small brands" emerge in the whole sports market?

If we want to find the reason, we can't do without the internal operation mechanism of the clothing industry. The effective operation of the traditional clothing industry has two supporting forces, one is a high-density production system, the other is a mature sales system. The two complement each other. If you produce good things, you have to sell them. If you want to sell them, the quality of the products must be excellent. In fact, in modern society, there is an important force in supporting the clothing industry, that is planning, design, brand building.

These three forces constitute the upper, middle and lower reaches of the clothing industry: the upstream is the production end, the midstream is the brand merchant, and the downstream is the retail end.

China is a traditional clothing country with complete upstream, midstream and downstream industrial chain resources in China. Therefore, the clothing brands in China are all focused on production, operation and sales at the beginning, such as Hailan home, Jihua Group and Senma clothing, which are the top three companies in A-share clothing sector.

The advantage of this is that fertilizer does not flow into the field, and the family makes money. What about the disadvantages? Obviously, production is very powerful. After all, we are a powerful manufacturing country, but there is always a gap between operation and sales.

What do international giants like Nike and Adidas do?

The production, transportation and marketing of these two countries are completely separate.

At the same time, it will be responsible for the development of a large number of products such as Adidas and Nike, and will only be responsible for the development of a large number of major products such as Adidas and Nike in the European market.

Nike and Adidas outsource the production to Shenzhou International and give the channel to taobo and Baosheng. The efficient operation of taobo and Baosheng has helped Nike and Adidas sink into the second and third tier cities in China, forming a nationwide sports product distribution network.

With a strong distribution network, it in turn improves the inventory turnover of Nike and Adidas. According to the annual report of 2019, it can be turned four times a year, once a quarter. For example, the inventory turnover rate of Hailan house in 2019 is 1.44, and that of SEMAR is 2.61.

Judging from the market value of Hong Kong stocks on July 10, the three companies that closely "hold" Nike and Adidas "thighs" occupy a place in the top ten of the clothing sector, and the market value of Shenzhou International, which is responsible for production, has reached 100 billion level, second only to Big Mac express and Anta sports, which is the most popular one recently. Taobo and Baosheng have 62 billion and 9.9 billion respectively.

In recent years, domestic sports brands Anta and Li Ning have also explored the Growth Logic of sports brands, and have gone out of their own unique road.

1. From selling shoes and clothing to managing brand, it is not enough to create and purchase to gather together. This is a different path for Li Anning

Anta is constantly buying and buying to expand its brand territory. For example, it bought FILA from Belle in 2009, focusing on fashion and sports brands, and let FILA help Anta realize its dream of "rebuilding an Anta". Anta recorded 33.9 billion revenue in 2019, of which FILA brand was 14.77 billion, accounting for 43.6%, with a year-on-year growth of 73.9%.

Li Ning has transformed itself from a shoe clothing supplier to a fashion week brand by building the Guochao "Li Ning in China" brand, which has attached a unique label to itself and helped Li Ning grow from 8.8 billion in 2017 to 13.9 billion in 2019.

2. Pay attention to retail resources. As high-quality dealers are deeply bound by Nike and Adidas, and the old "husband and wife shop" model fails to achieve the goal of "fast and efficient", both Anta's FILA and Li Ning's "China Li Ning" mainly focus on the direct store mode. With the retail resources in their hands, they can improve the single store profit through efficient operation and solve the problem of excessive inventory. Take FILA as an example. In 2019, Anta has 1951 FILA stores, whose sales are higher than those of Li Ning and Tebu, ranking first among domestic sports brands. According to Caixin, Li Ning's channel reform in 2012 and the recovery of poor management in recent years have made the franchise stores directly operated, resulting in a relatively high proportion of direct marketing channels and revenue. Tebu still adopts the distribution mode, but controls 60% of the store operation through the exclusive agent.

Why do the clothing brands that make money go to Hong Kong stock market?

There are 24 clothing companies in Hong Kong stock market and 54 A-share companies. In terms of quantity, there are more A-shares, but in terms of market value, the market value of clothing sector in Hong Kong shares is higher. As of July 9, 2020, there are only seven companies with a market value of 10 billion yuan, among which Hailan home, with the highest market value, has a market value of only 27.625 billion yuan.

However, in the Hong Kong stock market, there are nine companies with a market value of 10 billion yuan. The parent company of UNIQLO, the largest fast retailing group, has a market value of HK $470 billion. In addition, Anta sports and Shenzhou International, ranked second and third, have a market value of HK $100 billion.

The reason for this difference lies in the recognition of clothing brands in Hong Kong and a.

In Hong Kong, there is more room for brands. Hong Kong's fashion culture and aesthetics are closer to the international trend. There are a lot of excellent fashion designers in Hong Kong. At the same time, as a "shopping paradise", Hong Kong's retail industry is very developed. Therefore, brand companies will find ways to improve the design and R & D capabilities of brands, deepen brand image, and accelerate brand precipitation. Investors in Hong Kong stocks like this kind of firm performance and are willing to give "rewards" for performance. So when the brand influence rises steadily, its intrinsic value will be reflected in its share price.

For example, Anta really takes off to become the leader, which is the market's recognition of its value after the strong performance of its acquired brand FILA. In 2014, FILA successfully turned loss into profit, that is, Anta began to maintain double-digit growth; in 2015, Anta's revenue exceeded the threshold of 10 billion yuan, reaching the highest performance of domestic sporting goods companies. From 2018 to 2019, FILA soared to the sky, realizing "rebuilding an Anta" and becoming the main revenue engine of Anta.

Anta's performance changes are also reflected in the capital market. From the performance of Anta in the figure below, the three big leaps correspond to 2014-2015, 2017-2018, and 2018-2019.

However, A-share investors are more inclined to the business turning point of the industry and the profit expectation of the industry policy, while clothing is a necessary consumer goods, and its ultimate goal of consumption demand growth is population, income and consumption intention. In the foreseeable future, the population will decrease, the income will increase and the willingness to consume will increase. These three points will not give consumers too much imagination.

Therefore, they are more willing to go to Hong Kong for financing and listing. Among the clubs with a market value of 10 billion Hong Kong stocks, half of them are China capital stocks, including Anta sports, Shenzhou International, Li Ning, taobo and bosden.

summary

In Anta's annual report, there is a sentence: "we not only attach importance to the growth of sales figures, but also pay attention to the quality of development and operation." I believe that such a goal is Anta as a clothing sector leader in the Hong Kong stock market after being recognized, can also be used as the vision of the entire clothing sector. Only when the intrinsic value of the whole industry is enhanced can it be truly recognized by investors.

The bull market atmosphere in Hong Kong and Hong Kong a is gradually rising. After understanding the internal logic of the growth of the clothing industry, you may have more space to choose.