The wind of "football fever" is still blowing to young people. Recently, the women's football team of Jinan Licheng No. 2 Middle School won the women's championship of the 2023 World School Football Championship. The Chinese team won the World School Football Championship again after 16 years, which ignited a lot of football Enthusiasm for lovers.
Under the enthusiasm of children's sports, the sales of sports children's clothing related to it are also increasing day by day. 361°, which deployed children's sportswear business earlier, continued to expand the campus sports category in the first half of this year, adding professional sports products such as youth basketball and racing running, and achieved good results in performance. The data shows that 361° Children’s business revenue was 911 million yuan, a year-on-year increase of 33.4%, accounting for 21.1% of the total revenue.
However, in the domestic children's wear market, there is no brand with a market share exceeding 10%. The industry concentration is low, there are many small brands, and mass brands are the mainstream trend of the industry. So, under such a competitive landscape and development trend, what kind of development has 361° achieved? What are the company's future points that deserve the market's attention?
361°'s revenue in the first half of the year reached 4.31 billion yuan, and its performance achieved steady growth
On August 15, 361° International Co., Ltd., a Hong Kong-listed company, released its unaudited interim performance report for the six months ended June 30, 2023. Data show that in the first half of 2023, 361°’s revenue reached 4.312 billion yuan, a year-on-year increase of 18%; net profit was 704 million yuan, a year-on-year increase of 27.72%; gross profit was 1.796 billion yuan, a year-on-year increase of 18.5%. On the whole, under the growth trend of the sportswear industry, the company benefited from the dividends of the sinking market, continued the previous growth trend, and achieved steady growth in performance in the first half of the year.
According to the financial report, in terms of store layout, as of the end of the reporting period, the 361° brand had 6,829 stores worldwide. Among them, the number of sales outlets in mainland China increased by 162 to 5,642 compared with the end of 2022, and the proportions of first-tier, second-tier, third-tier and below were respectively 4.9%, 18.8% and 76.3%. This shows that while the company insists on store expansion, the layout of stores occupying the top of the sinking market has not changed. At the same time, the company continued to pay attention to the improvement of store efficiency. The number of the latest ninth-generation image stores of the 361° brand increased by 7.8% from the end of 2022 to 3,182, accounting for 56.4%, and the proportion of supermarkets and department stores increased to 31.3%.
In terms of e-commerce channels, the company’s 23H1 online channel revenue increased by 38% year-on-year to 1.08 billion yuan, accounting for 25% of total revenue. During the 618 period, the cumulative turnover of all e-commerce channels increased by about 43% year-on-year. The growth rate of e-commerce has obviously benefited from 361°'s continuous improvement of the group structure and integrated marketing strategy.
In terms of children’s business, during the period, 361°’s children’s business revenue was 911 million yuan, a year-on-year increase of 33.4%, accounting for 21.1% of the total revenue. The company’s second growth curve is clear. It is worth mentioning that the growth rate of children's clothing is still faster than that of adults. Adult income rose 14.6 percent year-on-year, the data showed.
On the whole, 361°'s performance in the first half of the year is recovering well, and children's clothing and e-commerce are still powerful growth engines. However, in the competitive landscape of domestic sportswear, the ranking of 361° has not yet undergone major changes. According to the Huajing Industry Research Institute, in 2022, 361° and Xtep International will have a market share of less than 10%, 3% and 6.3% respectively; Li Ning and Adidas will both have a market share of more than 10%, 10.4% and 11.2% respectively. %; Anta China and Nike's market share are above 20%, 20.4% and 22.6% respectively.
Then, after 361° achieves steady growth in performance in the first half of 2023, how to find a new breakthrough point to increase market share, so as to break into a new world in the field of sportswear?
361° odds for children’s sportswear?
In recent years, the domestic children's clothing market has grown significantly. According to Euromonitor data, the market size of the domestic children's wear industry will be 256.361 billion yuan in 2021, a year-on-year increase of 15.60%. It is estimated that in 2027, the domestic children's wear market will reach 459.7 billion yuan, and the compound growth rate from 2022 to 2027 will be 9.81%. There is room for future growth relatively broad.
Sports children's wear, as its subdivision track, has now benefited from the integration of sports and education and has become a new growth point for the children's wear industry. Many leading adult sportswear brands and new brands have entered the game, for example, foreign Nike, Adidas, domestic Sports brands Anta, Xtep, 361°, and the new sports children's wear brand MoodyTiger, etc. Despite this, the industry still believes that the field of sports children's wear is still in the blue ocean, and there is no obvious head brand that can occupy consumers' minds.
Under such a market competition pattern, many institutions expressed optimism about the growth potential of 361° children's business based on the performance of 361° children's business in the first half of 2023. According to the financial report, in the first half of 2023, 361° children's business revenue was 911 million yuan, a year-on-year increase of 33.4%, accounting for 21.1% of total revenue. However, if 361° wants to achieve a higher breakthrough in the field of sports children's wear and seize the head market, it still has to face many challenges.
Challenge 1. Parents’ consumption concepts have changed, and they pay more attention to the brand value of products. The brand awareness of 361° needs to be improved.
Analysts at CITIC Securities said that my country's children's clothing industry is currently shifting to the "brand consumption" stage, and the survival of the fittest in the industry is accelerating. Enterprises with more obvious advantages in design, product quality control, etc., and stronger brand effects will be more competitive.
Compared with Nike, Adidas, Anta and other giants, the competitiveness of 361° brand awareness is relatively average. This can be seen from the current market share of children's clothing. According to the Huajing Industry Research Institute, the total market share (CR10) of the top ten brands in China's children's wear industry will be 16.8% in 2022. Among them, Balabala has a market share of 6.8%, and Anta has a market share of 2.1%. According to Euromonitor data in 2022, the market share of the 361° brand in the children's wear market is stable at 0.4%. Compared with the head, the market share needs to be improved.
The second challenge is that in the field of sports children's wear, compared with new brands, 361° still has a lot of room for improvement in brand labelling.
At present, most of the sports children's wear brands on the market are children's sub-line brands extended from adult sports brands, and the number of professional and influential high-end sports children's wear brands is relatively small.
Among them, the new sports children's wear brand MoodyTiger has seized this market vacancy. According to the data, MoodyTiger ranked second in the 618 Taobao Tmall sports and children's clothing industry list, and has long been ranked first in the children's professional sports store list. This is due to MoodyTiger's more precise market positioning and gradually improved marketing strategy.
It is reported that MoodyTiger has followed Lululemon's marketing core, emphasizing the concept of "releasing children's nature", and invited influential star families such as Guo Jingjing, Zhang Yining, Lin Feng, Ying Caier, Zheng Jiaying and other influential star families to promote, occupying the minds of mid-to-high-end families and making the brand more distinctive. Social attributes, so that users can resonate with the brand, improve brand stickiness and repurchase rate. Compared with the price war, MoodyTiger's community marketing method has a higher user conversion rate and trust.
The growth rate can also reflect the success of MoodyTiger. According to data from Taobao + Tmall Magic Mirror, the total sales of the MoodyTiger brand on the Taobao Tmall platform in 2022 will exceed 180 million yuan, a year-on-year increase of 197.1%. As for 361°'s current children's clothing business, although the revenue is much higher than that of MoodyTiger, the growth rate still needs to be improved. Data show that in the first half of 2023, 361 Children’s revenue was 910 million yuan, a year-on-year increase of 33.4%, accounting for 21.1%; in 2022, 361° children’s clothing business revenue was 1.442 billion yuan, a year-on-year increase of 30.3%, accounting for 20.7% of total revenue.
In short, MoodyTiger's community marketing strategy may provide some reference for 361°. But unlike MoodyTiger, 361° aims at the sinking market, and in the sinking market, 361° has many advantages.
Advantage 1: Compared with top domestic sports brands such as Anta and Li-Ning, 361° has more energy in the field of sports children's wear and has a first-mover advantage.
At present, Anta is taking the "road of mergers and acquisitions". This business model will allow Anta to devote more energy to the running-in and operation of the brand organization and personnel of mergers and acquisitions; while Li Ning is taking the "road of national tide". Affected by factors, the growth rate of Guochao has slowed down.
This shows that although the leading enterprises have a layout in the field of sports children's wear, the energy of the enterprises at a certain stage is limited, and their focus is also different. Therefore, at this stage, Anta and Li Ning may not be able to concentrate their firepower on the sports children's wear business in the sinking market. However, 361° has been steady and steady. As early as 2009, 361° Children had been established. The layout of the sports children's wear business can be used in sports children's wear The field devotes more energy, which is expected to achieve lane change and overtaking.
Advantage 2, 361° focuses on research and development, and children's products have differentiated competitiveness.
It is reported that 361°'s research and development investment level far exceeds that of other domestic sports brands. The data shows that in 2022, 361°'s research and development expenses will account for 3.8%, while Anta, Li Ning, and Xtep will only account for 2.4%, 2.1%, and 2.3%. According to the mid-term report data, as of June 30, 361° R&D expense ratio was 3.2%, and 406 valid patents had been obtained. It can be seen that the company pays more attention to product research and development.
At the same time, 361° continuously strengthens the technological attributes of products to create differentiated competitiveness. At present, 361° children's business has launched innovative technologies such as "elastic spring", "quick bullet", "easy decontamination" and "silver ion antibacterial", and signed a long-term strategic cooperation with China Shipbuilding Corporation to jointly develop military-grade "zinc antibacterial "Technology can effectively help children fight against harmful microorganisms. Today, 361°Kids has successfully released a variety of hot products such as Flashbok rope skipping shoes, Qingkong basketball shoes, Magic Armor basketball shoes, Yufeng basketball shoes and so on.
The third advantage is that 361° took the lead in seizing the dividends in the sinking market of sports children's wear by adopting dislocation competition in the first half of the year.
From the perspective of store layout, the financial report shows that as of the end of the reporting period, 361° had a total of 2,448 sales outlets offering 361° children’s products, a net increase of 160 compared with the end of the previous year. By region, approximately 69.6% are located in third-tier cities or below in China, while 6.2% and 24.2% are located in first-tier and second-tier cities in China, respectively. The stores of top sports brands such as Anta and Li Ning are mainly concentrated in first- and second-tier cities. It can be seen that 361° children's business accounts for nearly 70% of the sales outlets in the sinking market, which will lay the foundation for it to increase its market share in the sinking market.
From the price point of view, 361° has the advantage of high cost performance. According to Huaxi Securities, from the perspective of pricing, the average price of 361° footwear products is about 300 yuan, and the average price of apparel products is about 200 yuan. Compared with Nike (500-1000 yuan), Li Ning (400-800 yuan) ) and so on have a large price gap. This price positioning makes 361° more competitive in the sinking market.
In short, many organizations said that the children's business has become the second growth curve of 361°. In the future, 361° will continue to make efforts in this business field, relying on the advantages of price, outlets, product quality, etc., to achieve lane change and overtaking.
Summarize:
After the financial report was released, investment banks rated 361° as a buy. At present, 361° is constantly exploring in the highly competitive sports apparel track, and gradually emerges in the field of sports children's wear. In the future, with the help of e-commerce and other channels, 361° is expected to change lanes and overtake in the field of sports children's wear by virtue of its network layout and price advantages in the sinking market under the iteration of fashion trends.
Author: Winning Buffett's Fate
Source: Hong Kong Stock Research Institute