Apparel listcos recalibrate to face slowdown

With increasingly fierce market competition, Chinese apparel enterprises are considering how to excel in a tough environment.

Today, the era of high growth for the nation's clothing industry has passed, with market demand shrinking and growth momentum significantly weakened. According to Blue Shark — an online market observer — in the first half, out of 48 A-share listed clothing companies, 31 experienced a year-on-year decline in revenue and 31 experienced year-on-year bottom line declines.

The Blue Shark survey said that in terms of revenue, the clothing industry has shown an obvious Matthew effect — in which enterprise scale becomes a key factor determining strong performance — leading to increasingly pronounced market differentiation.

There are only three companies with January-June revenue of over 10 billion yuan ($1.4 billion), and their overall performance has been stable of late. Sportswear brand Anta Group leads the industry with a top line of 38.54 billion yuan, followed by Li-Ning at 14.82 billion yuan and HLA Group with 11.57 billion yuan.

In terms of revenue growth, the three groups grew at a pace of 14.3 percent, 3.3 percent and 1.7 percent year-on-year, respectively.

There are nine companies with an interim revenue scale of over 2 billion yuan but below 10 billion yuan, among which five companies — Youngor, EEKA Fashion, PeaceBird, Lancy and Saint Angelo — have experienced top line declines, with Youngor experiencing the most severe drop of 10.4 percent.

There were 36 firms with first-half revenue of less than 2 billion yuan, accounting for 75 percent of the total surveyed. Among them, 26 companies experienced top line declines, with Metersbonwe experiencing the largest fall of 45.23 percent.

There were 10 companies seeing revenue growth, with Harson Group experiencing the largest jump of 67.03 percent, Blue Shark's statistics showed.

Although the industry is undergoing adjustments, there are also some whose performance is still impressive, such as sportswear firms which have become a growth point for the clothing sub-industry. Sector players such as Anta, Li-Ning and Xtep occupy three of the top five spots in terms of revenue. Among them, Anta's revenue exceeds the sum of all other sportswear brands, with smaller players such as outdoor activewear names Toread and Mobi Garden showing downward trends for both revenue and net profit.

Meanwhile, clothing enterprises are no longer distinguishing between their original main business and new business segments, and are rushing into high-growth areas, presenting an even more crowded and competitive landscape. Furthermore, industry experts noted that enterprises are not only facing competition from existing brands, but also newly emerging players.

"Consumption weakness offers rising opportunities for new brands, as consumers pursue cost performance, which means high quality at a fair price. This is accelerating market competition," said Blue Shark's report.

Wang Peng, an associate research fellow at the Beijing Academy of Social Sciences, said: "Under the current economic conditions, apparel companies may turn to overseas markets so as to spread risk and increase their brands' international influence. Also, they may strengthen consumers' emotional connections through cultural narratives to build long-term brand loyalty.

"Apparel enterprises may include lifestyle categories into their businesses to encourage refined demand."

In the first half, Anta invested nearly 1 billion yuan in research and development, up 8 percent on a yearly basis, while Li-Ning's R&D investment over the same period surged 8.7 percent.