A seemingly bleak start to 2024, with a pessimistic view of the country's economic outlook coupled with the World Bank's forecast that China's GDP growth will fall to 4.5% this year and further decline to 4.3% in 2025. continues to increase. However, preliminary 2023 financial results for Chinese footwear and apparel brands have caused the fashion industry to reassess the domestic consumer market.
There has been a clear recovery from the market downturn seen after the lifting of pandemic-related lockdowns, with strong recoveries being reported in markets in various regions of the country by the end of 2023. For example, just over 3 million tourists visited. Harbin's total tourism revenue during the Lunar New Year holiday period alone was 5.914 billion yuan, three times that of Sanya. According to Chengdu China Resources Land Co., Ltd., the annual sales of Chengdu MIXC Mall exceeded 6 billion yuan, showing double-digit growth compared to 2022.
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Harbin's popularity shows the potential of China's domestic market, and Chengdu MIXC's revenue growth in 2023 further proves the growing demand for fashion and luxury goods in China's second-tier cities. Against the backdrop of slowing overall domestic demand growth, these two cities in the northeast (Harbin) and southwest (Chengdu) are increasing liquidity and “storage capacity” (the ability to convert resources into liquidity reserves) in the Chinese market. It has been proven.
Regarding the consumer fashion sector, a weak recovery was the main theme in 2023. The sporting goods sector alone has fallen by more than 30% year-to-date, and Li Ning's market value has fallen by more than 70%. Xtep International was down more than 49%, and sporting goods retailer Pou Sheng International was down more than 8%. There was at least one bright spot. In its 2023 interim results, Amer Sports, which was acquired by Anta (whose revenue in the Chinese market last year surpassed Nike's) in 2019 for $5.2 billion, filed a filing with the Securities and Exchange Commission. It was shown that The US is considering an initial public offering as a key “stepping stone” in Anta's internationalization strategy.
Amer listed on the New York Stock Exchange earlier this month, but the reaction to the IPO was weak and the stock had to be discounted initially, but has since risen just 3%, giving the group a market capitalization of $6.3 billion. It became.
Peace Bird Group, which focuses on the fashion footwear and apparel sector, expects its 2023 results to increase by 125 percent, while men's clothing brand Septwolves' third-quarter net profit is expected to increase by a significant 12% in the first half of 2023. It was revealed that the company's sales jumped by 545% due to the growth. 2023. Biemlfdlkk specifically maintained his double-digit growth and net profit attributable to owners of the parent company increased by his 25%.
Q1 2023 financial results showed that the Sports & Outdoors segment led the overall fashion consumption sector, but its performance stalled by the end of the year. This led some financial institutions, including CICC, Goldman Sachs, and JP Morgan, to downgrade Li Ning's ratings. JPMorgan said that against the backdrop of an uncertain macroeconomic environment and industry-wide challenges, Li Ning's single-brand strategy faces more uncertainty than a well-executed multi-brand portfolio.
Contrary to the impression that Li-Ning is a single-brand sportswear company, the group's portfolio actually includes eight brands, including Lotto, Kason and DHS. However, these brands are generally no longer top-tier brands. Their online search volume was much lower than his Anta's popular sub-brands such as Fila, Descente, and Arc'teryx.
But Anta is not immune to market turmoil, and while the growth of its core brands has slowed, Descente has grown 60% year-on-year, replacing Fila as the group's fastest-growing subsidiary. Prior to this, Anta spent his 10 years transforming his Fila from his 100-year-old brand in the red into a prestigious label.
In addition to revenue, these brands' various interests include fashionable sports and trendy youth in the case of Fila, professional sports and luxury outdoor in the case of Descente, and “capturing the hearts of the urban middle class” in the case of Arc'teryx. The focus is contributing. Diversification and globalization of the Anto Group.
In early 2024, Japanese outdoor brand Snow Peak opened its first flagship store in China in Taikoo Li on the Bund. The store is run by Biemlfdlkk, a Chinese clothing company that has bucked trends and grown over the past three years. The 20-year-old Chinese-owned group also owns the Cerruti 1881 and Kent & Curwen global trademarks and offers a portfolio of five major brands.
What is clear during this period of transition in the Chinese market is that brands with a long history and deep culture will always be preferred by Chinese consumers. For local companies, leveraging the product culture of international brands to supplement business expansion has become a potentially successful strategy. Despite the rapid increase in demand for sports and outdoor products in recent years, the penetration rate of professional sports products in China is still much lower than in the United States.
The benefits of a multi-brand strategy can also be seen in the fashion sector, as repeatedly proven in the Chinese market.
In 2023, Elasei Group acquired ownership of Canadian down jacket brand Nobis' regional operations in mainland China, Hong Kong and Macau through a joint venture operating company. According to previously published data, Nobis reported revenue of CAD 287.2 million in the first nine months of 2023.
The deal with Nobis is an addition to Elasei's growing portfolio, which includes its flagship brand Elasei Label, which saw sales increase by 10 percent year-on-year. British contemporary fashion brand Self-Portrait, German luxury women's clothing brand Laurel and French designer brand Iro Paris also grew rapidly by 51%, 35% and 55% respectively. Meanwhile, American brand Ed Hardy recorded growth at the same level as last year. During the year, Iro, Self-Portrait, Laurèl and Ellassay added his 14, 12, 9 and 8 stores, respectively.
Building a multi-brand portfolio is generally achieved through two approaches: internal incubation and external acquisition. Li Ning Group's “Li Ning China” brand is a mid-to-high-end fashion brand that has a high unit price, is mainly made for young consumers, and is cultivated internally based on the famous Li Ning brand. Brands in line with the dividend of “guochao” (the rise of domestic brands and the revival of traditional styles and cultural elements) and cultural confidence. Elasei, on the other hand, is a typical company that relies on acquisitions to achieve an international multi-brand matrix.
However, the rapid development of multi-brand strategies has also revealed difficult problems and bottlenecks faced by China's domestic fashion groups. That's exactly how you build a true fashion brand. Or rather, how can you significantly increase your brand power? Meanwhile, another question is how local brands that once enjoyed rapid growth amid national trends can move quickly to the next stage as the craze wanes.
National men's clothing company Septwolves is proposing a possible strategy based on its 2023 results. Focusing on the jacket category has proven that even a single brand, or even a single category, can deliver strong performance. In addition to long-term development of products, technology, sales channels, etc., Septwolves launched a series of brand reinvention programs in 2023. From strengthening brand development with overseas designers to creating new products with technology fabrics and independent research, we have upgraded our operations from products to stores as we develop.
Peace Bird has more surprises in 2023. According to preliminary results released in early January, the group achieved his $57.7 million net profit, an increase of about 125% year-on-year. Increased profits despite revenue declines indicate that in the current turbulent market environment, strategies to strengthen brands and products may be accompanied by tighter control of discounts and inefficient store closures. I am.
Despite the underperformance of many of China's leading fashion and apparel companies, it has become clear that acquiring international brands to supplement channel access has become the norm in the market. This means that it can be an effective strategy to counter the slump. For domestic Chinese companies, brand strength helps protect long-term development while continuing to improve products.
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