The company released the 2023 annual report and the 2014 quarterly report

24Q1 revenue of 288 million yuan decreased by 2.2%; return to mother of 0.53 million yuan decreased by 17.5%; deducted 45 million yuan increased 0.8% year over year; 24Q1 profit decreased year on year, with a steady increase in government subsidies after deducting non-return year on year.

The 23Q4 revenue of $435 million increased 2.8%; the return to mother of $53 million decreased by 14.7%. 23A's revenue of 1.15 billion was up 0.8%; it was worth 180 million yuan, up 8.6%; after deducting non-124 million, it decreased 9.5%.

The increase in the company's profitability in '23 compared to '22 means that demand in the consumer goods market is stabilizing. However, due to the impact of the external environment and macroeconomic situation, consumers' desire to spend is picking up slowly. At the same time, the growth rate of online platform sales in 2023 tends to slow down compared to the previous year.

In 2023, the company plans to distribute a total cash dividend of 82.08 million yuan (tax included), with a dividend rate of 45.6%.

By channel, offline direct revenue in '23 was 247 million yuan, up 13.2%, accounting for 21.5%; franchise revenue was 137 million yuan, up 12.7%, accounting for 11.9%; e-commerce direct revenue was 766 million yuan, down 4.6%, accounting for 66.5%.

In 2023, the company had 165 direct-run stores, with a total store area of 103,000 **** meters, contributing a total revenue of 247 million yuan, and an annual store efficiency of 24,000 yuan/**** meter/year.

E-commerce channels currently account for more than 60% of revenue. Since the peak sales season for the Spring Festival in '24 and '23 was in January and February, respectively, the data showed a marked increase in January '24, and there was a decrease in February; overall, e-commerce channels grew by a high number of units in 24Q1 over the same period last year.

The gross profit margin for 23 was 59.8%, an increase of 0.02pct; the net profit margin was 15.6%, and the total annual rate increased by 1.1 pct23 to 41.9%, and the same increase of 1.7 pct. Among them, the sales rate was 33.8%, an increase of 1 pct; the management rate was 8.5%, an increase of 0.9 pct, mainly due to the significant increase in consulting fees due to the company's purchase of intangible assets and hiring relevant consulting agencies in 23; the financial rate was -0.36%, a decrease of 0.3 ct, mainly due to a significant increase in interest income compared to 22 due to the increase in the scale of the company's cash management in '23.

Reorganize the casual adult clothing product line and increase marketing promotion

After acquiring all types of IP assets of Hush Puppies (Hush Puppies) in Greater China, the company established the Hush Puppies Brand Marketing Department to promote the brand at the overall level of the brand.

In the short term, the company will carry out product upgrades, brand image renewal, and category integration; in the medium to long term, the company may consider organizing themed events with various categories, opening all-category family flagship stores, participating in major event sponsorship, participating in influential fashion weeks, making more accurate publicity investments for target audiences, and hiring spokespersons that match the brand style. Reach target consumers in multiple dimensions from the overall level of the brand.

Hush Puppies (Hush Puppies) is a brand that has existed in the domestic market for nearly 30 years. Consumers have a certain brand awareness of Hush Puppies (Hush Puppies). Hush Puppies (Hush Puppies) has always been positioned in the middle and high-end market, and has a certain mass base.

Adult clothing is a very important category for casual travelers, and the company will further enhance and develop this category after self-operation. At this stage, the company first needs to update the entire adult clothing product line, further focus on classic casual style in design, and combine the current fashion, leisure, sports and leisure lifestyle of young people to make the product presentation more youthful and fashionable.

Natural fabrics that are more comfortable for everyday wear and functional fabrics suitable for outdoor scenes will be used in the fabric, and the version will be optimized on the basis of the existing one to improve the overall quality of the product.

Second, after the adult clothing product line is fully upgraded, the company will increase the promotion of the brand at the overall level to further shape the brand value in the minds of consumers.

The company will pay attention to balanced category development, and both men's and women's clothing will develop healthily. Ikubushi is a home-based brand. In the future, it will consider opening image stores in business districts with high offline traffic and good locations, and will also launch family lifestyle stores in due course. The collection store integrates all categories of products such as men's and women's clothing, children's clothing, dolls, and even footwear, bags, and accessories to be developed, giving consumers a one-stop shopping experience.

Adjust profit forecasts to maintain “buy” ratings

In September 2023, the company used its own capital to acquire all types of IP assets of the Gavushi brand in mainland China, Hong Kong and Macau Special Administrative Regions. The main business categories of the Freelace brand in Greater China include adult clothing, adult shoes, children's shoes, children's clothing, bags, leather goods, etc. The adult shoes, children's shoes, luggage, and leather goods categories in mainland China currently operate under an authorized model. The company charges brand usage fees from authorized parties every year; the children's clothing category is self-operated; the adult apparel category companies took back their own operations this year and are still in the process of handing over business with the original authorized dealers.

Considering the slow recovery in consumer spending intentions and the slowdown in the company's online platform sales growth rate, we adjusted our profit forecast. We estimated that the company's net profit for 24-26 will be 2.3/30/360 million yuan (24-25 years ago, respectively), EPS would be 2.13/2.81/3.33 yuan/share, respectively, and the corresponding PE would be 11/8/7X, respectively.

Risk warning: risk of slowing domestic macroeconomic growth; risk of increasing competition in children's clothing industry; risk of increasing inventory share and price decline; brand licensing risk.