The company publishes annual reports and quarterly reports

24Q1 revenue was $1.15 billion, down 1.2%; net profit to mother was $120 million, up 13.2%; 23A revenue of $4.55 billion, up 16.6%; net profit to mother of $3.0 billion, up 316.8%; 23Q4 revenue of $1.45 billion, up 21.5%; and net profit to mother of $110 million, compared to 22Q4.

23A revenue growth is mainly due to a gradual recovery in domestic market demand, and simultaneous growth in offline and online revenue. The high increase in net profit due mainly to a sharp reduction in financial expenses and a significant control effect on sales expenses. Among them, financial expenses decreased by 0.7 billion yuan compared to the previous year, a decrease of 41.8%. The main reason was a decrease in syndicated loan balances, and interest expenses were reduced as a result.

24Q1 financial expenses were 16 million yuan, a decrease of 42%, continuing the trend of fee reduction, mainly due to the reduction in the size of the company's short-term loans and the reduction in interest on loans. At the same time, the company optimized the loan structure, reduced the size of syndicated loans, and drastically reduced interest expenses.

23A gross profit margin was 69.2%, the same year-on-year; 24Q1 gross profit margin was 70.2%, an increase of 0.8 pct.

The company plans to distribute a cash dividend of 90 million yuan (tax included) in 2023, with a dividend rate of 30.3%.

By brand, TW/VG/Yunjin's revenue in '23 was +16.7%/+12.4%/+120.4%, respectively, accounting for 78%/21%/1%, respectively. The gross margin was 67.8%/74.5%/73.6%, respectively, and -0.2/+1.1/+0.7pct.

24Q1TW/VG/ Yunjin's revenue was +0.3%/-14.2%/+165.6%, respectively, accounting for 80%/18%/2%, respectively.

By channel, online/offline revenue in '23 was +15.0%/+17.2%, respectively, accounting for 38%/62%, respectively. Among them, looking at offline store types, direct-management/franchise revenue was +9.9%/+150.7% year-on-year, respectively, accounting for 54%/7%. The rapid growth of franchises is mainly due to the company's adoption of a strategy of transferring existing direct-managed stores to TW, which has accelerated the expansion of franchise channels. As of the end of '23, the number of TW direct-managed/franchised stores was 860/238, respectively, and -215/+91, respectively.

24Q1 online/direct/franchise revenue was -1.56%/-8.7%/+125.62%, respectively. Online and direct revenue showed a slight decline. Franchise revenue remained high, and the revenue structure continued to be optimized.

Work together offline and online to enhance omnichannel retail power

The company's offline channels continue to expand multiple points of contact with customers, and enhance the customer's offline shopping experience through new retail models and complex experience stores. Online channels continue to consolidate and expand their existing advantages on various platforms, and strengthen the dual self-broadcast model to build a brand live broadcast room matrix.

The Teenie Weenie brand's offline channels are advancing three major reforms relating to “channel, new retail, and quality.” Among them, “channel reform” is to carry out direct management to franchise and new retail changes to the original channel structure, increase the share of franchised stores and new retail performance, and enhance the performance of shopping centers and leading Ole channels.

The “new retail transformation” is the introduction of an online business model for offline stores, using offline stores as the center to carry out private domain transformation of public traffic, and increase the scale of offline business performance. “Quality reform” increases the share of new product performance and overall gross profit margin by changing promotion policies and optimizing the promotion and promotion of new products.

In terms of online channels, TeenieWeenie's e-commerce division continues to consolidate its existing advantages, optimize business processes, enhance brand visual effects, and actively build a brand self-broadcast matrix. The brand's online business continues to grow rapidly, and the online menswear and children's clothing business is growing at an accelerated pace. At the same time, the industry rankings of various brands on different online platforms are also steadily improving. The VGRASS brand retail center continues to upgrade private marketing and strictly control new product discounts. By recruiting and incubating new retail talents, it showcases products and disseminates brand stories and scene matching solutions through images, videos, and live broadcasts, so that the sales performance of customers leaving the store is growing at the same rapid pace. Yuanxian Brand Yunjin Division combines external market insight and its own resources to optimize the store's organizational structure and talent pool, implement changes in store retail business, and enhance offline channel sales capabilities and performance. In terms of online channels, it continues to build online marketing and Taobao platform teams on the original basis, breaking through a single traditional retail channel, and the online business has grown dramatically.

Improve the performance of offline single stores and accelerate the expansion of franchise channels

With years of accumulated resources in the fashion retail industry, the company's brands have established a strong offline sales channel network advantage. In the core business districts of first-tier cities, provincial capitals, and second-tier and third-tier cities in China, the company's brands occupy an advantageous position in high-end department stores and shopping centers. According to their own positioning, each brand adjusts the layout of department stores, shopping centers and outlet channels positioned accordingly in each city across the country. On the basis of continuing the channel layout of the brand's historical advantages, the company has gradually adjusted the structure of direct-run stores, high-end shopping centers, and high-end department stores in recent years. The focus for 23 years has been on improving the single-store performance of direct-managed stores of various brands.

At the same time, the company is actively developing franchise business, speeding up the layout of franchise channels in relatively remote regions and cities, with the aim of building a comprehensive and powerful offline marketing network system. In '23, the Teenie Weenie brand successfully built an asset-light offline retail system. Faced with increasing factors of instability in the current macroeconomic environment, the company has steadfastly pushed forward channel reforms and achieved a contrarian increase in revenue and profit despite the year-on-year decline in the number of offline stores. This operating result is due to efforts on two fronts:

On the one hand, the company adopted the existing direct-run store transfer strategy, which accelerated the expansion of franchise channels and explored evaluation mechanisms and process standards within the group, laying a solid foundation for further channel restructuring; on the other hand, the company optimized the direction of resource investment, closed inefficient stores, and reduced profit loss, thus providing a wider space for the vigorous development of opportunity channels.

Adjust profit forecasts to maintain “buy” ratings

The company's three private brands: Teenie Weenie, VGRASS, and Yuanxian, cover the middle and high-end product lines, forming a pyramidal three-dimensional brand matrix layout. In the short term, the company optimized its loan structure in '23, the profit level increased significantly, and the trend continued in Q1 '24. In the long run, with the steady progress of direct management to franchise and the continuous expansion of online business, the company's profit level is expected to increase further in the future. In view of this, we adjusted our profit forecast. The company's net profit for 24-26 is estimated to be 377/448/5.2 billion yuan respectively (previous 24-25 years were 3.7/420 million yuan), EPS was 1.1/1.3/1.5 yuan/share, respectively, and the corresponding PE was 8/7/6X, respectively.

Risk warning: Increased industry competition, financial risks, and the expansion of franchise channels falls short of expectations.