Image Source: joeone co.,ltd. Official Website

Blue Whale News September 25th (Reporter Wang Hanyi) A decision in the first half of this year directly led to a decline in the non-net income of the main clothing business in the first half of the year, but joeone co.,ltd. seems to have no other choice.

In April, joeone co.,ltd. made a big move and announced 5 spokespersons at once. In response, some consumers exclaimed, 'This is the real business warfare, signing all the tall-legs, leaving no legs for the opponents to sign.' Compared to just claiming to be experts in buying pants, letting the spokespersons speak with their legs seems more direct and impactful.

joeone co.,ltd., a clothing company founded in Jinjiang, Fujian in 1989, is known for its men's trousers products. After successfully listing in 2011, joeone co.,ltd.'s market cap once exceeded 7 billion, becoming a true 'King of Pants.' However, with the continuous changes in the market environment, joeone co.,ltd. is facing the challenge of brand aging.

Facing Challenges in Survival

In the past two years, the domestic menswear industry has generally experienced a strong recovery in 2023 and stagnant growth in 2024, which is consistent with the overall market trend.

Data from the National Bureau of Statistics shows that in the first half of 2024, the retail sales of clothing, footwear, hats, and textile goods increased by 1.3% compared to the same period in 2023, a significant slowdown from the 12.8% growth in the first half of 2023.

As the market enters the stage of stock competition, companies typically adopt strategies such as reducing costs and improving efficiency while maintaining stable revenue to pursue profit growth; or they seek new growth opportunities through the development of new businesses.

Similar to other traditional domestic men's wear brands, joeone co.,ltd. once accumulated a large number of stores in non-shopping center channels such as street shops and department stores, many of which are located in scattered lower-tier markets, mainly operated by franchisees.

However, due to inadequate attention to details, joeone co.,ltd. has not fully established the high-end brand image. Meanwhile, its offline-oriented layout appears to be struggling under the impact of e-commerce. This has resulted in slowed or declining sales growth and significant inventory pressure.

With the evolution of retail formats, joeone co.,ltd. intends to update and enhance its brand image, therefore choosing to strengthen the layout of self-operated stores, especially those in shopping centers with higher gross margins and larger floor areas.

In the first half of 2024, the total number of joeone co.,ltd. stores decreased by 35 to 2,351, including an increase of 10 self-owned stores to 801, accounting for 34%. joeone co.,ltd. also disclosed that the average area of its offline stores continues to expand.

On September 23, Lin Congying, the chairman of joeone co.,ltd., stated at the 2024 semi-annual performance briefing that during the period, joeone co.,ltd. continued to optimize its channels and build tenth-generation stores, increasing investment in shelf props, decoration expenses, and adjusting personnel costs to enhance the competitiveness of shopping guide salaries. Therefore, employee salaries, decoration expenses, and mall management expenses increased during the reporting period, raising sales costs.

It can be said that due to the channel adjustment strategy, joeone co.,ltd. may find it difficult to increase profits by cutting costs in the short term. The financial report also indicates that the decrease in non-GAAP net income from the core clothing business is mainly due to joeone co.,ltd. signing contracts with five celebrity endorsers during the reporting period, and increasing brand promotion expenditure, with advertising and business promotion expenses rising by 40.35 million yuan year-on-year.

Clearly, joeone co.,ltd. is not taking the path of reducing costs and improving efficiency to increase profits. However, compared to China Lilang's announcement in its latest financial report, which plans to implement a multi-brand strategy through joint ventures and take over the brand operation of Munsingwear, a golf brand under Japan's Descente, in the Chinese market, joeone co.,ltd. does not seem to have plans to increase investment in its two sub-brands - the South Korean fashion men's wear ZIOZIA and the fashion pants brand FUN.

In the first half of 2024, the revenues of ZIOZIA and FUN decreased by 2.46% and 10.24% respectively, to 56.14 million yuan and 62.85 million yuan. The number of ZIOZIA stores decreased by 3 to 92, while the number of FUN stores decreased by 18 to 76. Considering the relatively small scale and unclear differentiation advantage of these two brands, it is not easy to develop them into the company's second growth point.

What road is Joeone Co.,Ltd. really walking on?

Joeone Co.,Ltd. on the road.

Faced with challenges, Joeone Co.,Ltd. chooses to increase marketing investment and make a bold bet on brand rejuvenation.

In the first half of this year, Joeone Co.,Ltd. signed five celebrity spokespersons at once to promote its 'Five Pants' series, including Business Outdoor No.1, Casual Pants, Little Black Pants, Free Jeans, and High Fashion Western Pants. Joeone Co.,Ltd. Chairman Lin Congying expressed the hope that through this approach, different age groups of consumers will get to know Joeone Co.,Ltd., boost brand rejuvenation and fashion, and further attract more attention and experience from young consumers.

According to Blue Whale News, Joeone Co.,Ltd.'s five spokespersons cover different age groups: Zhu Yawen born in 1984, Zhang Yunlong in 1988, Wei Daxun in 1989, Li Yunrui in 1996, and Fan Chengcheng in 2000. It can be seen that while maintaining attractiveness to the 30 to 45-year-old middle-aged and young male market, Joeone Co.,Ltd. is also actively expanding its consumer base among post-95s and post-00s young males.

More importantly, these spokespersons have precisely targeted the preferences of more affluent female consumers. 'You have to understand that many men who buy pants are actually not buying for themselves, but for their women,' expressed one female consumer.

However, is this strategy really effective?

Joeone Co.,Ltd.'s 2024 first-half financial report shows that its sales expenses surged by 36.15% year on year to 0.655 billion yuan, an increase of 0.17 billion yuan. However, the revenue only increased by 0.17 billion yuan to 1.576 billion yuan, with a year-on-year growth rate of 12.5%. Meanwhile, net income plummeted by 45.88% year on year to 50.01 million yuan, and non-net profit decreased by 7.28% year on year to 0.128 billion yuan.

Looking at the quarters separately, Joeone Co., Ltd. recorded revenue of 0.636 billion yuan in Q2 just after signing five spokespersons, compared to 0.674 billion yuan in the same period last year, actually declining by 5.6%. The first half-year growth was mainly supported by Q1's revenue.

In other words, despite a significant 36.15% increase in sales expenses year on year, net income dropped by 45.88%. In the short term, the heavy investment in spokesperson marketing has not shown significant effects yet.

Although Joeone Co., Ltd. failed to maintain the growth momentum of the first quarter in the second quarter, its financial report for the first half of 2024 still showed revenue growth, which is rare among peers.

Among some men's wear enterprises that have reported their performance for the first half of 2024, the revenue growth rates for Fujian Septwolves Industry, Baoxiniao Holding, China Lilang, Metersbonwe Group, HLA Group Corp., Jiangsu Hongdou Industrial were -4.90%, 0.36%, 7.31%, 0.28%, 1.53%, -1.33% respectively. Joeone Co., Ltd. was the only enterprise among them to achieve double-digit revenue growth.

The final judgment depends on the long term.

Compared with other men's wear brands during the same period, HLA Group Corp. successfully transformed from a "man's wardrobe" to a "family wardrobe" through diversification of product categories, optimization of the supply chain, and marketing innovation, achieving a net income of 2.155 billion yuan in 2022, and a breakthrough revenue of over 11.3 billion yuan in the first half of 2024.

After setbacks in real estate and stock market investments, Youngor Group refocused on its main clothing business, implemented a brand segmentation strategy, no longer relying on a single product, but through multi-brand strategies like YOUNGOR, HartSchaffnerMarx, MAYOR, achieved brand diversification.

Although Joeone Co.,Ltd. is actively promoting brand rejuvenation, the inventory issue has been unresolved, and the pressure is still very high.

In response, Chen Huipeng, the chief financial officer of Joeone Co.,Ltd., addressed investors' questions about inventory at an explanatory meeting. When discussing the inventory issue, he pointed out that as of June 2024, the company's inventory book value reached approximately 0.83 billion yuan, an increase from the same period last year, mainly due to the increase in the proportion of direct-operated stores. In order to address this situation, the company has adopted a prudent financial management strategy, made sufficient provision for inventory write-downs, with a provision ratio of 26%.

Furthermore, he further explained that the company has always placed inventory management as a priority. All direct-operated and franchised stores are equipped with POS systems to monitor inventory dynamics in real time. In recent years, Joeone Co.,Ltd. has continuously strengthened product planning and supply chain management by creating popular products, focusing on core categories, reducing ineffective stock keeping units (SKUs), preparing for popular products, implementing mid-season rolling replenishment, enhancing quick response capabilities, and reducing inventory backlog.

In addition, Chen Huipeng also revealed Joeone Co.,Ltd.'s plans to help franchisees alleviate inventory pressures in the future: first, for discontinued or slow-moving products at the end of the season, offering equivalent-priced current season goods for exchange to optimize franchisees' inventory structure; second, for dealers with large inventory levels, the company will repurchase part of the inventory based on specific circumstances to improve inventory turnover rate; finally, using direct-operated outlets such as outlets to assist franchisees in clearing previous years' stock.

Despite facing many challenges in the transformation process, Joeone Co.,Ltd. is reshaping its brand image through optimizing channel structure, increasing brand promotion investment, enhancing store image, and other measures. It is worth mentioning that after nearly 5 years, the brand has once again used spokespersons, revealing 5 at once. Whether it can be said to be a bold move or a generous one, Joeone Co.,Ltd. has to do so to avoid the fate of brand aging, even if the current marketing is truly eroding profits.