Incidents:

In the first three quarters of 24 years, revenue and net profit to mother were -13%/-49% YoY, Peacebird released its 2024 three-quarter report. The company achieved operating income of 4.54 billion yuan in the first three quarters of 2024, a year-on-year decrease of 13.1%, and net profit to mother of 0.11 billion yuan, a year-on-year decrease of 48.6%, after deducting non-net profit of -9.78 million yuan, and EPS of 0.23 yuan. Among them, in Q3, the company achieved operating income of 1.4 billion yuan and net profit of -63.38 million yuan to mother in a single quarter.

On a quarterly basis, 24Q1-Q3 companies' revenue in a single quarter increased by -12.9%/-12.3%/-13.9%, respectively, and net profit to mother increased by -26.9%/-62.9%/loss, respectively.

Comment:

All brands have declined, and the pressure on direct-run store channels is relatively high

By brand: PB Womenswear, PB Menswear, Rakumachi, MP Childrenswear, and others accounted for 39%/39%/8%/12%/1% of revenue in the first three quarters of 24, respectively. Revenue was -11.6%/-7.4%/-31.5%/-16.8%/-59.8%, respectively. In the context of weak retail sales, all brands declined to varying degrees.

Channel division: Online and offline revenue accounted for 26%/73% respectively, and revenue was -9.5%/-14.7%, respectively. Among them, when looking at the offline channel split, direct management and franchise each accounted for 42%/31% of total revenue, and revenue was -19.0%/-8.2%, respectively, and the pressure on direct management channels was relatively greater.

In terms of number of stores, the company's main stores at the end of September '24 were 3,476, a net decrease of 255 from the beginning of the year; among them, the number of PB Womenswear, PB Menswear, Rakucho, MP Kidswear, and other stores were 1,329 (-8.9%), 286 (-15.9%), 504 (-8.9%), and 33 (+230%); by type, the number of directly-managed stores and franchised stores was 1095 (-6.8%) and 236.81 (-6.8%), respectively).

Gross margin declined, expense ratios increased, and inventory and accounts receivable turnover slowed gross profit margin: gross margin fell 1.4 PCT to 54.9% year over year in the first three quarters of 24. By brand, gross margins of PB Womenswear, PB Menswear, Rakucho, MP Childrenswear, and others were year-on-year, respectively; by channel, online/direct/franchise gross margins were -3.12/-0.34/+1.41PCT, respectively; on a quarterly basis, 24Q1-Q3 companies' gross margins remained flat year-on-year at -4.7 PCT/+1.5PCT/ respectively.

Expense rate: The cost ratio increased by 3.4 PCT to 52.2% year on year during the first three quarters of 24 years. Among them, sales/management/R&D/finance expenses were 40.5%/8.0%/2.8%/1.0%, respectively, +2.7/+0.4/+0.2PCT, respectively. Among them, the amount of sales/management/R&D expenses all decreased year on year, but the cost rate increased year on year due to the relative rigidity of expenses in the context of declining revenue. On a quarterly basis, the cost rates for the single quarter period from 24Q1 to Q3 were +0.3/+5.6/+5.3 PCT, respectively.

Other financial indicators: 1) Inventory increased by 18.6% to 1.79 billion yuan at the end of September '24 compared to the beginning of '24, a year-on-year decrease of 7.9%; the number of inventory turnover days was 217 days, a decrease of 23 days over the previous year. 2) Accounts receivable increased by 10.9% to 0.54 billion yuan at the end of September '24 compared to the beginning of '24, a year-on-year decrease of 5.9%; the number of accounts receivable turnover days was 30 days, an increase of 2 days over the previous year. 3) Net operating cash flow for the first three quarters was -86.31 million yuan, which turned into a net outflow year over year.

Pay attention to marginal changes on the retail side, expect the peak winter clothing season and consumer promotion policies to improve performance under pressure in the context of weak retail sales, and expect improvements due to the peak winter sales season in the fourth quarter and the implementation of consumer promotion policies.

Considering that there is still uncertainty on the demand side, we lowered the company's profit forecast for 24-26 (net profit to mother decreased by 59%/34%/22% from the previous profit forecast, respectively), corresponding to EPS of 0.47/0.93/1.24 yuan for 24/25/26, and PE 29 times for 24, respectively, and downgraded to a “gain” rating.

Risk warning: Domestic consumption continues to weaken; inventory backlog; fee control falls short of expectations; channel adjustments and expansion fall short of expectations; online traffic peaked and profitability declined.