Author | Wang Xiaojuan

In today's weather is good. Today's weather is good.

The chill in the outfits market has already spread to the top of the industry.

Recently, the well-known domestic outfits brand, biem.l.fdlkk garment, released the financial report for the third quarter of 2024. In this quarter, biem.l.fdlkk garment, contrary to its previous growth, turned in a 'dramatic' financial report.

Specifically, in the third quarter, biem.l.fdlkk garment's revenue fell by 4.37% to 1.06 billion yuan, and net income also plunged significantly by 17.32% to 0.28 billion yuan. This is the first negative growth report handed in by biem.l.fdlkk garment after six consecutive quarters of growth.

With the overall downturn in the industry's performance, whether it is increasing revenue without increasing profit, or the double decline in revenue and profit, biem.l.fdlkk garment's growth myth naturally becomes unsustainable. Despite growth in the past few quarters, the growth rate has slowed significantly.

In the first quarter of 2023, biem.l.fdlkk garment's revenue and net profit growth rates were 33.13% and 41.36%, respectively, however, by the second quarter of this year, the year-on-year growth in revenue and net profit was 15% and 15.3%, showing a significant decline. Nonetheless, this quarter's decline exceeded industry expectations.

Capital markets are clearly very dissatisfied with this performance. On the day of the financial report release, biem.l.fdlkk garment closed down by 4.01%.

However, even with the decline, currently, biem.l.fdlkk garment's profit margin is still leading the industry. In the third quarter, biem.l.fdlkk garment's gross margin rate was 76.42%, still maintaining the top position in the outfits sector.

High profit margin is also the reason why it is called the 'Moutai in clothes' (Kweichow Moutai's gross margin reached 91.96% in 2023, net margin 52.49%), with its gross margin about 30 percentage points higher than the industry average.

Despite its stylish name, biem.l.fdlkk garment is actually an authentic Chinese brand. This brand was purchased by its founder and current director Xie Bingzheng from Hong Kong businessmen in 2003.

During a time when the industry had relatively few brands focusing on vertical niche areas, biem.l.fdlkk garment targeted the golf sector. Early on, Xie Bingzheng, who used to represent international luxury men's wear, firmly established a high-end route for biem.l.fdlkk garment.

By positioning itself as high-end and focusing on the golf sector, biem.l.fdlkk garment has maintained steady growth throughout the following two decades of consumption upgrade. In 2016, it went public on the Shenzhen Stock Exchange, achieving success in the capital markets.

However, golf is still a very niche sport in China. A biem.l.fdlkk garment t-shirt easily costs 1000 yuan, while jackets can be priced at three to five thousand yuan. Who are the people allowing it to achieve an annual income of 3.5 billion?

According to its 2016 prospectus, biem.l.fdlkk garment's products are positioned in the niche market that combines golf sports with fashion leisure life. The target audience is golf enthusiasts and middle-class and above consumers who identify with golf culture and have a dressing preference for golf style.

Brokerage research reports provide a more specific profile for this group, who are mainly business professionals over 40 years old with low price sensitivity, a focus on experience and quality, and high brand loyalty.

As seen in the popular trend of 'Gorpcore' in recent years, outdoor outfits are now worn in non-outdoor settings, functional clothing is no longer limited to outdoor activities, and biem.l.fdlkk garment also extends professional golf attire to Golfcore and related lifestyles.

Among biem.l.fdlkk garment's members, about 80% of them have expressed that they do not usually engage in golf or have only practiced golf at the driving range. It can be seen that the reason these middle-class individuals choose biem.l.fdlkk garment is for the business casual style it represents.

The positioning of biem.l.fdlkk garment's middle-class business professionals can also be glimpsed in their store locations. As of the end of June this year, biem.l.fdlkk garment's number of stores has reached 1255, with 607 of them being directly operated, most of which are located in high-end malls, large airports, and high-speed rail stations.

Amidst the downturn in performance for most companies in the industry, biem.l.fdlkk garment is not satisfied with its current achievements. In the 2023 financial report, biem.l.fdlkk garment stated its ambition to become a global luxury goods conglomerate.

If we only consider the gross margin, biem.l.fdlkk garment's current gross margin is not inferior to luxury brands. For comparison, in the first half of this year, the gross margin of the top luxury brand Hermès was 70.6%, and the Louis Vuitton Group, the parent company of LV, had a gross margin of 68.8%.

However, it is evident that becoming a global luxury goods conglomerate cannot rely solely on gross margin.

To achieve this vision, in the first quarter of 2023, biem.l.fdlkk garment acquired the global trademark ownership of international luxury brands 'CERRUTI 1881' and 'KENT＆CURWEN' indirectly through its subsidiaries. However, these two brands have not made significant waves in the market yet, so it remains to be seen how they will perform in the future.

Although this global strategy has not yet been realized, Biem.l.fdlkk garment has already started spending big.

In the middle of this year, Biem.l.fdlkk garment announced its intention to invest no more than 2.3 billion yuan in building a headquarters base over the next 8-10 years. The amount invested is roughly equal to the total net income from 2021-2023. This decision quickly raised questions from investors, but Biem.l.fdlkk garment did not provide a clear response.

In addition, the current outfits market is severely saturated, and Biem.l.fdlkk garment's golf track is not without competitors. Since last year, FILA's golf series has frequently appeared in the public eye, even collaborating with well-known luxury car brand McLaren, hoping to quickly gain recognition from middle to high-income individuals.

Last year, Xie Bingzheng made a bold statement that revenue would exceed 30 billion yuan in ten years, which means revenue needs to almost increase tenfold within a decade.

Although a distant goal of ten years, currently, industry giants also need to confront the challenge of a downturn in the industry, seeking the ability for sustainable growth to continue telling the high-end story.