(viewer / Xu Heng) March 26, underwear brand endorsed by Guan XiaotongUrban beauty(HK:02298) disclosed the annual results announcement in 2019, with a huge loss of nearly 1.3 billion yuan.

The Observer Network noted that Metro Beauty also confessed to the crisis in its annual report and said that the main reason for the loss was that the company had made large one-time expenses for the sake of transformation. After the release of the results, urban beauty rose 18.39% yesterday and continues to rise slightly by 1.22% today.

Urban beauty "broken arm"

According to the financial report, the revenue of urban beauty for the whole year was 4.082 billion yuan, compared with 5.096 billion yuan in the same period last year, down 19.9% from the same period last year. The loss attributable to the owners of the company was 1.298 billion yuan, compared with 378 million yuan in the same period last year, down 443.9% from the same period last year. Gross profit margin was 22.6%, 41.7% in the same period last year, down 45.8% from the same period last year.

Urban beauty said that the loss was mainly due to an one-time provision of 738 million yuan of old inventory, which directly led to a sharp decline in the company's return net profit. In addition to 738 million yuan of old inventory, Urban Beauty also exempted 327 million yuan in arrears from the company's major customers, 69 million yuan for impairment provision for withholding accounts receivable, and 52 million yuan for the cost of closing the store, totaling 447 million yuan.

Thus it can be seen that the urban beauty "cut a knife" on herself in 2019, which directly led to a sharp rise in losses. the reason is that the urban beauty tried to "break the arm" for transformation.

Urban Beauty said that the rapid network expansion in the past had contributed to the group's success and market leadership. However, the retail and replenishment capabilities of the various franchisees of the Group are mixed, coupled with the diversification of sales channels and structural adjustments in product quality and product mix in the domestic intimate clothing market, resulting in the hoarding of inventory in the Group's direct stores and franchise stores.

In addition, some of the business strategies previously adopted by the Group failed to meet the needs of most female consumers for practical, functional and cost-effective products. As a result, the productivity and profitability of the stores have been adversely affected and the financial position of the Group and its franchisees has been weakened, which makes it difficult for many franchisees to improve through their own resources alone.

Hidden dangers caused by rapid expansion

The Observer Network noted that the management of Metro Beauty pointed out a number of problems in its annual report. The research report of Everbright Securities also pointed out that the store expansion strategy in the early stage of the city was too radical, the channel quality deteriorated, and most of the franchisees were weak. For example, the company has increased the size of the department store channel while ignoring the decline in its ability to gather customers, and at the beginning of 2018, 7% of the company's stores are still in department stores.

After consulting public information, Observer found that after listing in 2014, Urban Beauty aimed at the gap between high-end brands and low-end brands in the domestic lingerie market at that time, and grew rapidly. In particular, the market occupation was quickly completed through the expansion of stores.

Urban Beauty had 7026 stores in 2014, of which 6049 were franchisees. In 2015, Urban Beauty implemented the "Wandian Plan", and the total number of stores once reached 8058, including 6937 franchise stores and 1121 self-owned stores. In that year, the urban beauty achieved a revenue of 5 billion, a net profit of 540 million, and a market capitalization of more than 18 billion Hong Kong dollars.

But then in 2016, the crisis of Metro's over-expansion began to emerge. According to the financial report, the company's sales revenue fell 9% in 2016, net profit halved to 240 million yuan, and the average inventory turnover soared to 142 days from 92 days in 2015. inventory stock is nearly 1.2 billion yuan, accounting for 30% of the total assets.

As a result, urban beauty has begun to cut stores on a large scale in the past two years, with the total number of stores reduced to 5970 last year and the total number of employees from 8800 to 3530. At the same time, the company introducedJingDongTencentAnd other strategic partners have strengthened the efforts of online sales.

For the overall financial affairs of the company, the profits brought by franchisees account for "half of the country". Last year, franchisees accounted for 47.77% of the company's total revenue, although it was 8 percentage points lower than at its peak, but the profits of franchisees are still crucial.

In addition, Everbright Securities also said that its organization failed to respond to retail changes in a timely manner. In 2016, the popularity of steel-free underwear broke out, and the market share jumped from 10% to 30%. 40%. On the other hand, the urban beauty hesitated and missed the best time. Led to a decline in sales.

According to the company's financial report, from 2016 to 2019, Urban Beauty's main business bra earned 2.04 billion yuan, 2.286 billion yuan, 2.504 billion yuan and 1.872 billion yuan respectively, contributing 45.2%, 50.3%, 49.1% and 45.9% of the company's income, respectively.

However, in 2019, the income of urban beauty bra fell 25.24%, while the income of underwear, pajamas, household clothes and thermal clothing products decreased by 9.02%, 11.35% and 32.33% respectively compared with the same period last year. In the case of sluggish sales, the sales and marketing expenses of Urban Beauty have expanded for two consecutive years. It was 1.471 billion yuan in 2018, an increase of 10 percent over the same period last year, and 1.631 billion yuan in 2019, an increase of 9.6 percent over the same period last year.

In the face of various difficulties, Urban Beauty said in the 2019 financial report: after the introduction of consulting companies, Urban Beauty put forward a series of transformation plans at the end of last year, including returning to products that focus on practical, functional and cost-effective products; replace Lin Zhiling with Guan Xiaotong as the company's spokesperson; open a new image store; increase investment in e-commerce channels; expand business to low-end cities Optimize the structure of franchisees and other measures in order to restore the profitability of the group and franchisees.

It is obvious that Metro Beauty has begun a large-scale reform. In August last year, the company appointed Xiao Jiale as the new CEO, and Zheng Yaonan, the former CEO, resigned as chairman of the board and executive director of the company. In addition, a group of new senior managers and Boston Consulting Company were hired to optimize the company's business strategy, brand operation model and inventory management; at the same time, shopping malls with the theme of "family concept" and seventh-generation personal clothing stores with a new image were opened to attract consumers; to strengthen the investment in e-commerce channels to the low-line market and strictly control expenditure.

As for whether the reform of urban beauty can be successful? At present, it remains to be tested by time.

This article is the exclusive manuscript of Observer Network and may not be reproduced without authorization.