Editor's note: This article comes from the WeChat account “Songuocaijing1” (ID: songguocaijing1), author: Ye Xiaoan,36Published with permission.
The one that has been popular in the capital market for seven yearsNoble bird, now there is only one leftliabilities4 billion dollars or bankruptcyDelistingThe end.
Recently, Guirenniao Co., Ltd. (“Guirenniao” for short) announced the latest restructuring progress announcement. According to the announcement, as of March 5, 163 creditors have submitted claims to the manager, with a total declared amount of 4,032 billion yuan. Furthermore, the court has ruled that Guirenniao has entered the restructuring process, but there is still a risk that Guirenniao will be declared bankrupt due to the failure of the restructuring. If Guirenniao is declared bankrupt, there is a risk that Guirenniao's stock listing will be terminated.
As the “first stock of an A-share sports brand,” a noble person is actually the first to enjoy a wave of dividends from the “sports footwear and apparel industry.” At its peakTotal market capitalizationAt one point, it exceeded 41.7 billion yuan. However, today is not what it used to be. As of the close of trading on March 12, Guirenniao's stock price was 2.45 yuan/share. The total market value reached only 1.54 billion yuan, and the lower back was over 40 billion yuan.
Gao Guang is no longer there. What happened to Guirenniao, which is still burdened with huge debts and faces the risk of bankruptcy and delisting? Who is the one who broke its wings?
Guirenniao enters the “ghost gate” of bankruptcy and delisting
Guirenniao was founded in 2004. Its main business is the design, development, production and sales of sports shoes and clothing. At its peak, Guirenniao opened an average of three new physical stores every day; at its peak, the number of stores exceeded 5,000.
In 2014, it also successfully entered the Shanghai Stock Exchange as the “No. 1 A-share sports brand”; after listing, the stock price soared, and the total market value once exceeded 40 billion yuan. Chairman Lin Tianfu also won the “richest man in Quanzhou” for the first time with a net worth of 19 billion yuan, ranking among Hurun's 100 richest people that year.
However, today is different from the past. By the first half of 2019, there were only 2,685 Guirenniao stores left, cutting the number of stores in half since its peak, and Chairman Lin Tianfu had already dropped from the list of “richest people in Quanzhou.” Furthermore, recently announced by Guirenniao on the progress of restructuring, it may be declared bankrupt and face the risk of being forcibly delisted under a debt of more than 4 billion yuan.
Actually, the news that Guirenniao has been delisted is not surprising. After the company reported a loss of 686 million yuan for the first time since the company announced its listing in 2018, its ability to operate and repay debts was deeply questioned by the market.
According to Songuo's financial observations, most of the keywords that have surrounded Guirenniao in recent years have been “shrinking market value,” “continued loss,”net profit“A sharp decline,” “inability to repay debts,” “restructuring and bankruptcy,” “delisting,” etc.
According to the announcement on the progress of the restructuring announced by Guirenniao this time, as of March 5, 163 creditors had declared claims to the manager, with a total declared amount of 4,032 billion yuan. However, the huge debt of over 4 billion yuan may not be able to hold back at all.
Financial reports show that from 2018 to 2019, Guirenniao's net losses were 686 million yuan and 1,018 million yuan respectively. Although the 2020 financial report has not been announced, its estimated net loss is about 379 million yuan. Furthermore, the relevant regulations of the Shanghai Stock Exchange show that if Guirenniao's net profit in 2020 is negative, the company's stock listing may be suspended.
Therefore, whether it is bankruptcy and restructuring, shrinking market capitalization, and poor net profit standards, all kinds of signs indicate that Guirenniao has only one path to delist. So, what happened to Guirenniao, which once went public under the aura of “the first stock of an A-share sports brand”? How did it break its wings again?
How does a noble bird fold its “wings”?
The person who broke the wings of a noble person is probably just him.
(1) “Strength cannot keep up with ambitions”, and the diversified expansion strategy is clearly out of balance.
For Guirenniao, the first step taken by mistake was the diversified expansion ambition revealed after listing. In 2015, Guirenniao launched the banner of transformation from “traditional sports footwear industry management” to “a sports industrialization group based on sportswear manufacturing and coordinated development of various sports industry forms”. Simply put, it is an “all-round sports” strategy.
Immediately, nobles who were unwilling to do a single business carried out a large number of cross-border investments and acquisitions between 2015 and 2017. This includes investing in Tiger Pu, soccer agency BOY, Compass Sports, and Famous Shoe Depot, and the acquisition of the AND1 brand license in mainland China. The net cash flow for the past three years was a net outflow of 556 million yuan, 1,317 million yuan, and 992 million yuan, respectively.
However, the high investment expenses have not allowed the birds to eat good fruit. Beginning in 2017, Guirenniao's performance and capital chain began to decline. According to financial data, Guirenniao's net profit in 2017 was 157 million yuan, down nearly 50% from the previous year. Then, in 2018, the company released its first financial report with a loss of 686 million yuan.
The main business is no longer good, and the performance is changing from positive to negative. This makes people very anxious and wonder if their diversified expansion strategy has gone wrong. As a result, Guirenniao began selling a large number of companies previously invested or acquired across borders, but this also brought Guirenniao to a second dead end.
(2) The focus has been repositioned on the main business, but it is difficult to overcome the situation.
The gradual expansion of debts and losses has accelerated the loss of wings by noblemen. When Guirenniao realized that it was impossible to blindly expand across borders and do what it was not good at, the company began to sell in large quantities the companies it had previously acquired. Since the second half of 2018, Guirenniao has sold subsidiaries including Hupu, Compass, and Jie Zhi Xing. However, Guirenniao has profited 30 million yuan from Hupu's share resale, but lost 130 million yuan during its resale of shares.
However, by sellingassetsResolving the cash flow problem in the main business is clearly a drop in the bucket, because the problems left behind after the company's diversified expansion are a bunch of huge debt sheets and a wave of offline store closures. According to financial data, from 2016 to 2018, Guirenniao's total debt was 4.791 billion yuan, 4.956 billion yuan, and 3,223 billion yuan respectively; as of the end of the third quarter of 2019, the total debt was 3,342 billion yuan, and the balance ratio increased to 68.42%.
Being burdened with more and more debts, losses are gradually expanding, and the number of stores closed is increasing, making it difficult for Guirenniao to save its main business. In the end, Guirenniao has to fend its wings on its own.
(3) High-end brands continue to sink, mid-range and low-end brands are rising, and there is no room for survival for noble birds.
At a time when people are struggling to diversify their expansion strategies, high-end brandsNike,AdidasIt has already set its sights on the second and third tier markets of Guirenniao; at the same time,Anta Sports,Li NingTwo contenders in the same echelon quickly rose. However, at that time, it can be said that the noble birds had no power to fight back, or that they had no effort at all to take into account the sneaker and clothing business in the second and third tier markets.
As a result, when fellow competitors were vigorously developing the sneaker and clothing business, Guirenniao missed the best period to stabilize its position in the industry due to its “all-round sports” strategy; yet, under diversified expansion, it only received a number of huge debt sheets. Therefore, in the battle of sneakers and clothing, Guirenniao did not give it its all and was already defeated.
Taken together, an imbalance in strategy formulation has caused noblebirds to fall into the abyss of bankruptcy and delisting. However, does this company still have a first day?
The sports footwear and apparel industry is doing great, but there is no such thing as a breakthrough
Looking at it now, the domestic sports footwear industry can be described as a springtime that is infinitely better. According to Euromonitor data, the size of China's sports footwear market increased from US$21.738 billion in 2013 to US$45.95 billion in 2019, with a compound annual growth rate of more than 13%.
Source: Euromonitor, Wanlian Securities Research Institute
Moreover, the sports shoes and apparel industry has been booming due to favorable policies, health trends, and consumption upgrades. Leading players in the industry, Anta Sports, and Li Ning have taken advantage of various favorable factors to enter the 100 billion club. Among them, the market value of Anta Sports has exceeded 300 billion yuan.
It can be seen that Guirenniao is not on a bad track; it is just an “underdog” in the industry. However, with peers being favored by capital and the sharp increase in market capitalization, this also highlights the obvious Matthew effect of the industry, that is, “the stronger the strong, the weaker the weak.” Furthermore, according to data from Wanlian Securities, this is confirmed. In 2019, the CR5 of China's sports footwear industry was 72%, an increase of 21 percentage points compared to 2010. The market share is concentrated on leading companies, and the industry has already shown a Matthew effect.
So, under such a racetrack with huge market potential and an obvious Matthew effect, will Guirenniao still have a chance to make an appearance?
None. First, in terms of market size, according to the “2020 Market Value List of Listed Sports Companies in China” published by Xinhuanet Sports, as of the end of 2020, Anta Sports,Shenzhou InternationalThe market capitalization of three companies, including Li Ning, was in the 100 billion club. At the time, Anta Sports ranked first on the list with a market value of 279.48 billion yuan.
Looking at Guirenniao, the remaining market capitalization of only 1.56 billion yuan is far less than that of leading companies. It can also be seen from this that Guirenniao is not a company that can be compared to Anta Sports and Li Ning at all.
On the other hand, in terms of strategic positioning, Anta Sports uses a “multi-brand” strategy. It owns many well-known Chinese and international sports brands such as Anta ANTA (China), Fila Fila (Italy), and Descente Descente (Japan).
However, the reason why Anta Sports is still successful in adopting a multi-brand strategy is that it can stabilize its main brand and achieve multi-brand expansion strategy. Among them, Anta Sports's ability to clean up inventory in a timely manner also helped it achieve new growth in Anta Sports stores in 2015, taking the lead in overcoming the major sneaker and clothing hoarding industry crisis back then.
Li Ning, on the other hand, focuses on the “single brand” strategy and uses the style of the national trend to harvest the consumer market. It continues to fully integrate Oriental elements in product design, and the Oriental charm it has shown has also been recognized overseas. In recent years, it has entered the Paris Fashion Show many times and has won the common interest of both consumer and capital markets.
Therefore, as can be seen in comparison, whether in terms of market share, strategic positioning, or keeping up with trends, this company can no longer keep up with everyone's pace.
What is revealed behind Guirenniao's current decline is that “or there are no backward industries, only backward enterprises” and “there is no such thing as focusing on omnipotence, only a complete imbalance in Guirenniao's strategic initiatives,” which has caused the company to collapse and no longer prosper.
In this industry where “the strong are stronger and the weak are weaker”, only the noble birds are crushed by themselves. Therefore, in the future, it may only face the end of delisting, and the stage of saying goodbye to capital or even consumers. Although bankruptcy and restructuring have a chance of being reborn, who would want to take over such a ruined company?