Revenue for the 2020/21 fiscal year increased 7% year on year, and Guimu's net profit increased 20%, exceeding expectations. The company released annual results for the 2020/2021 fiscal year ending the end of February 2021, achieving operating income of 36.09 billion yuan (RMB, same below), up 6.9% year on year, and Guimo's net profit of $2,770 million, up 20.3% year on year ($2,772 million in an adjusted comparable caliber, up 16.4% year on year), EPS of $0.45, and proposed final dividend of HK$0.14 per share. Among them, the increase in profit exceeding revenue mainly came from fee control contributions.
Looking at the first half of the fiscal year for the first half of the fiscal year, the company's revenue from March 2020 to August 2020 and September 2020 to February 2021 was -7% and +21%, respectively, and the net profit of the mother was -11% and +75.6%, respectively.
The impact of the epidemic was gradually eliminated, and revenue growth rebounded in the second half of the fiscal year
Looking at spin-off revenue, by brand, the company's main brands (Nike+Adidas), other brands (PUMA, Converse, VF Group brands, Reebok, Asics, Onitsuka-Tora, Skechers), joint expenses revenue, and e-sports revenue accounted for 87.3%, 11.8%, 0.7%, and 0.2% of total revenue, respectively. Revenue was +6.6%, +9.3%, -9.8%, and +168.1%, respectively. Among them, the revenue of major brands in the first half of the fiscal year was -7% and +20.4%, respectively, and the revenue of other brands was -8.4% and +26.4%, respectively. Sales of major and other brands in the second half of the fiscal year achieved a revenue growth rate of more than 20%, indicating that demand from multiple brands in the sportswear category recovered well.
By channel, retail, wholesale, joint venture fee revenue, and e-sports revenue accounted for 85.3%, 13.8%, 0.7%, and 0.2% of total revenue respectively. Among them, retail and wholesale business revenue increased 5.4% and 17.3% year-on-year respectively. The revenue of the retail business in the first half of the fiscal year was -11.5% and +22.4%, respectively; the revenue of the wholesale business was +22.9% and +11.7%, respectively.
In terms of offline stores, at the end of February '21, the company had a total of 8006 direct-run stores, a net decrease of 389 from the same period in '20, but the total sales area increased by 4.1%. The share of large stores increased and the quality of individual stores boosted overall sales growth.
The decline in the expense ratio exceeded the gross profit margin. The company's gross profit margin for the 2020/21 fiscal year was 40.8% and the year-on-year decline in operating cash flow was 40.8%, down 1.3PCT from the previous year, mainly due to the increase in sales discounts in the context of the pandemic.
The company's expenses rate for the period decreased by 2.8 PCT to 30.7% year on year. Among them, the sales, management and financial expenses rates were 26.8%, 3.5%, and 0.4%, respectively, and -1.8, -0.7, and -0.3 PCT, respectively.
In terms of other financial indicators, inventory and accounts receivable turnover days were 109 days and 18 days, respectively, -9 and -3 days compared to -9 and -3 days; net operating cash flow decreased 27% year-on-year to 4.706 billion yuan.
Adhere to digital transformation to improve retail efficiency, and expect the sportswear category to continue to recover, and the company will continue to promote digital transformation. Digital procurement and product management will extend to brands and retailers other than the main brands. The mobile toolkit empowers first-tier store employees and has covered almost all direct-run stores, continuously improving retail capacity and efficiency, and achieving steady growth in performance. We continue to be optimistic about sports apparel booming tracks. As a large retailer, the company has stronger bargaining power and operation management capabilities, and is expected to continue to share track dividends. The increase in FY22-23 and the new FY24 EPS was 0.52, 0.60, 0.68 yuan (up 14%/15% from the previous profit forecast), corresponding to FY22 PE 19 times, maintaining the “buy” rating.
Risk warning: terminal consumption is weak, channel inventory pressure is increasing, industry competition is intensifying, international brand reputation risk, and investment in digital transformation falls short of expectations.