“Disease comes like a mountain.” Xinjiang La Chapelle Fashion Co.Ltd(603157) ( Xinjiang La Chapelle Fashion Co.Ltd(603157) , SH, hereinafter referred to as La Chapelle) described the upcoming A-share delisting in the 2021 annual report.
The former “king of women’s wear” had to bid farewell to A-Shares after falling into the mire of loss for four consecutive years and having negative net assets at the end of two consecutive years. Xinjiang La Chapelle Fashion Co.Ltd(603157) will enter a delisting period of 15 trading days on April 22.
“Failure to make a correct judgment on the external industry environment, improper internal strategy, rapid expansion and unbalanced cost structure, combined with the impact of covid-19 pneumonia in 2020…” is La Chapelle’s reflection on the company’s current dilemma in its 2021 annual report.
Zhu Fengwei, the Secretary of La Chapelle, said in an interview with the reporter of the daily economic news that the company’s reflection on the problems is a dynamic process. In the process of operation, we constantly find problems and then adjust them. He said that in the future, the core goal of the company is to achieve profitability.
“the king of women’s clothing” is about to bid farewell to A-Shares
On April 15, La Chapelle issued a delisting announcement, saying that due to the negative net assets attributable to the shareholders of the listed company at the end of 2020, the company’s A-share shares have been subject to delisting risk warning since April 30, 2021. Meanwhile, the 2021 annual report shows that the net assets attributable to shareholders of listed companies at the end of 2021 are -1.431 billion yuan. According to the regulations, after the review of the Listing Committee of the Shanghai Stock Exchange, the Shanghai Stock Exchange decided to terminate the listing of the company’s A-share shares and will enter a delisting and consolidation period of 15 trading days on April 22.
As for the impact of the upcoming farewell to the A-share market on the company’s future operation, La Chapelle replied to the reporter of the daily economic news that the delisting of A-shares will not affect the company’s normal operation, nor will it have a direct impact on the listing status of H-shares. At this stage, the company still retains a capital market window. After the delisting of a shares, the company’s management will have more energy to focus on the company’s operation level. In the future, the company will forge ahead, expand its business, strive to realize the transformation of quantity and quality, at the same time, it will unremittingly clear the remaining problems and unswervingly improve the operation of the company.
This clothing brand, once known as the “king of women’s clothing” and “Chinese version Zara”, successfully landed in Hong Kong stocks in 2014 and was listed on the main board of Shanghai Stock Exchange in 2017, becoming China’s first clothing brand listed on “a + H” shares.
According to the data, as of June 30, 2017, the number of retail outlets of La Chapelle in China was 9066, and by the end of 2018, it had increased to 9269. Also in 2018, La Chapelle’s revenue reached the peak of 10.176 billion yuan.
After the peak, it was a downhill road. Also in 2018, La Chapelle began to fall into a loss dilemma. From 2018 to 2021, the net profits attributable to the shareholders of the listed company were – 160 million yuan, – 2.166 billion yuan, – 1.840 billion yuan and – 821 million yuan respectively, with a total loss of about 4.987 billion yuan in four years.
Since July 1, 2020, the company’s shares have been subject to delisting risk warning, and the abbreviation of A-share shares has been changed from “La Chapelle” to ” Xinjiang La Chapelle Fashion Co.Ltd(603157) “.
In the 2021 annual report, La Chapelle reflected that since the second half of 2018, the company has faced a heavy debt burden due to the failure to make a correct judgment on the external industry environment, improper internal strategy, rapid expansion and unbalanced cost structure, plus the impact of covid-19 pneumonia in 2020.
In an interview with the reporter of the daily economic news, Zhu Fengwei, the Secretary of La Chapelle, said that the company’s reflection on the problems is a dynamic process. “Especially in the case of a large scale, the company can’t say to reflect after the problems appear, but constantly find its own problems and adjust them in the whole business process.”
The first loss of La Chapelle in 2018 became an obvious signal, “making the company more aware that some offline stores with low floor efficiency have indeed brought a heavy burden”.
Zhu Fengwei further said that in fact, the time of internal adjustment and transformation of the enterprise should be well advanced. “When you feel the pressure from the operation, you have already adjusted internally”. An obvious signal is that La Chapelle began to implement the franchise and joint venture model in 2018 and increased its online expansion. “In the process of transformation and adjustment of the company, the cash flow may not be particularly good. As a result, after the epidemic suddenly came in early 2020, the scale actually shrank sharply, and the impact of the epidemic is particularly large, such as the sales of stores. There must be a certain time to close the store when the epidemic comes.”.
stall multi brand strategy
In fact, before the impact of covid-19, the crisis of La Chapelle had revealed some clues.
The diversification of brands and the rapid expansion of offline retail outlets once helped La Chapelle win the title of “the king of women’s clothing”, but now, the two “weapons” in the past have become one of the fuses for La Chapelle’s decline to some extent.
Ma Gang, an analyst in the garment industry, told the daily economic news that strategic mistakes, including multi brand, direct marketing and capital turnover, and corporate internal control and governance are the reasons for La Chapelle’s decline.
Before 2011, La Chapelle had only three women’s clothing brands, La Chapelle, puella and candies. In 2012, La Chapelle put forward the development strategy of “multi brand, direct marketing oriented”. In addition to launching its own brand, it also expanded the brand through investment and acquisition. By the end of 2018, La Chapelle had held at least 14 brands in the field of women’s clothing, men’s clothing and children’s clothing.
At the same time, La Chapelle has rapidly expanded its stores across the country and has nearly 10000 retail outlets across the country by 2018. When landing A-Shares in 2017, La Chapelle said in the prospectus that one of the company’s plans to use the raised funds is the retail network expansion and construction project, which plans to invest 321 million yuan to build 3000 retail outlets within three years.
However, the multi brand strategy has not become the growth engine of La Chapelle.
In the 2018 annual report, La Chapelle once said that the business model of “multi brand and direct marketing” will also bring more and more challenges to the company, including the need to invest new and more business resources to expand new brands; New brands will suffer losses in the cultivation period, which will drag down the current profits of the company; If differentiated positioning cannot be achieved, there may be a lack of clear focus on the target consumer groups, which will also lead to excessive resource input and low output efficiency; The pressure of rising labor, rent and other costs brought by direct channels.
The 2018 annual report shows that under the background of the decline in the revenue of La Chapelle and puella, the sales growth of women’s brand candies, children’s wear and men’s wear brands can no longer make up for the decline of La Chapelle and puella.
On the other hand, the cost problem caused by the rapid expansion of direct mode has dragged down La Chapelle’s net profit step by step. Taking the rental cost as an example, in 2018, the rental cost of La Chapelle rose to 17.527 million yuan, compared with 6.557 million yuan in 2014.
Zhu Fengwei frankly said that the multi brand strategy was a very powerful boost in the growth process of the company before, and the company also achieved rapid growth through multi brands. He said that at this stage, the company will still focus on multi brand development, but there are certain differences from the past. First, it will focus on the development of several brands, especially the core women’s clothing brand.
“the core goal is to make profits”
“The core goal is profit.” Zhu Fengwei said.
By the end of 2021, La Chapelle had only 300 offline outlets, which had shrunk significantly compared with nearly 10000 outlets in the peak period. La Chapelle said in the annual report that “the number of offline channel outlets has basically reached the bottom”.
La Chapelle disclosed in the announcement that affected by the epidemic and the tight cash flow of the company, the company continued to close offline loss making stores. Due to the operating losses of closed stores and the one-time confirmation of decoration amortization and cabinet removal expenses, the company suffered an operating loss of about RMB 60 million in 2021.
For this self-help measure of closing stores, La Chapelle responded to the reporter of the daily economic news that in 2021, closing inefficient stores will generate one-time expenses and have no negative impact on future performance. Closing the store can effectively reduce the company’s fixed expenses such as store rent and personnel cost, and reduce the company’s cash flow and cost pressure. In addition, the closure of inefficient stores will enable the company to effectively concentrate its energy and resources on efficient stores, improve the fine management level of existing stores, and bring positive effects on the company’s operation.
Zhu Fengwei, the Secretary of the board of directors, said: “in the case of tight cash flow of the company, this is a measure of self-help.” In the future, La Chapelle’s store opening strategy will no longer pursue scale as before, but take profit assessment as the core.
In addition to A-share delisting, La Chapelle is still on the verge of bankruptcy. In November 2021, La Chapelle announced that its creditors Jiaxing Chengxin Garment Co., Ltd., Haining mangrove Clothing Co., Ltd. and Zhejiang Zhongda Xinjia Trading Co., Ltd. submitted a bankruptcy application to the court to apply for bankruptcy liquidation of La Chapelle. In December 2021, the creditor Pinghu Yurong Clothing Co., Ltd. applied for bankruptcy liquidation.
When asked about the debt problem, Zhu Fengwei said that this is an unavoidable problem. “From the original peak to now, the company may indeed have a lot of debt problems due to cash flow pressure. These debt problems may also be the most important factor leading to the negative delisting of the company’s net assets. The company certainly hopes to solve these problems.”
La Chapelle responded to the reporter of the daily economic news that the company has always faced up to and actively planned solutions to the existing debt problems, and is responsible for every creditor and every debt. At present, on the one hand, the company negotiates with the court, creditors and financial institutions to strive for a certain proportion of debt allowance or installment payment conditions, so as to avoid the uncertainty brought to the company by new litigation cases; On the other hand, plan an overall solution to the debt problem, including but not limited to debt restructuring, bankruptcy restructuring and the introduction of strategic investors, strive to eliminate the debt burden through a package solution and promote the company to return to the track of sound development.
Bid farewell to A-Shares and walk on the brink of bankruptcy. Can la Chapelle successfully save herself and become the “king of women’s clothing” again? “Survival is the most important thing.” Ma Gang thinks.
