Rihe Junmei Co., LTD. (hereinafter referred to as “Junmei Shares”) released a performance notice on January 26, the company expects that the net profit attributable to shareholders of listed companies during the reporting period is 81.21 million yuan to 90.45 million yuan, down 46% to 51% compared with 167 million yuan in the same period last year.

The main reason for the change in performance was that during the reporting period, the company’s sales revenue declined year on year due to adverse objective factors such as the declining clothing consumption boom and the late winter cooling across the country. At the same time, in order to adapt to changes in market demand, the company’s overall gross profit margin declined due to the increase in the proportion of sales of low gross profit margin products. The average inventory age of the company has increased, and based on the principle of prudence, the loss of inventory falling price provided for according to the inventory age structure has also increased correspondingly, resulting in a decline in operating profit.

For the main reasons for the decline in performance, the company explained that, first, during the reporting period, due to the adverse objective factors such as the downturn in clothing consumption and the late winter cooling across the country, the company’s sales revenue declined year-on-year, and at the same time, in order to adapt to changes in market demand, the company’s low gross margin product sales accounted for an increase in the overall gross margin of the company declined year-on-year. Second, the average inventory age of the company has increased, and based on the principle of prudence, the loss of inventory falling price provided for according to the inventory age structure has also increased, resulting in a decline in operating profit; Third, the company’s net profit after deducting non-recurring profit and loss is expected to be 45.32 million yuan to 54.56 million yuan, down 57%-64% from the same period last year. The impact of non-recurring profit and loss on the company’s net profit is expected to be 35 million yuan to 38 million yuan. The company’s non-recurring income mainly comes from the management of idle cash. The non-recurring profit and loss of the same period of last year was 41.38 million yuan.
During the reporting period, Rongmei participated in the 48 million shares of Jiangsu soho International Group Co., Ltd. held by Shanghai Pudong New Area People’s Court from 10:00 on November 27, 2023 to 10:00 on November 30, 2023 (corresponding capital contribution of 48 million yuan). The corresponding shareholding ratio of 4.8791%) won the 48 million shares of Jiangsu Soho International Group Co., LTD., held by Shanghai Zenda Investment and Development Co., LTD., with 76.95 million yuan, and obtained the “Confirmation of successful online bidding”.
According to the official website of Jiangsu SOHO International Group Co., LTD., its predecessor is the Jiangsu Branch of China Silk Import and Export Corporation, which is the holding subsidiary of Jiangsu Soho Holding Group Co., LTD., a state-owned enterprise in Jiangsu Province. It is one of the largest companies engaged in silk import and export trade in China, and its sales network covers all over the world. It has established trade with more than 100 countries and regions in the world.
After the success of the equity auction, Jung Mi Shares will hold 48 million shares of Jiangsu Soho International Group Co., LTD. (corresponding capital contribution of 48 million yuan, corresponding shareholding ratio of 4.8791%). On the one hand, the silk business engaged by Jiangsu Soho International Group Co., Ltd. has synergistic effect with the business of the company. It has positive significance for the company to optimize the industrial layout; On the other hand, the participation in the judicial auction is the company’s equity investment, and the investment income of the project has a certain predictability.
According to public information, Rong Mei Shares was founded in 2012, and listed on the GEM IPO in 2021. Since its establishment, it has been deeply cultivating Taobao platform, relying on Taobao to carry out online sales of its own “Rong Mei RUMERE” brand, which mainly focuses on women’s wear. By the end of 2022, the number of fans of the main store “Rong Mei high-end women’s wear” exceeded 5.8 million, the store praise rate exceeded 99.9%, the product SKUs exceeded 4,000, and the number of subscribers of the Taobao live broadcast account “Rong Mei high-end women’s wear” exceeded 6.4 million.
According to the financial report, the sales revenue of Rong Mei shares are contributed by online channels, and at present, there are three online stores “Rong Mei high-end women’s A-share listed companies”, “Rongmere flagship store” and “Rumere flagship store”, and the revenue of Rong Mei high-end women’s stores in Taobao channel accounts for more than 99% in 2022.
From 2017 to 2022, the operating income and net profit CAGR of the company will be 10%/19%, respectively. In 2020, the epidemic will have a great impact on offline clothing consumption, and the company’s main online channels will meet the needs of consumers for home shopping. Therefore, with the resumption of work and production and the normalization of life, Good growth in 2020 and solid growth in 2021 and 2022. In the first three quarters of 2023, the operating income of Rong Mei shares decreased by 15% year-on-year to 520 million yuan, and the net profit attributable to shareholders of listed companies decreased by 43% year-on-year to 63 million yuan. Among them, operating income in the third quarter decreased 43% year-on-year to 130 million yuan, and net profit attributable to shareholders of listed companies fell 80.6% to 7.126 million yuan. The company explained that the year-on-year decline in third-quarter performance was mainly due to the relatively sluggish consumption of high-end products in the clothing market, and the high temperature in the same period led to the delay of the sales period of high unit price products in autumn and winter, taking into account the fluctuations in the performance of the same period in 2022, the performance of the third quarter in the past five years, in fact, although there are fluctuations but the trend is rising.
By product, the top contributes the main revenue, and the knitting is the fist product. From 2017 to 2022, the company’s revenue CAGR of jacket/jacket/pants/skirt/fur/other accessories will be 8.8%, 9.5%, 12.9%, 12.4%, 21.6% and 2.0%, respectively, with steady growth in each category. In the first half of 2023, the company’s shirt, coat, pants, skirt, fur, and other accessories accounted for 34%, 21%, 17%, 17%, 4%, and 7% of the revenue, respectively, and the top category contributed more than 30% of the revenue, including the fist products represented by knitwear, covering a wide range of scenes and greater customer demand.
The core operating data of Rongmei Shares are recorded and saved according to the platform orders, including the number of buyers placing orders, the total amount of orders and the number of orders placed; For customer consumption behavior data such as page views, number of visitors and number of new visitors, Junmei Shares relies on information recorded and provided by the Internet platform through business advice software. Business staff background data show that the company’s main operating data during the reporting period and the same period last year are listed in the following table. The data showed that the company’s operation was stable, and the core data showed an overall upward trend.
Since the first half of 2023, although the business environment has gradually returned to normal, the prosperity of the clothing market has still not seen a significant recovery trend. During the reporting period, the main business income of Rongmei was 392 million yuan, an increase of about 1.4% compared with the same period last year; Net profit was 56 million yuan, down about 24.9% year-on-year. The company admitted that the total profit declined mainly because first, affected by the Spring Festival earlier this year than last year, the sales period of winter clothing with high gross profit margin was relatively shortened in the first half of the year, and its sales proportion was relatively decreased; In order to adapt to the change of market demand, the proportion of sales of low gross margin products increased, and the change of product sales structure led to the decrease of gross margin year on year; Second, in the middle of 2022, three intelligent manufacturing and logistics distribution workshops of the first phase of the company’s modern manufacturing service base project were put into operation, and the company appropriately expanded the talent team based on the consideration of future development, resulting in an increase in depreciation expenses and compensation expenses compared with the same period last year.
Rong Mei shares also said that clothing as an optional consumer goods, industry growth and macroeconomic has a strong correlation. In the long run, the changes in the number and structure of the domestic population will accelerate the structural changes in the consumer goods market, and the decline in the number of aging and young consumer groups has become a trend. In the context of economic growth may tend to slow down in the medium to long term, the decline in economic activity will change consumers’ income expectations, thereby reducing the purchase motivation of durable consumer goods, including clothing and apparel, which may affect the future performance of the company.
Li Jie, an analyst at Soochow Securities, pointed out that at present, domestic consumption is in a stage of downgrading under the background of long-term consumption upgrading, that is, the upgrading and downgrading cycles are superposed. On the one hand, from a long-term perspective, with the improvement of domestic economic level, residents are in the background of consumption fluctuation upgrading; On the other hand, affected by the epidemic in the past three years, the current domestic residents’ income confidence and consumption confidence are insufficient, and consumption faces short-term downward pressure. As a result, the consumption trend in the current period will be dominated by the downgrade represented by “cost performance” and “sinking market”, accompanied by the upgrading trend represented by “experience sense consumption”, “practical consumption” and “rational consumption”. From the perspective of positioning, clothing brands that conform to the positioning characteristics of “sinking market, cost-effective consumption”, or “practical consumption, experience consumption, rational consumption” may perform better in the current market environment.
Source: First Textile Network