Maibang apparel inventory increased 222% year-on-year inventory problems

ME&CITY casual wear

Meibang Apparel announced its mid-term report on August 22nd. As the leading casual wear brand in China, the substantial increase in interim results did not disappoint the market and it has been looking forward to. However, when looking closely at this report, it is difficult to hide behind the significant growth in performance. The reality of slow sales.

Last year's low base figure is not a significant reference to this year's performance

The main business of Smith Baron Fashion is the combination of production outsourcing, direct sales and franchising, and organizes the design, production and sales of its branded fashion casual apparel products. At present, the company has two brands, “Meters/bonwe” and “ME&CITY”. The products cover a wide range of fields including adult wear, children's wear and underwear.

During the reporting period, the company’s operating income increased by 48% over the same period of last year, and gross profit margin increased by 4% to 47% over the same period of last year. During the reporting period, the company achieved a net profit of approximately RMB3.76 billion, an increase of RMB 403.4 million over the same period of last year. %, the rapid increase in net profit was mainly due to the poor performance in the same period of last year and the low base, so it was not very informative.

Inventories increased 222% year-on-year and 90% of net assets

In the mid-term report, the company seems to be inclined to report good news but not report bad news; it only means that the competitiveness has been strengthened and how the performance has grown; from the beginning to the end, we have talked about the inventory issues that people are concerned about, and there is no comparative data of this important project over the same period. Reporter found that the report found that in the same period last year, the amount of inventory was 903 million, and this year showed 2.889 billion, a substantial increase of 222% year-on-year. Ironically, during the reporting period, the net assets were only 3.2 billion. Inventories accounted for 90% of the net assets for the same period. Although the amount of inventory cannot be equated with its net assets, it is certain that the best value for the company is now Inventory that has not been sold in the warehouse.

The inventory problem is very serious

In the 2010 annual report, the company’s account showed an inventory of 2.5 billion. At the general meeting of shareholders, the company also explained this important issue: “In fact, 60% of our inventory is new products in 2011. It is the goods that we prepared in response to the labor shortage. In addition, we will also use specialized Discount store for sale."

In the first quarter of 2011, the inventory amounted to RMB 3.16 billion. Chairman Zhou Chengjian explained: “The main reason is that the weather is abnormal, and other labor shortages have caused the spring and summer clothing to drag on until April to May, and missed the best time to market. The climate has disrupted the Meibang Garments. The production and sales plan for 2010 was due to a short winter time and the winter clothes were too late to digest, and this spring came late again, and the sales schedule of spring clothes was affected again. The company will sell them through discount stores in the form of lower discounts. Discounts above the cost will not result in a loss of Smith Barney.”

The reporters found several listed companies with the same type of positioning as those of Meibang Apparel Products to contrast the inventory, to verify whether the company's problems are the common problems of the entire industry, and also to verify whether the company's explanation is reasonable.

Giordano International's 2010 annual report shows that inventory accounted for 19% of current assets and 16.7% of net assets.

Rising Sun International's brand name is Jeanswest. The 2011 mid-year report showed that inventory accounted for 26.7% of current assets and 32% of net assets.

Summa apparel, 2011 mid-year report shows that inventory accounted for 16.6% of current assets, accounting for 16.4% of net assets.

The 2011 mid-month report of Smith Barney shows that inventory accounted for 54.5% of current assets and 90% of net assets. Judging from the comparison of data, Smithfield exceeded the average of the industry by several times. It can even be said that the inventory problem has reached a very serious situation! It is also doubtful whether the company has attributed the problem to the interpretation of weather and labor shortages. Does the same industry competitor not face the same type of problem?

In response to the inventory problem, the reporter repeatedly called Meibang Apparel Office on August 23 and 24. The phone could not be connected and there was no way to get more information.

Product slow sales intensify financial pressure

Due to the increase of inventories, Smith Bargain also brought a series of problems, such as a significant increase in account receivables by 316% over the same period, short-term loans increased by 106% over the same period, cash decreased by 53% over the same period, and operating cash flow was also negative at the end of the reporting period by 554 million. Compared with the 48% increase in operating income over the same period, the above data is extremely abnormal. In the case of a substantial increase in business, short-term borrowings increase, cash on the books decreases, and operating cash flow is then negative.

As the company did not explain the above issues in the interim report, the reporter learned from a senior accounting person and made the following reasoning: “Assume that the company's direct sales stores are slow-moving, resulting in an increase in inventory, while the franchise’s slow sales As a result of the increase in accounts receivable, the increase in inventory and accounts receivable will lead to operating cash shortages, resulting in cash reductions and short-term borrowings to supplement operating funds. Finally, there will be 554 million operating cash flow negatives and financing. The result of active cash flow inflows was 394 million yuan.From the financial report point of view, the company did experience the issue of slow-moving products.In addition, the provision for depreciation of inventory was only 6 out of 1000. This accrual is far from enough to compensate for the fall in the prices of fashion apparel. The stock price of cotton dropped sharply in half a year."