Huge Loss 1 Billion 200 Million Also Invited Us BCG As A Consultant City Beauty, To Weigh The Stock Sold To Southeast Asia.

Local fast fashion underwear brand city beauty (China) Holdings Limited (hereinafter referred to as "city beauty") issued a notice recently announced that, due to the downturn in the retail industry, the mainland China consumer market downturn, the company's underwear business in the first half of 2019 revenue decreased by 9.5%. In order to improve the company's performance, the city beauty board appointed a new chief executive officer in August 2019 and hired Boston consulting company as a consultant for the company.

According to Baidu data, Boston consulting company (BCG) is a well-known American business management consulting firm, recognized as a pioneer in the field of strategic management consulting. The company's greatest characteristics and advantages lie in the advanced management consulting tools and theories that the company has owned and is still creating. The famous Boston matrix of management academia was founded by the company in 1960s. The four major functions of BCG are enterprise strategy, information technology, enterprise organization and operation efficiency. As a highly innovative consulting firm, many of its consultants have gone out of the world. The founders of international consulting companies are from Boston consulting company.

In 2019 8-11, the Boston consulting firm presented the following recommendations to the urban beauty board and management:

1, return to practical, functional and cost-effective parts instead of turning to fast fashion sexy section.

2, accelerate the clearance of old stock.

3, optimize franchisee's structure;

4, take actions to alleviate the cash flow problem of franchisees.

5, close down the loss shops, open new shops and adopt new images to renovate existing stores; and introduce more classic products.

City Beauty Management listened to the advice of Boston consulting company to clean up old stock. As it is difficult to clean up inventory in stores before and after 2017, management plans to sell it to Southeast Asian developing countries in 2020 at a price estimated at the weight of inventories (actually about 95% off). Therefore, after considering all kinds of sales costs, the management will make full provision in this regard.

For the survival of 2018, urban beauty management plans to increase sales in 2020, and provide sales to discount discount stores and discount e-commerce platforms by providing customers with higher average discount levels, and the average discount level in 2020 may exceed 65% off. As a result, management may consider further discounts and all kinds of required sales costs after consideration of the passage of time, and 50% provision is made for this purpose.

City beauty said that in 2019, its franchisees were losing money and cash flow was tight. As most franchisees are short of financial strength and limited resources, fewer products are ordered in the company, resulting in over 30% sales decline to franchisees in 2019. As the situation worsened, the average receivables turnover period changed from 49 days in 2018 to 64 days in 2019 (before exempting accounts receivable).

As of December 31, 2019, urban beauty had about 2200 franchisees, and more than half of the franchisees owned only one shop, resulting in higher administrative costs. In addition, smaller franchisees have limited opportunities for further expansion due to limited resources. After adopting the advice of Boston consulting company, by focusing on the larger franchisees with strategic value, in order to alleviate the cash flow of franchisees and optimize the franchisee structure, the urban beauty management decided to provide support for the 40 major franchisees. The amount owed by 40 franchisees overdue 181 days from December 31, 2018 to 26 million 500 thousand yuan significantly increased to December 31, 2019. After careful consideration and consultation, the management of the city beauty reached an agreement with 40 franchisees to exempt their long-term outstanding balance, and therefore made a one-off exempted account receivable of about 326 million yuan, which is about 75% of the total outstanding balance of the larger franchisees.

According to public information, the city beauty is headquartered in Dongguan, and has four branches in Beijing, Shanghai, Shenzhen and Chongqing. It is mainly engaged in the design, research, development and sales of high cost performance clothing. The company focuses on the mass market of China's clothing industry, and plans to expand the share of high-end underwear market. The company mainly produces and sells five series of personal clothing products, including bra, underwear, pajamas and home wear, thermal clothing and other (including Bottomwear and tights, vest, socks and accessories), which basically cover the whole category of personal clothing.

The results show that in 2019, the urban beauty realized 4 billion 82 million of business income, down 19.91% from the same period last year. The net profit loss attributable to the parent company was 1 billion 298 million, down 443.13% from the same period last year, and the gross profit margin dropped from 41.7% in 2018 to 22.6%. Almost all the urban beauties in the transformation plan put forward a large scale of impairment allowance, and the sale of the goods could be reduced by 738 million at a time. At the same time, it waivers 327 million of the customer's arrears and accounts for 68 million 665 thousand of the accounts receivable. In addition, the total cost of employee dismissal brought about by the closing of the loss shop and the total cost of the other loss shop decoration is 51 million 776 thousand, which constitutes the main reason for the huge loss of urban beauty in 2019.

Cheng Weixiong, general manager of textile and clothing brand management and Shanghai Liang Qi Brand Management Co., Ltd., in an interview with the media, said that the decline of urban beauty performance was mainly due to rocking brand positioning, which led to product development. Although the rise of urban beauty has benefited from popular positioning, it did not further consolidate the advantages of cost performance and supply chain in the course of development, lack of control over small and medium-sized shops, directly distribute goods to franchisees without management and guidance, and did not play a very good role in franchisees.

Roland Begg analyst Chen Ke said that behind the changes in the industry is the acceleration of changes in consumer demand. Digitalization drives the increasing transparency of information, and the platform and brand players spare no efforts to seize the leisure time of consumers, in order to get exposure and seize the minds of consumers. However, the level of consumer demand is accelerating, and the stratification of diversity has become more diversified. In other words, consumers are becoming more and more changeable.

From the perspective of the consumer side, the operation of consumer demand is becoming more and more challenging. Under the Internet economy, there is no shortage of products and brands that are catching up with a consumer demand. However, the rapid change of demand means that the explosive products are becoming shorter and shorter, and the two successful and continuous highlights of enterprises are becoming more and more difficult to control. Under the mobile economy, the original consumer journey is thoroughly rebuilt, and the scene of the consumer contact can be dispersed and diversified, which greatly increases the dimension of consumer operation. Under the logic of "stock appreciation", the acquisition cost of enterprises is rising day by day, capturing the difficulties of consumers' attention and the importance of consumers' operation, all urge enterprises to accelerate the layout of lean user operation.

In Chen Ke's view, whether the macro environment, the change of large consumption industries, or the pluralism and gradation of consumer demand, all shows that the importance of lean user management is becoming increasingly prominent in today's era. Facing the future, changing the mode of thinking, cultivating a group of users with high value, high activity, loyalty and recognition, and doing well the operation of users is the foundation for the everlasting development of enterprises.

The market participants also said that since entering the first half of 2020, with the current domestic epidemic becoming stable and the spread of overseas epidemic spreading rapidly, domestic demand and investment have become the top priority for stabilizing domestic economic growth and employment. With the gradual resumption of industries and the resumption of domestic economic activities, it is expected that the optional consumption that is affected by the epidemic will be guided by policy guidance and support. Under the trend of gradual upward recovery, we gradually get out of the most difficult stage of the first quarter. From the medium term, the epidemic is also forcing the whole industry to speed up the improvement of operational efficiency, inventory management, precision marketing and other aspects, and the new retail mode under the online and offline integration has been further accelerated.