Hailan home listing is not high risk of garment industry intrusion

Due to a number of issues such as inconvenient inventory, the men’s brand Hailan’s home has been widely questioned by the media and failed to convince the issuing committee that this will mean that a number of PE institutions, including the National Star Group, will miss out on this wealth feast. Contacting a number of apparel companies in recent days have been folded IPO, this may also be VC/PE draw a piece of investment "high-risk area."

On May 11th, the 84th meeting of the China Securities Regulatory Commission's issuing and approving committee rejected the application for the listing of Hailan Family. The company originally planned to issue 49 million shares, raise more than 1 billion yuan to invest in marketing network construction and other four projects. Although the China Securities Regulatory Commission has not disclosed the specific reasons for the loss of the Haishu House, analysts generally believe that the rapid expansion of the inventory level, which accounts for more than half of the total assets and the “take-all” upstream and downstream may allow the issuing committee to examine the The prospects for development cannot be reassuring.

According to the Haishu House prospectus (submission draft), as of the end of 2011, the company's inventory was as high as 3.863 billion yuan, an increase of 134.10% year-on-year, accounting for 56.82% of the total assets. Many of the indicators were much higher than those of listed companies. . On the other hand, such a high inventory level corresponds to a fall in value of only 8.2 million yuan. Like other apparel companies that have long struggled under the pressure of high inventory, the abnormally high inventory level of Haicang Home will undoubtedly become the future development of the company. One of the "Swords of Damocles".

Behind the high inventory is the unique expansion business model of Haishu Home. “The company dared to bring such a financial report to the meeting. Perhaps it was the opinion that their business model could provide reasonable results. However, from the results, this explanation not only failed to persuade the members of the issuing committee, but also brought out even more. "More questions." A senior sponsor who has been in the apparel industry for many years told reporters.

According to the instructions of Haishu House, the company only retains a small amount of production business, mainly through the purchase contract with the supplier to purchase goods with the returnable terms of goods with unsalable sales. At the same time, the company uses the consignment sales instead of the buyout method from the store (excluding straight In this way, the company has been able to expand rapidly in recent years. In the downstream area, the franchise conditions for the homes of Hailan are relatively unique. The franchisees do not have to participate in the specific operations of the franchise stores and are only responsible for the payment of related expenses. The sales settlement between the company and the franchisee adopts the consignment sales model, and the franchisees do not bear the slow sales of stocks. risk.

In this regard, a partner of a large domestic accounting firm pointed out that the premise of this mode of smooth operation is that companies can return capital through continuous expansion and absorb inventory through continuous growth of sales, once the downstream expansion or sales slow down, And pushing upstream suppliers, large-scale returns will be difficult to achieve, and easily lead to various disputes.

“This mode of expansion of Hailan’s House attracts downstream users by controlling the upstream, but at the same time it also draws downstream risks from its own, and whether it can be passed on to the upstream through returns, it is still unknown. The light asset model advocated by the company itself seems to be a far cry from nothing. A light asset company with 3.8 billion inventories on its books is believed by nobody.” Said the aforementioned partner.

Perhaps it is this systematic risk that spreads throughout the industry, adding many variables to the prospects for the development of Hailan Home.

In fact, in recent years, there have been many clothing companies such as Shandong Shulang, Nanjing Weige Nasi, Shanghai Li Bu Rui, Zhuhai Weisiman, Fujian Nuoqi, Shenzhen Ladies House, etc., which were dismissed by IPOs and disclosed in the China Securities Regulatory Commission. In the report period, the company’s sharp increase in inventory levels was an important reason. There is no lack of venture capital agencies in each of these companies. For example, the three-shareholder China Star Group of Haicang House is part of the joint venture of Temasek Investment and the Columbia University Foundation. It is expected that there will be so much in the apparel industry. The case of being rejected will allow subsequent VC/PE to evade the selection of the project.