Senma performed better than the overall market in the first quarter, but the challenges have become more apparent

The outdoor leisure clothing and children’s clothing brand group Senma Clothing recently released its 2023 annual report and first quarter performance report. According to the financial report, in 2023, Senma Clothing realized a business expenditure of 13.661 billion yuan, a year-on-year decrease of 2.47%, a net profit of 1.122 billion yuan, a year-on-year decrease of 76.06%, and a net profit of 1.021 billion yuan, a year-on-year decrease of 105.29%, after deducting non expenses.
The first quarter report continued its upward trend in 2023, with a year-on-year decrease of 4.6% in operating expenses to 3.139 billion yuan, a year-on-year decrease of 11.4% to 346 million yuan in net profit after deducting non operating expenses, and a year-on-year decrease of 15.6%. Its performance in the first quarter was also better than that of the clothing consumption market, with a 2.7% increase in social retail sales of clothing, shoes, hats, needles, and textiles in the first quarter of 2024.

However, the operating and net profit range of Senma Clothing has not yet been adjusted back to Cenling, which was nearly 20 billion yuan and 1.5 billion yuan respectively before the epidemic in 2019.
But 2023 is an important turning point for Senma Clothing, with changes in governance, channel changes, and overseas shopping mall expansion all coming to a halt in sync.
At the beginning of 2023, Qiu Guanghe resigned as the legal representative and chairman, and both positions were taken over by his son Qiu Qiangqiang. Qiu Qiangqiang, known as the “second generation” of the company, had already participated in the operation of Senma since its establishment in 1996. He successively worked hard in Senma’s clothing procurement, co development, and governance planning teams, and was responsible for positions such as vice chairman and general manager.
It is rare in the action dressing industry to directly witness a company’s successor from 0 to 1, and Qiu Qiangqiang has his own understanding of the operation and growth of Senma. He has made a public appearance before, aiming to turn Senma into the “Chinese version of Zara”.
In 2023, Zara’s parent company Inditex developed a group business worth 35.9 billion euros, covering hundreds of countries. From the perspective of deletion trends, some rising stars, such as Urban Revivo, which is rapidly expanding in rural areas, and SHEIN, which has become a challenger to Zara overseas, seem to be closer to this goal.
Senma Clothing has two main brands under its umbrella, namely Senma, a leisure clothing brand established in 1996, and Batui, a children’s clothing brand established in 2002.
The advantage of Senma Clothing lies in the basic offline channels established in its early years. By the end of 2023, Senma Clothing had a total of 7937 stores, with franchise stores accounting for over 90%. The overall number of stores was 203 more than in 2022. According to the statement from Donghai Securities, Senma Clothing plans to continuously optimize its stores and will expand and merge in May 2024, including multiple S-mall Olay stores, with a focus on increasing operational volume.
Digital operation has become an exaggeration for both offline and online channels.
Senma Clothing pointed out in its annual report that digital stores have opened up multiple brands of the company, with 4000 more stores realizing the widespread use and differentiated operation of multiple modules such as live streaming business, WeChat ecological business, local career business, O2O business, and actual grass planting diversion, mobilizing the growth of physical store sales.
In order to enhance the ability of live broadcast, in 2023, Sima Garments and Accessories set up a live broadcast miracle department. By the end of 2023, it will drive the live broadcast base located in Wenzhou, and jointly create a new leisure clothing brand Shuku and a parent-child outdoor activity children’s clothing brand VIVID-BOX with Jia Nailiang, Tiktok’s head goods wearer, and Batu&Bogu.
However, the business scope of online channels has been stagnant since reaching 6.46 billion yuan in Cenling in 2021, and has slightly declined by 3.5% to 6.23 billion yuan in 2023. However, the gross profit margin of online channels has increased, from 38.8% the previous year to 42.97%.
Offline channels remain a key point. The total proportion of direct sales, franchisees, and joint ventures is 53.6%, with nearly 20% of direct sales being deleted. The overall gross profit margin of the dressing business has increased to 44.09% compared to the same period last year. At the beginning of 2023, Senma Clothing also set the goal of net deletion of 200 to 300 stores throughout the year.
At the same time as channel integration, the inventory turnover ability of Senma Clothing has also improved. In 2023, the company’s inventory turnover days increased by 26 to 159 days year-on-year, and the inventory range increased by 28.6% to 2.747 billion yuan year-on-year, resulting in an increase in the effectiveness of commodity operations.
However, in terms of the overall business scope that has not yet been restored to pre epidemic levels, Senma’s clothing still cannot be relaxed due to the temporary recovery.
During the period, the revenue of leisure clothing and accessories business, mainly under the Senma brand, decreased by 2.6%, and its proportion in total revenue also slightly decreased to 30.54%.
The children’s clothing and accessories business, which focuses on promoting children’s clothing, has experienced a growth of 4.9%. However, according to the report of Donghai Securities citing Euromonitor data, although promoting children’s clothing has stabilized the leading position in China’s children’s clothing shopping malls, its market share has been declining since reaching 7.3% in 2020, with a market share of 6.3% in 2022. This is mainly due to Anta children’s clothing and Feitui children’s clothing event brands taking advantage of the outdoor activity style to divert market share.
Senma Clothing also has children’s activity brands, such as authorized brands Asics Kids and PUMA KIDS. In terms of brand acquisition, Senma Clothing also has multiple authorized and self owned brands such as mid to high end women’s clothing Jason Wu, baby and children’s clothing brand Macaro, and Mini Batui, surpassing different circles from the public to high-end and children to adults. Unfortunately, these sub brands do not particularly surpass the situation reflected by the two main brands.
In order to further expand its business scope, Senma Clothing is also confident in betting on overseas shopping malls.
In April 2023, Senma Apparel’s Overseas Miracle Department increased its efforts to cultivate Asian shopping malls and explore the expansion of African shopping malls. In September, Senma Clothing held its first overseas agent customer gathering, and in December, Ba Tui Ba Tui closed its first store in Singapore.
But this is not the first time that Senma Clothing has tested going global. Since 2016, the company has cooperated with Southeast Asian e-commerce company Lazada to test and join Southeast Asian shopping malls, and established an overseas business center in 2019. By the end of 2023, the company had already expanded 70 overseas and Hong Kong based stores, but its revenue was still less than 0.5%.
It is still unknown how much confidence Senma Clothing has in joining overseas this time. Compared to SHEIN, which has been valued at billions of dollars since its establishment for only 12 years, Senma Clothing needs to start by inheriting and stabilizing the domestic market to replace Zara.


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