Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
CH OUTFITTERS
HKEx Stock Code : 01146 
 
Corporate Profile
Principally engaged in the business of design, manufacturing, marketing and sale of apparel products and accessories in the People's Republic of China.

Business Review - For the year ended December 31, 2012

Sales network

Our strategy to use a combination of self-operated retail points as well as retail points operated by third-party retailers to increase our market penetration. We believe that selling our products through a balanced network by establishing a meaningful presence in major cities in the PRC which we consider as our core markets by opening our self-operated retail points and engaging third-party retailers which directly operate stores or concession counters in department stores or shopping malls in cities where we do not operate retail points to expand our sales network has allowed us to penetrate the vast PRC menswear market.

As at 31 December 2012, our sales network comprised a total of 549 self-operated retail points, comprising concession counters, consignment stores and self-operated stores, and 763 retail points, including concession counters and self-operated stores, operated by our third-party retailers.

Self-operated retail points

¡E Self-operated concession counters: as at 31 December 2012 and 2011, we had a network of 535 and 467, respectively, which were directly operated by us. All of our self-operated concession counters are located within mainstream department stores, including Parkson (¦Ê²±), Golden Eagle (ª÷ÆN), MOI (­Z·~), Intime (»È®õ), Wangfujing (¤ý©²¤«); and

¡E Self-operated stores: as at 31 December 2012 and 2011, we had a network of 14 and 8, respectively, most of which were located in shopping malls within major cities in the PRC to ensure a steady flow of consumers as well as to enhance our sales and brand awareness.

Retail points operated by third party retailers

During the year, we engaged 35 new third-party retailers for our Jeep products, 17 for our SBPRC products and 4 for our London Fog product. We have also increased visits to our third-party retailers and provided formal and systematic training to them to implement a set of standard operating procedures for store operating functions, including cashier, marketing concession staff and store supervisor.

Branding

The continuing implementation of a multi-brand strategy is critical to our sustainable expansion and growth. We believe that our multi-brand strategy will allow us capture more market segments, take advantage of a wider range of market opportunities and ultimately increase our overall market share in China's fast-growing menswear market. Our diversification initiatives in brand portfolio in 2012 include the followings:

¡E We entered into a joint venture agreement with Perry Ellis International Group Holdings Limited and Perry Ellis International, Inc. in April 2012 to establish joint venture companies in Hong Kong and PRC for the purpose of engaging in the promotion, manufacture, sale and marketing of mid-to-high end men's and women's apparel products and accessories under the ¡§Manhattan¡¨ trademarks in the PRC. Manhattan has stood for innovation and quality for over 150 years, and continues to evolve into a diverse dress-casual lifestyle brand based on the essentials of metropolitan living. The classic Manhattan remains a dress shirt of choice, available at finer department stores throughout Asia and the Americas;

¡E We entered into a license agreement with MAXIM'S LIMITED in June 2012 for the purpose of engaging in the promotion, manufacture, sale and marketing of men's apparel products and accessories under the ¡§Maxim's¡¨ trademarks in the PRC. Maxim's was founded in 1893 and became one of the most popular and fashionable restaurants in Paris. The restaurant and the Maxim's trademarks are now owned by Mr. Pierre Cardin.

¡E We entered into trademark assignment and sale agreements with Iconix China Holdings Limited in December 2012 for acquisition of the intellectual property rights of ¡§Zoo York¡¨ and ¡§Artful Doger¡¨ which are concurrently registered in the PRC, Hong Kong, Macau and Taiwan.

Our brands are one of the most valuable assets and creating brand equity is more important than ever in a competitive retail environment. We differentiate ourselves from our competitors through our marketing and promotional initiatives, including:

¡E continuing to enhance the layout of our retail points and the way to display our products under our ¡§stylish, attractive and consistent¡¨ principle to provide better shopping experience for our consumers;

¡E active participation in in-store marketing activities organised by department stores and shopping malls which we believe is a relatively more cost-efficient marketing approach;

¡E on 11 December 2012, Iconix Brand Group Inc. and our Group successfully hosted a cocktail party in celebrating the launch of 2012/2013 fall/winter season products of London Fog; and

¡E on 17 December 2012, a charity party for celebrating the centenary of Santa Barbara Polo & Racquet Club was held by Interasia & Associates (Holdings) Co., Ltd. and our Group. Over 300 celebrities including Mr. Kenny Bee attended and a total of RMB10,000 was raised for Cui Yongyuan Commonweal Foundation in the party.

Design and product development

The Group has a dedicated design team for each of the brands. Product design for most of our brands is done in-house by our design team based in Hong Kong and Shanghai. As at 31 December 2012, our in-house design team comprises 24 full-time designers and is led by our chief designer, who has design experience in the industry for more than twenty years. The majority of our designers have an average of more than three years working experience in the related field.

In order to allow our design team to keep abreast of the latest trends and developments in new designs, we have arranged our designers to attend fashion shows and trade exhibitions in Beijing, Shanghai, Hong Kong, Paris, Milan and New York. Iconix China Limited also invited our design team to make a visit to Mr. Tommy Hilfiger's studio in New York and London Fog's accessories suppliers in the United States during the year.

We believe a wide range of product offerings including fabrics, styles, colours and sizes is one of the keys to our success. Our design team produced over 1,000 stock keeping units of product designs for each season products in 2012 to cover a wide range of consumer sub-segments and cater to the carried weather conditions of different regions in China.

Production and supply chain

We operate a supply chain model that combines of self-production, subcontracting services and outsourcing production, with an aim to optimise product quality, cost-effectiveness and production flexibility. The automated apparel transporting systems in our Dezhou manufacturing plant have been put into use during the year to improve production efficiency and maintain consistent high quality products.
In 2012, we have also allocated significant efforts and worked with third-party consultancies to develop a fine-tuned and standardized operational manuals that cover raw materials sourcing, production outsourcing, products distribution and inventory management to provide detailed guidance to our frontline employees. We believe the standardized operations provide a platform for sustainable future growth by enabling us to replicate our operations and improve efficiency of our supply chain.

Our office automation and enterprise resource planning systems have been deployed by our major third-party manufacturers to improve data and information exchanges. The objective of the initiative is to build long-term relationship with our third-party manufacturers and ensure consistent supply of our products in a cost-efficient manner.

Business Outlook - For the year ended December 31, 2012

¡E In line with our multi-brand strategy, the Group will seek opportunities to further diversify its brand portfolio and increase the portion of revenue from self-owned brands. We plan to introduce the first fall/winter season products of our new brands such as Manhattan and Maxim's in the third quarter of 2013. Our diversification initiatives also include efforts to expand the outreach of our existing core brand Jeep. The first fall/winter season products under ¡§Jeep Spirit¡¨, targeting the younger consumer group, will be launched in late 2013.

¡E We noticed rapid growth in outlet stores in recent years. In line with our strategy to establish a multi-faceted sales and retail model and given the current economic environment, we will continue to place great emphasis on expanding our outlet store network;

¡E The appearance of e-commerce has a huge impact on the consumption pattern and behavior of the consumers. In respond to such changes, the Group will explore more sales opportunities from e-commerce;

¡E Same store sales will be improved through precise product distribution and our ¡§stylish, attractive and consistent¡¨ principle in display of our products;

¡E New media, including social networking websites, microblogs, wechat on the internet, will be leveraged to enhance interaction with the customers and to raise brand awareness among our customers;

¡E Cost will continue to be managed. We have established a dedicated team to control and monitor our procurement. Our experience of operating the Dezhou manufacturing plant will enable us to formulate a set of cost models and increase our bargain powers on negotiation of favorable trading terms with third-party manufacturers.

Source: China Outfitters (01146) Annual Results Announcement
Chairman LO Peter Issued Capital (shares) 3,445M
Par Value HKD 0.1 Market Capitalisation (HKD) 4,824M
 
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