Reorganization of children's apparel business Xtep closed 350 stores last year

For clothing companies, children's clothing is a double-edged sword. According to the latest 2016 full-year results released by Xtep, the total revenue of Xtep last year was 5.397 billion yuan, a year-on-year increase of 1.9%; net profit was 528 million yuan, a year-on-year decline of 15.2%; net profit margin was 9.8% for the past 5 years lowest. Xtep said that the reorganization and adjustment of children's business has become one of the reasons for the decline in net profit. Due to the lack of operating capacity at the point of sale, in the past year, Xtep closed 350 children's stores.

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According to financial reports, in the main business of Xtep, the income of footwear last year reached 3.525 billion yuan, an increase of 8.2% year-on-year; however, the revenue from apparel and accessories fell by 8.4% and 3.6% respectively. Xtep said that the decrease in apparel revenue was due to the company’s reduction in low-margin products. It is also worth noting that, despite the increase in total revenue, Xtep's net profit has declined, mainly because Xtep restructured and adjusted its children's business in the past year.

With the release of the "two-child" policy, children's wear has become the focus of all apparel brands. According to statistics, the children's sportswear market will exceed 140 billion yuan in the future. Anta, 361 degrees and other brands have entered the children's market. Among them, the 361° children's wear brand same-store sales increased by 7.7% in the fourth quarter, which is 0.2% higher than the main brand.

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Xtep said that the company's children's department has undergone a major restructuring in 2016. The new Xtep children's products will be closer to Xtep adult sports products, and will also provide parent-child equipment to increase the cross-selling of adult and children's products. In addition, material procurement and production will be coordinated with adult products to reduce costs and production time. However, it is clearly unsatisfactory in terms of the current development of Xtep's business.

In 2016, Xtep aggressively abolished the sale of children's brands. In 2015, Xtep Children’s brand sales points rapidly expanded throughout the country, adding 100 new stores, and the total number reached 600. In 2016, in just one year, the sales points of Xtep Children’s Brands have sharply dropped to 250. Due to the large decrease in the number of children's stores, Xtep had to reorganize the children's business units.

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“The shop scale, store area and sales volume of Xtep Children’s Store are not very good.” Ma Gang, an apparel industry expert, clearly stated that “In comparison to brands such as Anta, Xtep’s children business started late and the number of shops is the least.” It is understood that Xtep has been acting in Disney Sportswear from 2008 to 2011, and the sub-brand “Xtep Children” was officially founded in 2011. However, the Anta Children’s Division officially started in 2008.

With weaker operating capabilities and late start-ups, the product quality of Xtep's children's business has also caused consumers to question. Since its launch, Xtep's children's products have become frequent visitors to various geological inspection agencies. In 2016, Xtep’s children’s products were repeatedly disqualified when they were spot-checked in Hubei, Shanxi, and Jiangxi. Some analysts believe that in the long run, it will certainly have an adverse impact on brand development.

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