Further differentiation of apparel business performance

Since the beginning of 2019， investments of apparel enterprises have been mainly revolving around main business. With the weakening of industry prosperity and the differentiation of apparel enterprisesbusiness performance， Chinese apparel enterprises have strengthened their competitiveness in different industrial segments through mergers and acquisitions（M&As） at an attempt to seek a larger share of the apparel market. This might be a mainline for apparel enterprises investments in M&As.

JOEONE planned to invest 75 million yuan to set up a joint venture with a French brand

On February 18th， JOEONE announced its signing of the “Shareholders Cooperation Agreement”with Kitsune France on February 15 to jointly invest in setting up the joint venture — Small Fox （China） Co.， Ltd. （the final name approved by the industrial and commercial department should prevail）. The joint venture is expected to specialize in apparels， bags and suitcases， beauty products and perfumes of “Maison Kitsuné” and “Kitsuné” in Mainland China， Hong Kong and Macau. JOEONE decided to contribute around 76.5 million yuan to gain a 50% stake in the joint venture. Kitsuné would invest in the ownership of trademark right of products including apparels， bags and suitcases， and so on， but excluding coffee， perfume and makeup products， and also take a 50% stake in the joint venture.

The announcement introduced that KitsunéFrance， which was founded in Paris， France， mainly specializes in selling apparels. The operating income of the latest financial year by March 31st， 2018 totaled at 18.3127 million EURO， of which 953，500 EURO was net margin. Kitsuné， a brand affiliated to Kitsuné France， was established also in Paris， France in 2002， which includes three series， chiefly the seasonal series — Maison Kitsuné， the classical Paris series — Maison KitsunéParisien， and the neutral artistic design series— ACIDE Maison Kitsuné. Maison Kitsuné has 17 exclusive stores， distributed in a wide range of areas， including France， Japan， the United States， South Korea and Hong Kong （China）， and it also has more than 400 retail stores in such cities as London， Copenhagen， Los Angeles， Sydney， Tokyo， and Hong Kong. At the same time， this brand has been selling its products on e-commerce platforms， such as Endclothing， Matches Fashion and Sense.

JOEONE claimed that it would stick to the strategy of “platform， multi-branding and all-channels” revolving around main business of the apparel industry， and build the “fine craftsmanship and quality platform，”“fashion quality platform” and “personality and fashion platform.” JOEONEs establishment of the joint venture with the French counterpart would hopefully enrich the brand matrix on the “fashion quality platform.” On the other hand， JOEONE would help Kitsuné quickly gain a solid foothold in China. The three quarterly reports of JOEONE in 2018 suggested that the total operating income of the company in the first three quarters of 2018 reached 1.92 billion yuan， registering an increase of 7.74% compared with the same period last year， and that the listed company actualized the net margin of 350 million yuan for its shareholders， which was 1.86% higher than that of the same period last year.

Annil increased its investment in Xinyu Wear for Infants& Children by 24 million yuan

On February 14th， Annil made an announcement that the companys board meeting passed the “Proposal on External Investments and Investment Increase in Shenzhen Xinyu Wear for Infants & Children Co.， Ltd.，” reaching an agreement on the companys increase of investment in Xinyu by 24 million yuan， and subscribing for 2.5 million yuan of newlyincreased registered capital of Xinyu. After this investment increase， Annil would take a 20% stake in Xinyu.

The announcement pointed out that Xinyu owns the brand business，core personnel trademark right， patent right， domain name and other intangible assets of Sunroo as well as the independent operating right of Sunroo. Currently， Sunroo has built its brand awareness and reputation on the infants and childrens market， and is capable of forming synergistic development with Annils products for infants and children. Annil said that this external investment would cultivate new profit growth points of the company and enhance its market competitiveness and profitability.

The quarterly report of Annil in the first three quarters of 2018 showed that the operating income of the company reached 795 million yuan， increasing by 18.91% compared with the same period last year. The net profits actualized for shareholders of the listed company were 57.3562 million yuan， increasing by 25.63% compared with the same period last year. The company predicted that the net profits for shareholders of the listed company in 2018 would rise from 75.7567 million yuan to 89.5307 million yuan， and the increased rose from 10% to 30%. The company attributed its performance growth to the rapid growth of its online sales and steady growth of offline sales along with channel transformation. Annil also disclosed the sales volume of its Tmall store， which was 97.8 million yuan on the “November 11th” Shopping Festival of 2018， and 23 million yuan on the “December 12th”Shopping Festival of 2018. Annil added that there is still a large room for the brands endogenic growth， so the company will still focus on the brand， Annil. As to brand expansion， the company would consider brands， which could offer complementary advantages to Annil and which have built its reputation and could realize synergistic development therewith.

SEMIR planned to set up the joint venture to sell products of KIDILIZ GROUP

On January 8th， SEMIR announced that it would sign the “Joint Venture Business Contract”with KIDILIZ GROUP to set up the joint venture —Kaixin Lizi （Shanghai） Co.， Ltd. The joint venture would be in a position to promote and sell prod- ucts of KIDILIZ GROUP， and expand relevant business projects. The registered capital of the joint venture is 30 million yuan， of which 21 million yuan is contributed by SEMIR in cash， accounting for 70% of the total， while KIDLIZ GROUP contributes around 9 million yuan in cash， accounting for 30% of the total. The announcement pointed out that KIDILIZ GROUP is a leading enterprise in Europes medium-and high-end childrens wear industry， which is located in Paris， France， and has 10 proprietary childrens wear brands and five authorized brands. KIDILIZ GROUP offers a great variety of products， ranging from medium class to high-end class， and for newborns to teenagers. SEMIR planned to set up the joint venture with KIDILIZ GROUP to promote and sell the latters products in China， and expand the market share of the latters products in China.

Announcement showed that Sofiza SAS took a 100% stake in KIDILIZ GROUP， while SEMIR， by taking a 100% stake in Sofiza SAS， indirectly realized its 100% stake in KIDILIZ GROUP. On May 2， 2018， SEMIR pointed out in its announcement that the company passed the resolution on its fully-owned subsidiary SEMIR International Group（Hong Kong） Co.， Ltd. to purchase the stake and creditors right of Sofiza SAS by 100% at the equity fund of around 110 million EURO （or around 844 million RMB） so as to realize the purchase of all assets of KIDILIZ GROUP. SEMIR added that， following this M&A， it would become a major participant in the global childrens wear industry for having a combination of childrens wear brands ranging from public wear to high-end wear. By then， SEMIR would have be qualified to enter the major markets of Asia and other international markets， and do business on these markets. All this would finally shaped its globalized supply chain layout.

The financial statement indicated that the actualized operating income of SEMIR in the first three quarters of 2018 was 9.764 million yuan， registering an increase of 21.41% compared with the same period last year. The net profits for the listed companys shareholders were 1.272 billion yuan， registering a year-on-year increase of 25.66%. The company predicted that the listed companys net profits in 2018 would increase from 1.366 billion yuan to 1.707 billion yuan， and the growth rate increase from 20% to 50%. SEMIR also claimed that the recovery of growth in its leisure wear business， growth of its childrens wear and development of its online sales would boost the companys overall performance growth.

Jinfa Labi planned to establish a joint venture with a Netherlands infant & mom brand

On January 9th， the listed company， Jinfa Labi， specializing in cot-ton products and daily necessities for infants and children issued two announcements successively to publicize its agreement reached with the Israeli “O8”infants and mothers shampooing product series and Netherlands “Umee” feeding series. According to this agreement， Jinfa Labi would be responsible for brand promotion， sales and after-sales services of the whole product series affiliated to “Umee” and became the exclusively authorized producer and distributor of these two brands in the Greater China Region. Jinfa Labi planned to establish a joint venture for these two brands， and inject the trademark， patent and intellectual property rights of the two brands in the joint venture to expand its market share in China and even the world at large.

The announcement pointed out that O8 ISRAEL LTD. to which O8 belongs was founded in 2013， and has outstanding technological advantages in functional R&D of shampooing products for infants and moms. More importantly， it is the invention patent owner， which first applied the Dunaliella salina from the Dead Sea to shampooing products of infants and moms. Right View Limited， affiliated to Umee， has a competitive edge in function upgrade， iteration and development of milk bottle and other feeding product design and R&D， particularly swelling resistance towards the milk bottle series.

Jinfa Labi added that O8 can offer complementary advantages to its shampooing brands for infants， while Umee can realize synergistic development with its products for infants and moms. Both brands can help it gradually realize brand diversification and internationalization. Their cooperation will not only expand the companys shampooing brands and feeding products for infants and moms， but also enrich the companys product categories and increase the companys profit growth.

The financial statement indicated that the actualized operating income of Jinfa Labi in the first three quarters of 2018 was 317 million yuan， registering a year-on-year increase of 11.48%. The net profits belonging to the shareholders of the listed company were 60.1930 million yuan， which was 9.31% higher than the same period last year. The company predicted that the net profits for its shareholders would rise from 82.4104 million to 101 million， and that the growth rate changed from -10.00% to 10.00%. The main reasons for the increase included the companys setting up of direct-sale stores， improvement of the direct-sale store layout， adjustment of the alliance authorization， increase of R&D input and talent introduction.

Apparel enterprises have been investing revolving around the main business in 2019

Investment activities of the major listed companies in Chinas apparel industry， including JEOONE， SEMIR， and Jinfa Labi， suggest that setting up of joint ventures with international brands has become a major channel for Chinese apparel companies to enrich their brands and product series. Differently， Annil has achieved the same goal via increasing its investments in a domestic brand to occupy more market share and create new growth points for the companys profits.

These companies， though of different operating scales and different market segments， have demonstrated a generally upward trend of their recent performance. It was predicted that the operating income and net profits of 2018 would increase considerably， because these investment activities， though not large in amounts， also reflected companies intention of external expansion via investments.

Another common characteristic of these companies investments is their basically revolving around the main business. JEOONE set up the joint venture with the French brand to create the “fashion quality platform” oriented towards the main apparel business； Annil increased its investments in the domestic wear brand for infants and childrens to achieve synergistic development with the main brand； SEMIR established the joint venture with the already purchased international childrens wear company to gain a larger market share for its brand products in China and promote the development of its childrens wear business； Jinfa Labi founded the joint venture with the Israeli and Netherlands infant & mom brand to form a synergistic effect with the main brand business.

On the whole， though investments of apparel enterprises have not been very active since the beginning of 2019， they have been industrial investments basically revolving around the main business development. Under the weakening of industry prosperity and the further differentiation of apparel enterprises performance， more and more apparel enterprises might attach greater importance to quality of their investments， and accelerate their development through M&As so as to gain a more advantageous position in industrial segments and market competition.