Economic Observer Network reporter Zheng Yuxin Since the announcement of divestiture, the share price of Tebu International Holdings Limited (hereinafter referred to as "Tebu International", 1368. HK) has risen by 20%.
On May 9, Tebu International announced that Ding Shuibo, Chairman and CEO of the Board of Directors of the Group, and his family would privatize the business of KP Global Investment Limited (hereinafter referred to as "KP"), a company owned by K-Swiss and Palladium brands.
The business of Tebu International is divided into three categories according to the multi brand operation model: mass sports, fashion sports and professional sports. Among them, the public sports business is mainly the Tebu brand, with the revenue of 11.947 billion yuan in 2023, accounting for 83.3% of the total revenue; Fashion sports business includes Gesway and Paladin brands, accounting for 11.2% of the total revenue; Professional sports business covers the brands of Saucony and Merrell, accounting for 5.5% of the total revenue.
Mass sports business is the cornerstone of Tebu International, and professional sports business will turn losses into profits in 2023. However, the fashion and sports business has been losing money, with a loss of 184 million yuan in 2023. Gesevi and Paladin have dragged down the performance of listed companies, which is also the main reason why Tebu International decided to divest its assets.
Tebu International said that it will focus more on the development of running business after the divestiture. Prior to that, Special Step has undergone several strategic changes. In the early stage of development, Ding Shuibo worked as a shoe industry OEM for export, then created a special brand, and then changed the brand positioning from fashion sports to sports fashion. Later, the company opened the road of multi brand development through acquisition.
When Tebu International launched the road of multi brand development, Anta Sports (2020. HK) has explored a path, and it has split Amafin Sports (AS. N) for listing. Li Ning (2331. HK) is still adhering to the development strategy of a single brand. In the ranking of domestic sports brand profit scale, Tebu ranks third. The revenue of Special Step is about one-fifth of Anta's and one-half of Li Ning's; The net profit of Tebu is about one tenth of that of Anta and one third of that of Li Ning.
The divestiture was regarded as an important step for Tebu International to carry out brand layout again.
Throughout the sale
In 2019, Tebu International acquired the sports brands Gesevi and Paladin under the Korean fashion retail company Ilian Group at a price of 260 million dollars. As a traditional sports shoe brand in the United States, Gesway was founded in 1966 to provide high-performance tennis shoes, leisure and fitness shoes and other products; Paladin was founded in France in 1947, and is now one of the world-famous military boot brands.
During the acquisition, Tebu International said that these brands have unique brand positioning and are highly complementary to Tebu's brand portfolio for different target consumer groups. The acquisition will promote the transformation of Tebu International into a global sporting goods company that can meet the needs of different consumers. At the same time, Tebu's sales network, R&D technology and supply chain resources will support the development of these brands in Greater China.
After the acquisition, Tebu International adjusted the two brands. Gaishiwei continues to provide professional tennis products for athletes around tennis, and at the same time expands its product line to integrate tennis elements into different product lines to meet the needs of commuters in high-end cities. Paladin is mainly aimed at young high-end consumer groups and provides fashionable sports products in combination with current trends. KP formed the fashion and sports division of the group, and improved the product matrix of Tebu International.
However, shortly after the acquisition, China experienced a three-year epidemic. Since 2019, KP's business has continued to suffer losses, with total accumulated operating losses exceeding US $100 million. In the first quarter of 2024, KP has lost about 9 million dollars. TBI believes that the economic environment has changed greatly. The slowdown of China's economy has led to a decline in consumption capacity, which has had a huge negative impact on KP's business. Tebu International expects that these two brands will continue to generate losses similar to those in 2023 in 2024.
Therefore, Ding Shuibo, the major shareholder of Tebu International, and his family suggested that KP should be separated from the listed company system, and the business with continuous unsatisfactory performance should be eliminated to improve the profitability and cash flow of the listed company.
The price of this sale is 151 million dollars. Tebu International told reporters that the price is based on KP's book value as of March 31, 2024. After the sale, Tebu International will distribute $151 million in full to shareholders in the form of special dividends. Tebu International told reporters that if all matters go well, the transaction is expected to be completed in August. After the completion of the transaction, KP will still be led by the existing CEO and move the team to Shanghai.
Multi brand focused running
In 2019, Tebu International signed a joint venture agreement with Wolverine to jointly carry out the development, marketing and distribution of Mylar and Soconi in mainland China, Hong Kong and Macao. In the same year, Tebu International opened the road of multi brand and international development, striving to build a multi brand matrix covering mass, fashion, professional sports, etc.
Among the brands purchased by Tebu International, only Sokoni has started to make profits. Nevertheless, the overall scale of Sokoni is still small. In 2023, the revenue of the professional sports field of Special Step International will be 796 million yuan, accounting for only 5.5% of the group's total revenue. Sokoni's contribution is not enough to become the main force of the Group.
In 2021, Tebu International released its fifth five-year plan, proposing the strategy of developing the main brand and new brand in parallel; It is planned that by 2025, the new brand group led by Sokoni will achieve the goal of accumulated revenue of 4 billion yuan. There is still a big gap between the current situation and the goal.
Suokani is often compared to Anta's Filo, but insiders believe that Suokani has not yet become the "Filo" of Tebu. On the one hand, the revenue of Sokoni is relatively small, and on the other hand, the brand awareness of Sokoni has not yet reached the height of Filo.
After the stripping of KP, Tebu International will concentrate its resources to develop its main brands, Sokoni and Miler. Tebu International said that its business structure will become more streamlined and focus on running: its main brand will face the mass market; Sokoni will serve high-end and mature consumer groups; Mile focuses on cross-country running and outdoor activities.
Ding Shuibo once said: "When it comes to basketball, you will think of Nike, and when it comes to football, you will think of Adidas. What about special moves?"
In 2015, Tebu International launched a three-year transformation. The core change is that the brand positioning has changed from "fashion sports" to "sports fashion" and focused on running.
As early as 2007, Special Step has begun to lay out the running field. In 2019, Special Step and the China Association of Athletics and Astronautics released the Chinese race project. In September 2022, Special Step announced a new brand strategic positioning - world-class Chinese running shoes. Ding Shuibo said that Special Step will focus on the advantageous field of running shoe system and take running as a strategic starting point.
According to iResearch, China is gradually becoming the second largest running market in the world. According to the research report of Western Securities, the domestic running market will continue to grow. From 2011 to 2019, the annual compound growth rate of the number of running events reached 77.7%, of which the number of certified events increased from 22 to 357, and the number of large-scale events increased from 0 to 1828.
The running shoes market is regarded as a competitive place for sports brands. Nike, Adidas, Anta, Li Ning, 361DU and other brands have also increased their investment in this field. The barrier of running shoes is the midsole technology. Anta's core technology is nitrogen technology, while Li Ning is the midsole technology. In 2015, the X-Lab Sports Science Laboratory was specially established, and the R&D expenses increased year by year.
In addition, the market performance of domestic running shoe brands is linked to the wearing rate of running shoes in marathon events and the performance of the signed champions. However, in the recent Beijing Marathon, He Jie was questioned that three foreign athletes "walked" to win the championship. Although the survey results show that the organizing committee mistakenly registered four foreign pace setters as specially invited athletes due to the fact that the pace setters were not clearly marked as the sponsors of the special step, which explained the "walk" scandal, this event caused some public runners to have doubts about the brand of the special step.
Tebu International said that after the divestiture of assets, the profitability of listed companies is expected to be improved, and Tebu will focus more on the field of running. At the beginning of March this year, Special Step announced to suspend its five-year plan. From the current situation, there is a big gap between the special step and the goals set in the five-year plan.
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Zheng Yuxin, reporter of Economic Observer
Journalist of Mass Consumption News Department
He has paid long-term attention to the market development and company trends of the big consumer industry, and is good at in-depth investigation and reporting, exclusive interviews with high-end people, and industry analysis.
For clues, please contact: zhengyuxin@eeo.com.cn
