INNOVATION DRIVES FASHION FORWARD

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Chinese Menswear Brand LILANZ: Operating Cash Flow Increased 27% in the Difficult Year

March 20,2021

LILANZ, a Chinese menswear brand listed on Hong Kong Stock Exchange (stock code: HK1234), released the 2020 Performance Report on March 18, 2021, according to which the company had kept cash flow strong, resumed retail sales growth in the second half of the year with an increase of more than 10% in the fourth quarter, and improved inventory level and accounts receivable collection period in a year that was severely affected by the COVID-19 pandemic.

In the fiscal year 2020, LILANZ’s annual revenue was RMB 2.681 billion (which should be RMB 3.07 billion if the RMB 390 million was not appropriated to repurchase inventory and promote the distribution model reform), and the operating cash flow was RMB 773.3 million, a significant increase of 27% from RMB 609.2 million in 2019. Meanwhile, LILANZ did not slow down but stepped up investment, the expenditure of which amounted to RMB 191 million in 2020, a sharp increase of 124% from RMB 85 million in 2019.

The robust financial performance of LILANZ is attributed to the vertical integration reforms the brand has been carrying on in recent years, through which the brand places control on the entire supply chain from fabric R & D to apparel and accessory production, and strengthens control on retail terminals, optimizes the store network, and reduces inventory risks.

Backed by healthy cash flow, LILANZ will steadily invest in R & D, logistics, brand building and other important activities centered on its main business - menswear. When asked about the future development, LILANZ was full of confidence. According to LILANZ Chairman Wang Dongxing, the brand will continue to “offer value for money”, enhancing competitiveness to achieve sustainable, long-term growth.

LILANZ has two brands: the core brand LILANZ and the business casual brand LESS IS MORE. The former is targeted at consumers aged between 25 and 45, is popular in the traditional third-tier and fourth-tier cities in China, and is gradually expanding into the first-tier and second-tier cities. The latter is targeted at consumers aged between 20 and 30 in the first-tier and second-tier cities.

From the summer of 2021, LILANZ will select 1,388 distributors with effective management and operate through the franchise model, which covers Fujian, Shanxi, Guizhou, and Henan etc., and accounts for 56% of the LILANZ stores at the end of 2020 and about 60% of the LILANZ sales in 2020 (prior to the appropriation of inventory repurchase).

The business casual brand switched to the direct-sale model altogether in 2020, to strengthen competitiveness in inventory management, market development, brand promotion, and retail sales talent training.

To offset the impact of the COVID-19 pandemic on the foot traffic of physical stores, LILANZ accelerated the construction of online channels. In 2020, the brand had increased online sales by more than 1.2 times from 2019 and achieved RMB 539 million in e-commerce turnover. To strengthen control and management of online channels, the company has transformed its online stores into direct-sale stores since January 2021, which are no longer operated by distributors and are easier for LILANZ to launch more special edition products for its online platforms.

In the fourth quarter of 2020, LILANZ announced the appointment of Han Han, the famous Chinese writer, racer and film director, as brand ambassador. Its novel marketing campaign had been well received by the market and consumers.

Besides, LILANZ has invested in long-term development to get well prepared for the future. The LILANZ Cultural and Creative Park, in which the company invested about RMB 1 billion and located its new headquarters, went into operation in February 2021.

Along with the inauguration of the LILANZ Cultural and Creative Park, the generation-7 flagship store of LILANZ and the generation-2 flagship store of LESS IS MORE started business.

The LILANZ Logistics Park Phase I project started construction in May 2020 and is projected to be completed in 2021.

| Image source: LILANZ

| Writer: Jiaqi Wang

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