Peak Sports Listed: Open 1,000 Stores Next Year

Peak Sports will be listed on the Hong Kong Stock Exchange on September 29. Based on the issuance price of HK$4.1, Peak's IPO will raise 1.7 billion Hong Kong dollars, which is higher than the previous estimate of 1.5 billion Hong Kong dollars. Excluding the over-allotment option, Peak’s total share capital after listing was 2.09 billion shares. The company’s total market capitalization was 8.6 billion Hong Kong dollars. The Xu Jingnan family holds a total of 61% of Peak’s equity. Based on this calculation, the Hui family is worth more than HK$5.2 billion.

Peak Sports CEO Xu Zhihua

Three rounds of financing

"21st Century": Since the introduction of the listing proposal to the company in 2005, why did this step go so late, why did the listing site choose Hong Kong?

Xu Zhihua: Qian Jia can be said to be a company’s financial investor and more of a financial advisor. Qian Jia proposed a listing proposal to the company in 2005, and we only had the idea of ​​going public. This investment was not implemented until January 2007. The reason is that when the company and Zhao Jia signed an agreement, they agreed that after the company's 2006 financial statements came out, funds were available.

The introduction of Sequoia Investment should be said to be the beginning of the company's real deployment of listings. Sequoia is a private equity fund of the United States. On the one hand, it can secure more international resources for us. On the other hand, it can also provide us with some funds for the development of the company. So the idea of ​​a company going public is early, but it takes longer to prepare. The company originally planned to go public in 2008, but due to market reasons, it had to be postponed.

The choice of listing location is considered by the company as follows: The company's positioning is an internationalized, century-old shop, and it hopes to be international in terms of market, capital, and shareholder structure. This requires overseas listing. Hong Kong speaks Chinese and is easy to communicate. It is close to the company’s main market. The Hong Kong Stock Exchange has a very good influence and therefore chose Hong Kong.

"21st Century": How does Peak choose these three rounds of financing?

Xu Zhihua: Qian Jia's shareholding is the company's first round of financing. The second round of financing started in 2007. The earliest investor was Redwood, and later it introduced a group of shareholders such as Shenzhen Innovation Investment. When the company initially planned to go public in 2008 and introduce a team of small shareholders such as Creative Capital, the company signed an agreement with it. If the company fails to go public before the end of April 2009, it will provide them with an exit mechanism that is higher than their investment.

Market reasons The listing was delayed until September this year. The third round of financing in April this year was partly due to paying some withdrawal funds for the second round of financing, and the other was to consider the choice of investors and whether it could bring extended effects to the company.

In the third round of financing, the company introduced CCB International and Lenovo Investment. In November 2008, CCB International and Lenovo expressed the idea to us and later reached an agreement.

CCB is the company's major current account bank and is expected to provide assistance to the company in terms of credit and financing in the future. Select Lenovo Investment, on the one hand Liu Chuanzhi itself is a famous entrepreneur, Lenovo has a better brand effect and influence, the promotion of the company's brand and business development, have a positive role in promoting.

Investment is definitely a hope for good investment returns. Peak's three-year sales compound growth rate of 80%, the company's high growth rate and sports brand future development prospects should be more valued.

30%-40% growth rate

"21st Century": In terms of fund-raising, 361 degrees and 38.9% of peers are used for promotion and sponsorship, while Peak will use 48.3% for advertising and marketing. Whether there is an over-reliance on advertising and marketing Quality or R&D investment concerns?

Xu Zhihua: On the surface, most of the company's fundraising is for advertising and marketing, rather than supporting the development of the main business. In fact, nearly 20% of the company’s fundraising is for product R&D and production expansion. This is one of them. In addition, after more than 20 years of development, the company has considerable experience in product quality and productivity. In addition, only 40% of footwear production and 10% of apparel production are performed by the company itself. Others are outsourced. It can be said that the company has matured in terms of product quality and production, which is the advantage of the company.

On the other hand, for many Chinese companies, brands and channels are often the shortcomings of development, which is what the company currently hopes to increase. By investing, consolidating brand influence and expanding channels, its purpose is precisely to promote sales of company products. In a real sense, this part of input is also used to support the development of the main business. Under the premise of ensuring quality and ensuring production, upgrading the brand and expanding channels is a top priority.

"21st Century": What is Peak's core competitiveness? How to achieve high growth goals?

Xu Zhihua: In the future, our strategy is to become a professional sports brand. Through professional sports, we will promote the professional experience of the public and improve more cost-effective products. The NBA and the company have had a long cooperation time. The NBA players competed in the shoes, and they themselves confirmed the quality of the products. From 2006 to 2009, the compound annual growth rate of the company's three-year sales was 80%. It can be said that it has a lot to do with brand promotion and broadening channels. In the future, we will also work hard in this area. But in the long run, our compound growth rate cannot always be maintained at 80%, but within 5 years, we still set the target at 30%-40%.

The extension of the product line will certainly be done. In the future, it will also involve tennis, football and running sports.

Judging from international experience, the single brand and single style of sports brand can achieve success. In the short term, the main energy of the company will still be used to increase the brand of Peak. When the company's profit level reaches a certain level, it does not rule out multi-brand development through mergers and acquisitions. The possibility of operation, the company's strategy is the internationalization of resource allocation, the possibility of international and domestic acquisitions, but there is no plan at this stage.

"21st Century": When you asked about the increase in gross profit margin to 40% within two years, compared with 32.5% in 2008 and 38.2% in the first half of this year's gross margin, this plan is somewhat radical?

Xu Zhihua: It seems difficult to raise gross margins on the premise that the price fluctuation of raw materials is unlikely to be too large. However, the gross margin of the company in the first half of this year has reached 38.2%, which is 6 percentage points higher than last year. It is not too far from 40%, so I think it should not be difficult for the gross margin to reach 40% in two years.

The company’s strategy is to provide more products with higher gross margins, such as NBA signature basketball shoes, which will increase overall gross profit margin. In addition, the company will also increase the price of distributors' distribution products, but the prices of products in the market will not change, because we will increase the prices of distributors and at the same time, we will also provide more support for them and help them increase sales. , to ensure the distributor's overall profit.

Shop plan

"21st Century": How is the company planning to open stores in the next two years? In terms of sales model, do you maintain open retail rights to distributors? How do you view the consumer market and industry outlook of Chinese sports brands in the coming years?

Xu Zhihua: It is estimated that 1,000 new stores will be opened each year next year. We are opening up retail rights for distributors because the flexibility can be given to distributors. Distributors can control their own channels. The overall effect is to help us flexibly control our inventory.

The consumer market of China's sports brands is quite broad, and there will be rapid development in the future, and the sports brand industry is a sunrise industry. However, the single product can be said to have entered the Warring States Period from the Spring and Autumn Period, and the competition among high-quality brands will intensify in the future.