Net profit growth of nearly 100% in 2023! How did Red Bean Group achieve this?

Recently, clothing companies have successively disclosed their 2023 annual reports. Many companies have submitted impressive transcripts.

Among them, Red Bean Corporation (600400. SH) is one of them. According to disclosure, the company achieved a revenue of 2.33 billion yuan during the reporting period; The net profit attributable to the parent company was RMB 30.056 million, a year-on-year increase of 99.51%; Non attributable net profit increased by 267.46% year-on-year.

In the past two years, Red Bean has focused its energy on the main business of men’s clothing. Now, after multiple upgrades and transformations, we have achieved results. The data shows that the company’s Hodo men’s clothing business saw a year-on-year revenue growth of 23.57% in 2023, and the overall operating performance showed a good growth trend.

In the eyes of industry insiders, the improvement of Red Bean Group’s business performance is partly due to its 67 years of deep cultivation in the textile and clothing industry, and partly due to its entry into the “comfortable men’s clothing track” and opening up a high-end clothing development path that is in line with the new economic environment.

Subsequently, after market hours on April 26th, Red Bean Group also released its Q1 2024 performance report: Red Bean Group achieved a revenue of 650 million yuan and a net profit attributable to shareholders of 41.234 million yuan in Q1 2024, a year-on-year increase of 31.08%.

The time-honored brand gallops in spring. Looking ahead to the future, Red Bean Group has also formulated a long-term development strategy: focusing on the comfort track, clarifying the brand positioning of “Classic Comfortable Men’s Wear”, focusing on the development of Red Bean Comfortable Men’s Wear comprehensive retail business, accelerating the implementation of high-end, digital, and online construction to create a high-quality brand, accelerating the cultivation of new productive forces to promote high-quality development, allowing more people to wear luxury grade comfortable men’s wear, and committed to becoming a leading enterprise in the men’s wear industry.

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Clearly define “classic and comfortable men’s clothing”, from selling goods to selling brands

In the current situation of low market concentration in the men’s clothing industry, Red Bean Group has shown strong and powerful competitiveness in the men’s clothing differentiation track, finding its own “comfort zone”.

In the past two years, based on the high-end transformation of “classic comfortable men’s clothing”, with the gradual implementation of strategic weighting actions such as products and channels, Red Bean Group’s comfort strategy has entered a new development stage, shifting from a sales model to a brand model. Not only has it achieved phased breakthroughs in indicators such as average customer price, joint rate, and repurchase rate, but its overall profitability has also effectively improved.

Focusing on the strategy of “classic and comfortable men’s clothing”, the first key action of Red Bean Group’s transformation is to launch a star single product – “0 Feeling Comfortable Shirt”, which constructs a consumer cognition basic plate of “Red Bean=Comfort” with a star single product strategy.

In 2021, Red Bean Group launched a groundbreaking product called “Red Bean Zero Sense Comfortable Shirt”, which deeply combines and binds the consumer perception of “Red Bean Men’s Wear=Comfortable Men’s Wear”. By the end of 2023, the sales of Red Bean Zero Sense Comfortable Shirts exceeded 1 million units, winning ten authoritative awards including China, France, the United States, Italy, and other five countries.

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Driven by the “zero sensation comfortable shirts”, the shirt category of Red Bean Group has opened up a new round of growth space. According to the financial report, the revenue of its shirt category in 2023 climbed to 448 million yuan, a year-on-year increase of 52.38% compared to the previous year’s revenue in 2021; The production and sales volume have exceeded 3 million pieces per year for three consecutive years, reaching 4.224 million pieces and 3.8154 million pieces respectively by the end of 2023.

In addition, Red Bean is not satisfied with the single item of shirts. After the success of the “Red Bean 0 Feel Comfortable Shirt”, Red Bean Group continues to increase its research and development investment significantly, in order to expand its product matrix with rich technological reserves. In 2022, Red Bean Group teamed up with high-end suppliers in the industry to conduct research and development upgrades on fabrics, processes, patterns, and technological functions. They innovatively utilized Austrian Lanjing TENCEL Modal fiber, Swiss patent HeiQ intelligent temperature control polymer, functional fiber blending between China and Austria, 3D three-dimensional cutting, etc., and launched popular products such as “Plus 1 Comfortable Men’s Pants” and “Comfortable Lightweight Down jackets”. Last year, the company put a lot of effort into improving the combination of “comfort” and launched a rich product matrix such as “skin friendly 100 sweaters”, “fine collar comfortable POLO”, “magic T”, etc., continuously improving product strength with the concept of comfort. These products have also achieved quite good sales results.

Looking back at the market advantages of Red Bean Corporation during the transformation period, it is not only about market expansion and product improvement, but also about highlighting brand strength and brand value. Red Bean Group has continuously created a hot regional atmosphere through celebrity store roadshows, comfortable outfits, and key city hard advertising, solidifying comfort awareness and boosting brand momentum, providing strong support for the company’s long-term development. For the future, Red Bean stated that the company will continue to focus on products and create differentiated competitive advantages.

Performance growth cannot be achieved without factory upgrades and replacements

As is well known, the rapid development of clothing companies cannot be separated from the support of the supply chain.

In today’s rapidly developing technology, Red Bean Group’s suit factory has successfully built a leading 5G fully connected intelligent factory in China, providing a vivid example for the transformation and upgrading of the clothing manufacturing industry. This 5G intelligent factory, which is based on product personalization, design collaboration, supply agility, manufacturing flexibility, and decision-making intelligence, not only improves production efficiency, but also creates a new model in the field of clothing customization.

In recent years, Red Bean Group’s suit factory has focused on improving productivity through intelligent transformation and improving product lines through high-end transformation. The birth of the factory’s “digital brain” has made labor-intensive production no longer mainstream, but a production scene full of technology and futurism.

In 2021, the transformation of the intelligent production line of Hongdou Suit Factory will be completed. Relying on the industrial Internet platform, cloud computing, big data, artificial intelligence and other new generation information technologies, Hongdou Suit Factory will form two ecological loops of business flow and human-machine system. This will not only improve the production efficiency, but also ensure the stability and reliability of the quality of suits. At present, Red Bean Group’s suit factory has laid out 21 intelligent hanging production lines and introduced intelligent production equipment such as fully automatic fabric laying machines, fully automatic template machines, fully automatic cutting machines, AGV robots, and intelligent ironing machines. Among them, there are 324 intelligent equipment in the workshop, and 230 networked equipment in the workshop. Through human-machine interaction, a flexible production mode is achieved for multiple products, multiple processes, multiple forms, and multiple units to quickly convert and collaborate.

Another set of data shows that compared with traditional production lines, 5G intelligent production lines have improved the overall per capita efficiency of factories by 20%, reduced unit consumption costs by 10%, increased production efficiency by 32%, reduced work in progress by 30%, and shortened delivery times by 40%, reducing the accumulation of semi-finished products, reducing product turnover cycles, and enhancing the industry market competitiveness of red bean men’s clothing. Starting from 2021, Red Bean Group’s suit factory has continuously increased sales and gross profit margin through the transformation towards high-end and intelligent products. In 2023, the suit factory achieved double growth in sales profit.

It is reported that the 5G fully connected intelligent factory has been selected into the list of industrial Internet pilot demonstration projects of the Ministry of Industry and Information Technology, and is the only clothing demonstration factory selected in the first batch of the country.

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The layout of online and offline linkage requires both hands to grasp

After two years of transformation, Red Bean Group has achieved significant results in channel expansion and structural optimization. In 2022, we will collaborate with French designers to create a 1000 square meter super flagship store, increase MALL channel layout, and build benchmark stores and strategic stores.

According to previous financial report data, the number of offline channels of Red Bean Group has experienced a bottom reversal. In terms of expanding stores in 2023, the company has opened 162 new stores, quickly reaching high-quality target customers with stores that provide a comprehensive and comfortable experience. Among them, Red Bean Group’s direct operated stores have grown particularly rapidly, with a year-on-year increase of 16.08% in revenue and a gross profit margin of 59.83% in 2023. The average single store revenue of direct operated stores that have been open for more than 12 months has increased by 34.3% year-on-year.

As of the end of March 2024, Red Bean Group had a total of 481 directly operated stores and 521 franchise joint ventures.

The company stated that the quality of offline channel operation is improving. On the one hand, based on brand positioning and strategic implementation stage, we will accelerate cooperation with high potential channel partners and joint venture partners, systematically layout ShoppingMall business models, and efficiently acquire target customers through this type of mainstream channel; On the other hand, the operational model has begun to emerge, with Wuxi as a model to replicate and form a number of regional benchmarks. With comfortable main products, scenario based store displays, and precise member marketing as the focus, it enhances the value attributes of offline store experience, social interaction, and service, gradually promoting the systematic upgrading of stores across the country.

According to relevant financial reports, Red Bean Group will prioritize “channel management” in 2024. Based on the existing channel network, the company will combine market capacity, business district distribution, brand positioning, and customer matching factors to conduct systematic planning, targeting two major channel formats and continuously outputting a “comfortable all in one” marketing concept. One type of channel focuses on expanding scale, entering high potential shopping centers to enhance brand image, creating image benchmark stores to have regional model and investment attraction functions, and strengthening the cooperation confidence of joint venture and channel merchants through new store opening invitations, investment attraction talks, etc; Another type of channel focuses on improving store efficiency by opening multiple stores in cities with high store efficiency, replacing low potential stores, fine user operation, and expanding incremental business to enhance operational efficiency.

In addition, red beans also attach great importance to online sales. At present, the company continues to expand its online presence, gathering offline stores and various e-commerce platforms to create diverse consumer scenarios. Focusing on the construction of human and freight yards, we will focus on product strategies, refined crowd operations, content strategies, and other aspects. We will closely grasp the pace of activities on various platforms to leverage public and private domain traffic, and pay attention to insights into crowd seeding and transformation from the perspective of products. We will meet the needs of various consumer groups with high-value and differentiated products. During the reporting period, the company’s self broadcasting sales business and daily sales of Tmall stores grew rapidly. In addition, the company has also been selected as a “National E-commerce Demonstration Enterprise” by the Ministry of Commerce.

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The steady recovery of the company’s performance has also made the major shareholders firmly hold onto it. On the evening of April 15th, Red Bean Corporation once again announced its repurchase plan. According to the announcement, Red Bean Corporation plans to use its own funds ranging from 20 million to 40 million yuan to repurchase some of the company’s public shares, in order to practice the development concept of “investor oriented” listed companies and promote the company’s “quality improvement, efficiency enhancement, and returns” action.

Since its listing, Red Bean Corporation has completed three repurchase plans, involving a total of 888 million yuan. The repurchases were completed on January 11, 2019, August 4, 2020, and June 30, 2021, respectively, with a total of 96044222 shares, 86875223 shares, and 58965615 shares repurchased. All of them have been cancelled, demonstrating the company’s confidence in development and effectively safeguarding investor rights with strong financial strength.

In addition, Red Bean Group announced on February 5th that due to recognition of the long-term investment value of the company and confidence in the company’s sustainable and stable development in the future, as well as to protect the interests of investors and enhance investor confidence, Director and General Manager Wang Changhui plans to increase his holdings by no more than 10 million yuan from February 5th, 2024 to August 5th, 2024.

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