HLA is no longer betting everything on brand business and is exploring more profitable new business models.
In the era of consumption upgrading, everyone wants to create a brand, but in a market with weak demand, pragmatism becomes essential for the survival of clothing companies.
According to Fashion Business News, HLA recently released its third-quarter 2024 performance report, with revenue down 11% to 3.89 billion yuan, net profit attributable to shareholders plummeting 64.9% to 270 million yuan, gross margin down 1.1 percentage points to 42.8%, and revenue for the first three quarters down 2% to 15.26 billion yuan, with net profit attributable to shareholders down 22.2% to 1.91 billion yuan.
Revenue and profit both declined, and after the financial report was released, the stock price of Hailan Home plummeted by more than 5% the next day, with the current market value at approximately 27.1 billion yuan.
More than three years into the transformation, the reform results of Hailan Home have still not satisfied the market.
In 2021, founder Zhou Jianping handed over to Zhou Lichen, and HLA Group launched a “multi-brand, full-category, group-oriented” strategic layout. Through independent incubation and acquisitions, it expanded from a men’s clothing giant to fields such as men’s clothing, women’s clothing, professional wear, home wear, and home life, aiming to become a comprehensive apparel giant.
Currently, the group includes the main brand HLA, the home brand HLA Select, the workplace women’s clothing brand OVV, the men’s clothing brand Heilan Whale, the children’s clothing brand YeeHoO, the sports brand HEAD, and the upgraded HLA group purchase customization business.
Over the past three years, HLA has continued to invest in the marketing of its main brand and its diverse brand matrix. Last month, HLA launched the “The Mountain is Not High” themed fashion show at Shanghai Fashion Week to showcase its full-category product matrix and the results of a new round of brand upgrades.
However, “the men’s wardrobe” has deeply resonated, and the mainstream audience has not yet made a substantial shift in brand perception.
Despite announcing a new spokesperson, mainstream audiences have yet to form a substantial shift in brand perception
From the perspective of revenue contribution, the main brand HLA remains the primary contributor to the group’s revenue, contributing 11.3 billion yuan in the third quarter, while other brands account for less than 20% of revenue, totaling 1.76 billion yuan.
Whether for the main brand or other new brands, the branding process of the HLA Group is still slow. The main brand closed 101 franchise stores in the third quarter, while self-operated stores increased by 65. Although this objectively helps to upgrade the brand image through direct sales channels and accelerate the entry into landmark commercial complexes, it indirectly pushed up the group’s sales expenses by 16% to 960 million.
Behind this is also the reason that, in this year’s market environment, most franchise stores as street-side shops are facing greater pressure from declining customer traffic and have to close down.
In the current challenging market environment, HLA is no longer putting all its eggs in one basket with its branding business and is instead exploring more profitable new business models.
There are several key trends worth noting. In 2021, a subsidiary of HLA Group obtained the exclusive license for the Austrian sports brand HEAD’s apparel category in China, focusing on various competitive sports fields such as skiing and tennis.
Since then, HLA has continued to delve into the sports goods sector, which is one of the few sectors still growing. In 2023, HLA invested 160 million yuan in Sports through its wholly-owned subsidiary Shanghai HLA, holding a 40% stake in Sports, and in May of this year, increased the stake to 51%.
Siboz’s main business is the authorized agency for the expansion and retail business of international sports brands such as adidas, Nike, Puma, and Asics in the Chinese market. It has currently reached a strategic cooperation with adidas, and the company completed financial consolidation in the second quarter.
This move marks HLA’s continued efforts in sports brand management, with Spoze working to help adidas and the adidas Neo series open stores, launching cost-effective product lines targeting lower-tier cities in the domestic market, and is expected to become adidas’s sole clearance channel in the Chinese market. Since the beginning of this year, Spoze has opened nearly 400 stores.
The menswear giant HLA is going to help adidas open stores, which surprises many people.
On one hand, as adidas is currently experiencing a resurgence in brand strength, the brand’s operations cannot afford any mistakes, and HLA, which started with menswear, previously had no experience in operating sports brands. On the other hand, this collaboration has also sparked market curiosity about whether the leading domestic apparel company can develop a new growth curve beyond its traditional business and gain a share of the booming sports market, becoming the focus of market attention.
To help Adidas open stores, especially clearance stores, is mainly based on the extensive channel network that HLA has accumulated over many years in the domestic lower-tier markets. By the end of the third quarter, HLA Group operated a total of 7,129 stores.
HLA helps Adidas open stores in lower-tier markets
In the past two years, Adidas has also been seeking opportunities in lower-tier markets. The group’s CEO, Bjørn Gulden, revealed in a conference call in the third quarter of 2023 that the group will compete with Anta and Li Ning on a more mass-market level in the future to capture a larger share of the market.
At the same time, adidas plans to continue expanding its channel network in China. Currently, the brand has about 7,500 stores in China, and as of the end of September, the group has opened nearly 300 new stores in China this year. In the future, it will also increase its presence in third- and fourth-tier cities.
This is an opportunity for HLA, which has an advantage in third- and fourth-tier city channels, and the discount clearance channel also seems to be a relatively wise direction at present.
The offline full-price channels of sports brands are being impacted by online and other low-price channels. Topsports, the largest domestic sports apparel agent long-term representing adidas and Nike, announced its latest performance data, disappointing the market. In the six months ending August 31, the group’s revenue fell by 7.9% to 13.05 billion yuan, and net profit plummeted by 34.7% to 870 million yuan. In the first half of the year, the main brand segment, including Nike and adidas, saw revenue drop by 8.1% to 11.35 billion yuan.
The financial report did not list the specific performance of adidas and Nike, but according to Reuters, Topsports stated that adidas’s performance was relatively more resilient. Industry insiders believe that adidas’s recovery is attributed to the brand’s decision to design products specifically for the Chinese market.
In recent years, Topsports has been striving to reduce its reliance on the two major brands, Nike and Adidas. In the first half of the 2025 fiscal year, the group announced a collaboration with Fanatics China to develop the Mitchell & Ness market in China.
The market space given up by traditional large agents will almost certainly be divided among more cross-industry operators, including Hailan Home, in the future. The only question is whether adidas, having gone through a de-stocking cycle in the Chinese market over the past three years, currently has enough inventory left for discount channels.
In fact, this round of business diversification transformation of Hailan Home is aimed at cost-effective channels with broader significance, excluding sports. Finding discounted product resources and efficiently integrating and distributing them has become an urgently needed operational capability in the new era, in addition to negotiating with shopping malls.
In July this year, HLA and JD Group reached a strategic cooperation to carry out outlet business operations. On September 25, the two parties jointly opened the first JD outlet offline store in the country at HLA Pegasus Water City in Jiangyin, Wuxi, Jiangsu Province.
HLA and JD Group have reached a strategic cooperation to carry out outlet business operations
On the basis of integrating the supply chain, both parties will simultaneously establish online and offline sales channels to provide consumers with affordable and convenient shopping options for clothing, light luxury, sports, footwear, and other high-end brand authentic products at low prices. In the future, both parties plan to open JD Outlet offline stores in multiple cities across the country to meet consumers’ diverse needs for low-priced, big-brand products through all-channel scenarios.
Amid the downturn in the apparel retail industry, the outlet channel has become one of the few businesses experiencing counter-trend growth.
The “2023-2024 China Outlet Industry White Paper” shows that there are currently about 239 operating outlet projects nationwide, achieving a sales scale of approximately 230 billion yuan in 2023, with a year-on-year growth of about 9.5%, the highest growth rate among all retail formats.
In addition to JD’s major expansion into the outlet business, Alibaba’s second-hand platform Xianyu also launched the “Xianyu Outlet” channel in September, focusing on minor flaw bargains, 99% new brands, and big brand clearance.
It is worth noting that against the backdrop of saturation and fierce competition in first-tier, new first-tier, and second-tier cities’ outlet projects, third, fourth, and fifth-tier cities will become growth points for the outlet business. According to the aforementioned white paper, 17 new outlet projects opened throughout 2023, of which 8 are in third and fourth-tier cities.
HLA and JD have reached a cooperation, essentially due to the channel capabilities in the lower-tier markets. The channel resources in the lower-tier markets, which were marginalized in the rebranding business in recent years, now do not need to be eliminated and are instead playing an important role in new business.
In response to the group’s previously weaker online channels, HLA stated during the financial report release that it has achieved significant results in its deep cultivation strategy on all-channel platforms, especially by increasing investment in short video innovation and live broadcast cooperation, driving rapid growth in online sales. In the third quarter, HLA’s online channels achieved a year-on-year increase of 44.7% in main business revenue to 3.2 billion yuan, with online revenue accounting for 22%.
As another growth point for HLA, the main action to expand overseas business is actually opening stores. As of the first half of this year, HLA has opened about 60 stores in Southeast Asia, covering countries such as Malaysia, Thailand, Singapore, Vietnam, and the Philippines. In the second half of the year, the company plans to establish a presence in other new markets such as Central Asia and the Middle East.
Not only HLA is trying to leverage the spillover effect of channel capabilities, but also the domestic golf apparel brand Biem.L.Fdlkk has gradually ventured into brand management business since last year.
In December last year, the Japanese outdoor brand Snow Peak opened a store in Shanghai Qiantan Taikoo Li, sparking a brand authorization dispute. Subsequently, it was discovered that the store was operated by the Shanghai Pudong New Area branch of Biem.L.Fdlkk Garment Co., Ltd., and Biem.L.Fdlkk had not previously disclosed any information related to the Snow Peak brand.
The highly-watched domestic clothing dark horse, Biem.L.Fdlkk, has quietly ventured into outdoor brand management, drawing widespread attention from industry insiders.
Biyinlefen also gradually started to engage in brand management business last year
Biyinlefen was founded by Xie Bingzheng in 2003 in Guangzhou, focusing on golf sports and casual wear, with stores mainly located in airports and high-speed rail, golf courses, shopping centers, and outlets.
Although domestic apparel groups are still in the early stages of building brand power, most of them are well-versed in channel expansion and have established relatively mature channel and store management systems through years of operation. Behind the scenes, By Creations opened the Snow Peak Shanghai Qiantan store, clearly hoping to replicate its successful store management experience to other brands.
Compared to the delayed returns of incubating its own brand, the incremental business of helping premium brands expand their domestic market channels is more certain for YINLEFEN, and it is an incremental business with very high return visibility.
Similar to HLA, Byford also attempted to incubate brands to break through the ceiling of golf apparel. The group launched the Carnaval de Venise brand in 2018, initiating dual-brand operations, and in 2019, it invested in the UR Group, holding a 2.7% stake.
In April last year, Bi Yin Le Fen announced the acquisition of two major international luxury brands, CERRUTI 1881 and KENT&CURWEN, venturing into luxury brand management.
However, as the global luxury goods and apparel market faces an unprecedented crisis this year, Bi Yin Le Fen is also feeling the difficulty of incubating new brands.
Biyinlefen recently announced its latest performance data, with the group’s third-quarter revenue falling by 4.4% to 1.06 billion yuan, net profit attributable to shareholders dropping by 17.3% to 280 million yuan, and gross profit margin decreasing by 2 percentage points to 73.8%. For the first three quarters, revenue increased by 7.3% to 3 billion yuan, net profit attributable to shareholders grew by 0.5% to 760 million yuan, and gross profit margin declined by 0.2 percentage points to 76.4%.
Since the first quarter of 2023, the revenue and net profit growth of Biyinlefen have slowed for seven consecutive reporting periods, dropping from 33.13% and 41.36% to 7.3% and 0.55% in the first three quarters of 2024, respectively. The third quarter marked the first time the group recorded a decline in revenue, breaking the myth of continuous counter-trend growth.
Use cash cows to steadily and long-term support the branding business. It may not be difficult during a market upcycle, but in a turbulent market, it will constantly shake and challenge its determination towards branding goals. Domestic apparel companies, accustomed to being pushed by the times, seem to be facing a reality after waking up from the dream of brand upgrading: the core capability accumulated by domestic apparel brands over the years is still channel capability, especially for asset-light brands like HLA.
Retreating from brand ideals to the role of a channel provider is being pragmatic.