The company recently announced that starting from 2010, each franchisee will be charged an annual channel support management fee of 30,000 yuan. Based on the current number of stores, this is expected to generate approximately 17 million yuan in fees for the company in 2010. From our perspective, while the company collects these fees from its franchisees, it is also likely to provide additional price concessions and promotional support to offset any impact on the franchisees, meaning the actual burden on them may be minimal. On the company's side, this adjustment is expected to increase profits by around 1.7 million yuan in 2010, primarily due to tax considerations. The policy is expected to continue in the coming years.
Recent data shows that the company’s winter sales are performing well, with growth exceeding 20% compared to the previous year. In 2009, comparable store sales grew by more than 5%. According to recent statistics from the National Bureau of Statistics and the China Business Information Statistics Center, retail sales of consumer goods increased by 25.8% and 31.48% respectively in November compared to the same period last year. Even after accounting for festival factors, the chain growth still rose by 3.1 and 5.75 percentage points, indicating strong domestic consumer demand. High-end apparel brands are showing signs of robust growth, and we expect overall domestic apparel consumption to grow between 15% and 20% in 2010.
After inventory clearance and internal restructuring in 2009, branded apparel companies are expected to outperform industry growth again. We maintain our previous view that, supported by additional capital and a solid brand foundation, the company will moderately accelerate its channel expansion. Revenue and profit growth will mainly come from rapid channel expansion, optimization of the channel structure, rising product prices, the scaling-up of the San Jeronado sub-brand, and the strengthening of Shanghai Bao-Yuan’s service business.
The company’s "multi-brand, diversified business" strategy is becoming clearer and more solid. In the future, the staggered growth of different brands and the complementary nature of various businesses will help the company evolve from a small, niche brand into a larger and more influential apparel retailer. We keep our earnings forecasts unchanged, expecting EPS to be 0.66 yuan, 0.88 yuan, and 1.14 yuan in 2009, 2010, and 2011 respectively, with growth rates of 56%, 34%, and 29%. We maintain our "overweight" rating.
We believe the recent stock decline due to broader market corrections presents a good opportunity to invest in quality companies like this one. Potential catalysts include the company possibly being the next high-potential stock. However, risks remain, including macroeconomic volatility and challenges in developing new brands.
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ZHOUSHAN FOISON IMPORT AND EXPORT CO.,LTD. , https://www.foison-fashion.com