Dealing With Muddy Water, Anta Quietly Completed The "Surgical" Structural Adjustment

After the first short report in Muddy Waters on July 8 caused Anta's share price to plummet by 7.32%, after seven trading days of adjustment, Anta's share price closed at HK $53.65 on July 17, only 1.65 Hong Kong dollars less than the 55.30 record.

Where is the real crisis of Anta? Obviously, the short report of Muddy Water did not give an answer.

In these four short selling reports, Muddy Water raised the issue of dealer independence and deceptively improved profit margins, the issue of FILA brand direct marketing model, and the issue of seeking private benefits at the expense of investors in the process of selling subsidiaries. In addition, Muddy Waters also showed its previous 14 achievements in conducting aerial stock survey - six companies were delisted, one was suspended for nearly five years, two were acquired by the management at a premium, two companies' share prices plummeted by more than 90%, two companies' share prices fell significantly, and only one company's share price rose.

Four reports came one after another, and the preparation of muddy water was not inadequate, which seemed to put Anta to death. However, from the reaction of the capital market, after a brief panic on the first day of being short, investors did not lose confidence in Anta. In fact, on the day when the fourth part of the short report was released, Anta's share price not only did not fall, but also rose 2.92%.

As a company with rapid growth momentum, Anta is clearly not impeccable, but whether from the perspective of enterprise operation or the response of the investment market, the problems listed by Muddy Water are not the real crux that will affect Anta's future development.

From the first time that the annual revenue exceeded 10 billion yuan in 2015 to the successful completion of the merger and acquisition of Amer Sports in the first half of this year, Anta directly or indirectly managed more than 20 brands, with a market value of more than HK $150 billion at one time. It took less than five years in total for Anta.

In the past four years, Anta has rapidly expanded from a Chinese sports shoes and clothing company focusing on its own brand to a multi brand management group facing the global market. Its biggest challenge at present is the strategic issues in the company structure, talent training, and globalization pattern that it faces in such a rapid development process.

In fact, Anta has a clear understanding of this, and began to adjust and respond in a low-key way a year ago.

At the end of April 2019, Anta quietly launched the "Anta WeChat Recruitment" WeChat public account, which shows the current division of Anta in the social recruitment list: three brand business groups of professional sports, fashion sports and outdoor sports, plus five departments of retail, procurement, production, function and e-commerce - this is a new organizational structure.

It is understood that Anta has indeed taken the initiative to drastically adjust its internal structure, changing the previous single brand management model to the classified business group management model, and each business group has a CEO in charge. For example, Yao Weixiong, who previously held the position of "President of FILA Greater China", changed his title to "Vice President of Anta Group and CEO of Fashion Sports Brand Group".

In the latest structure, professional sports brands include Anta main brand, Anta Children AntapluS、 Spandi is in the charge of Wu Yonghua, Executive Director and Sales President of Anta. Basketball, comprehensive training, running and sports life all have separate category divisions;

Fashion sports brand group includes FILA, FILA children, which is also subdivided into FILA Fashion Sports (FILA), FILA Fashion Sports (FILA FUSION) and Professional Sports (FILA ATHLETICS), led by Yao Weixiong, former president of FILA Greater China;

The outdoor sports brand group includes the strategy department of Dilant&Kolon Sport and Amer Sports. Zheng Jie, executive director of Anta and president of Anta Group, served as the CEO of the outdoor sports brand group, and was responsible for the group strategy and assisting the group CEO in handling relevant international affairs. Liang Xiazhun, the former president of Di Sant China, is in charge of the Strategy Department of Di Sant&Kelong. Unlike professional sports and fashion sports, which mainly work in Xiamen, the outdoor sports business group has its headquarters in Shanghai.

The three business groups all have related design, brand, marketing and other functions, while sales, procurement, production and e-commerce are all coordinated by the Group's independent departments. Ding Shijia, Anta's executive director and Ding Shizhong's brother, is responsible for production and procurement. All departments still report to Ding Shizhong, Chairman of the Board of Directors of Anta Sports and CEO of the Group.

Amer Sports brands (Archaeopteryx, Salomon, etc.) currently use two financial systems with Anta, without consolidated statements, and remain independent of each other. However, Xu Yang, the former general manager of Anta Basketball, was transferred to the general manager of Archaeopteryx, one of the most popular brands under Amer Sports.

For Anta, this structural adjustment is not a small "operation", which has brought many changes.

First of all, even Anta's main brand has not become a single category, but has become a part of the professional sports brand group. However, FILA has supported the brand group of fashion sports. An objective factor is that there is no "same category" of other fashion sports within the group to merge. At the same time, this is also proof that FILA has reached a sufficient size.

The biggest change may be the multi brands except Anta and FILA.

Spandi, incorporated into the professional sports department, used to be good at walking shoes, and it may have some changes in its positioning. Recently, we got a new introduction from a clerk in a Spandi store, "We used to make hiking shoes, but now we make casual shoes and sports shoes".

It is undoubtedly an improvement of strategic positioning for many brands, including Di Sant, Kelong and Spandi. They will get more resources to increase their actions in the market. The importance of multi brands in Anta Group has been further improved.

The most ideal effect of multi brand strategy is naturally that 1+1 is greater than 2. Previously, multiple brands under Anta had their own businesses and teams. The main synergies were in procurement, production and channels. This time, FILA, Di Sant, Spandi and other brands were arranged and combined by positioning, which will further coordinate in management, manpower, marketing, and further strengthen in procurement, production and channels. Once properly operated, It will highlight the synergy of multiple brands.

After the great success of FILA, Anta has never announced its specific performance, only in the financial press conference, there were some vague statements about the growth rate of media questions.

It is related to being short three times in 13 months. In addition to this muddy water short, Soren Aandahl, founder of Blue Orca Capital, a short seller, questioned Anta's corporate governance and FILA's income transparency at the end of May, and believed that Anta's share price had a decline space of up to 34%. Blue Orca believes that FILA's income is 40% exaggerated by Anta, and the brand's flat efficiency of 43800 yuan in 2018 is questionable. This led to the sharp fall of Anta's share price that day. However, like this muddy water short, Anta's share price returned to a relatively stable position after that. In June, their share price rose by nearly 12%. As of July 17, the overall share price rose by more than 43% this year.

2019 is the tenth year for Anta to win the rights and interests of FILA. When the volume has reached a certain level, it is bound to be subject to more rigorous scrutiny and test of the capital market. Anta must solve the problem that the financial data is not transparent enough, which is one of the bases and ways to reduce external daydreams and doubts. It is also a step that an enterprise must take to move towards modern governance.

On August 26, Anta will release its financial report for the first half of 2019. After frequent shorting, whether Anta will release the specific business data of FILA will become one of the focuses of attention.

Apart from FILA, Anta has not yet proved its effectiveness in other multi brands to the market.

It is understood that in 2018, the average annual store efficiency of the Dysonite store was about 6 million yuan, with a total revenue of about 800 million yuan, accounting for about 3.3% of the annual total revenue of 24.1 billion yuan.

Earlier, Zheng Jie, president of Anta, said that it "should be no problem" for Di Sant to achieve profitability in 2019. How much growth and share can Di Sant and Kelong and Spandi, who are still in the cultivation stage, contribute after making profits, will further test Anta's multi brand operation ability, which is also their ability proof and reassurance to the capital market. After all, it is unrealistic to expect Anta's main brand and FILA to maintain their previous high-speed growth for a long time after reaching the volume of more than 10 billion yuan.

This structural adjustment is more likely to be Anta's preparation for the overall operation of Amer Sports after the merger in the future.

After the acquisition of Amer Sports, there will be more than 15 multi brands under Anta, which requires a lot of resource investment and time cultivation. They need more efficient operation methods for the multi brands currently in hand, so that the brands under Amer Sports will be orderly incorporated in the future, which will be more beneficial to the performance. More importantly, a large number of brands need to be managed, and a scientific mechanism is the basis. Only when this upper mechanism is properly designed can brands operate efficiently.

From the independence of the original brands to the confusion and re combination of various brands and functions, Anta is preparing for the top-level structure of a global multi brand management company in the future, and moving towards a more efficient multi brand shoes and clothing retail management company.

The parent company of Vans and TNF, VF Group, clearly stated in the financial report that, for the purpose of management and internal financial reporting, VF is organized in the form of "coalitions", which are outdoor sports, jeans and Imagewear. "The management of each consortium is responsible for operating its brand, and the central functional department of VF provides some financial, administrative and system support, as well as disciplinary control."

Of course, the structural adjustment is also a big challenge for Anta.

First of all, it means that the change and transfer of personnel positions need some time to adapt. Second, there are more gaps in human resources.

From the channel of "Anta Group WeChat Recruitment" WeChat official account, Anta launched a large-scale talent recruitment in May, involving about 220 posts. Among them, the Group has the largest demand for functional recruitment, with 44 positions, mainly in finance and human resources. There are 32 gaps in the professional sports business group. Among the 29 recruitment in the fashion sports business group, design related positions are the main ones, while 11 positions in the outdoor sports business group are sales related positions.

Amer Sports China has also launched a wave of large-scale recruitment, involving Archaeopteryx, Salomon, Sonto, Precor and other brands. It is understood that after Anta completed its acquisition, Amer Sports China has undergone major personnel changes.

At the same time of completing the structural adjustment, it will also be a difficult problem for Anta to attract talents from all brands of the group, match suitable positions, and ensure the efficient operation of the business after the arrival of new people.

After being short frequently, the main reason why Anta can stabilize its position is the current business foundation. In the current downward environment of the footwear and clothing market, Anta has taken the initiative to make major structural adjustments, which is itself a crisis and aggressive behavior.

Facing the goal of global multi brand management company, structural adjustment is a necessary step forward, which once again shows Anta's ambition and initiative to deal with the market. With the completion of the acquisition and three short positions in 13 months, they are bound to withstand the more severe test of the capital market.

Anta's real test is in the future.