"French Cock": Le Kark 20% Shares Are Sold By The Shan Shan Brand.

In May 27th, the Shanshan brand announced that it would hold a special meeting of shareholders in June 22nd for the 20% stake of Ningbo music Kark dress (hereinafter referred to as "Ningbo Le Kark"), which is wholly owned by Affiliated Companies Ningbo Shanshan fashion clothing brand management Co., Ltd.

In April 29th, the brand of Shan Shan had disclosed the sale items. The transferee was priced at 50 million yuan for Ningbo Sugisugi Eiko Garments Co., Ltd. (hereinafter referred to as "Sugisugi Eiko"), with a net profit expected to be about 13 million 775 thousand and 600 yuan.

Shanshan brand said in the announcement that the stock of Ningbo music Kark has 20%, 30% and 50% respectively from Shanshan brand, Sugisugi Eiko and other independent third parties. If the sale is completed, the brand of Shanshan will no longer hold any rights and interests of Ningbo music Kark.

The Ningbo music Kark, founded in 2004, is a Chinese consignor of the "French cock" Le Kark brand, mainly engaged in sporting goods retail, trade and distribution business.

As a transferor, the brand of Shanshan is mainly engaged in the design, promotion and sale of men's business dress and business casual wear, including three brands of FIRS, SHANSHAN and LUBIAM.

At first, the brand of Shan Shan was founded by Zheng Yonggang in 1989. In 1991, the brand of Shanshan changed from state-owned to collective, and then changed to shareholding system. In 1996, Shanshan stock became the first listed company in China's garment industry.

In 1999, due to fierce competition in the market, Shanshan stock company joined in the field of lithium electronic battery materials and turned into a new energy industry enterprise, and garment business became one of its three major business segments.

In May 2017, Shanshan branch split its clothing business and submitted its listing application in Hong Kong under the name of "Shanshan brand". In June 2018, the brand of Shanshan, a clothing business, was listed in Hong Kong.

In fact, in recent years, the development of Shanshan brand is not smooth. In the 2015-2019 year, the brand revenue of Shanshan rose steadily, from 527 million yuan in 2015 to 1 billion 42 million yuan in 2019.

The net profit of the brand of Shanshan declined, from 52 million 829 thousand and 800 yuan in 2015 to 36 million 210 thousand and 400 yuan in 2018, down 145.05% in 2019 and 16 million 312 thousand and 200 yuan in 2019.

The annual report shows that in 2019, the net profit of Shanshan brand turned to net loss, mainly due to the decrease in gross profit margin, the increase in sales and distribution expenses, the provision for impairment of accounts receivable and other receivables, which was partially offset by the listed expenses recognized in the current year.

Economist Song Qinghui said that Shanshan brand began to lose money in 2019. The sale of Ningbo Le Kark equity may be part of the withdrawal of funds.

Regarding the reasons for selling, the Shanshan brand said in its announcement that the net proceeds collected from the sale items would be used for operational capital requirements, and it is expected that the brand of Shanshan can devote more resources to the management of brand development so as to enhance its long-term value.

In addition, Shanshan brand can make use of the net proceeds of some sales items to return part of the bank loan, reduce its overall interest cost and improve its financial position. The net proceeds from the sale were estimated to be approximately $49 million 201 thousand and 400 after deducting the related expenses.

Shanshan brand said in its announcement that the net proceeds from the sale of 40% would be used as operating capital, and the net proceeds from the sale of 60% would be used to return the existing bank loans.

Song Qinghui analysis said that if the sale of Le Kark stake matters through the shareholders' meeting, some of the funds will be returned to the Shanshan brand. If it fails to pass the shareholders' meeting, it will not be able to solve the predicament of Shanshan brand, and bring a blow to the cash flow of the brand.