On September 9, 2009, CITIC's "joint investigation of the sleepy apparel industry" took place at Ningbo Youngor Group Co., Ltd. During the visit, the group’s Vice President and Clothing Company General Manager Mr. Chen Zhigao, Board Secretary Ms. Liu Xinyu, and Youngor Property Co., Ltd.’s Mr. Ge Haidong engaged in an in-depth discussion and toured the Qianhu and Gloria Bay real estate properties. Here are my thoughts:
The apparel business has become a top priority for the company. In July 2009, Youngor Garment Holdings Limited was established. This move saw the company acquire direct or indirect stakes in all its apparel marketing and manufacturing enterprises, effectively consolidating its apparel operations. This decision reflects the company’s awareness of the current crisis facing the Youngor brand. While the company maintains a strong domestic market presence, its fashion design and brand management lag behind due to its historical strength in manufacturing. The apparel industry thrives on fashion trends, and capturing these trends quickly is key to success. Realizing this, the company aims to transition from a manufacturing-centric approach to one focused on building a strong brand presence.
Under the new organizational structure, Chairman Li Rucheng serves as both Chairman and CEO of the clothing holding company, emphasizing the development strategy, market expansion, and operational execution of the domestic apparel business. This indicates that the apparel division is now at the forefront of the company’s strategic focus. The company views the apparel business as its core future strategy, aiming to grow and strengthen it. Brand diversification has already begun with the introduction of serialized brands: GY for young professionals aged 25-35, Mayor (Youngor Mayor) targeting high-end customers such as civil servants, and Youngor CEO aimed at 35-45-year-olds with high cultural and financial backgrounds. Each brand has distinct pricing strategies, reflecting their target markets.
Significant progress has been made in implementing this brand diversification strategy. Three brand studios, each led by a top leader and equipped with independent planning departments, oversee the operation of their respective brands. Particularly noteworthy is the GY brand, which collaborates with Japanese fashion house W-GAME and employs seven Japanese designers to blend quality with contemporary fashion elements. The company plans to stock GY eight times a year to stay ahead of fashion trends. GY stores have already opened in Suzhou, Shanghai, Hangzhou, and Ningbo, with the first store launching in August 2009. By the end of 2010, the goal is to expand to 40 stores. The Mayor brand is also preparing for a high-end market launch in mid-September.
In terms of domestic apparel sales, the company aims to double its revenue in five years, achieving approximately 4.5 billion yuan through a 15% annual increase. The company is also undergoing significant changes in its terminal channels, categorizing them into five tiers: top-tier department stores like Shanghai Henglong Square, high-end department stores such as Shanghai Yaohan, mid-tier department stores like Shanghai Oriental Plaza, mixed-brand low-end department stores, and clothing wholesale markets. Currently, the focus is on mid-tier and low-end department stores, with plans to move towards high-end department stores in the future. In 2009, the company shut down some low-end stores while upgrading its product offerings, maintaining around 1,960 sales terminals. Future expansion will prioritize quality over quantity.
Simultaneously, the company established Youngor Chinese Creative Arts and Design Co., Ltd., which will handle renovations of existing stores and future designs. Over the years, the company has evolved from a manufacturing firm to a brand-oriented entity, undergoing two major transformations: the first in the late 1990s focused on “brand sales and expansion,†and the second starting in 2001 emphasized “channel weight and direct marketing.†The current transformation marks the third major shift, aiming for sustainable growth.
Regarding real estate, the company reported significant progress in the second half of 2009, with three major projects—Spring Forest Phase III, Urban Forest Phase II, and Champion Bay—confirming their commencement and delivery schedules. Urban Forest Phase II and Champion Bay have already been sold and delivered, with the remaining villas expected to be delivered by the end of October 2009. Sales for Champion Bay villas average around 5.5 million yuan each, contributing approximately 1.1 billion yuan to real estate revenue. Urban Forest Phase II has an average price of 13,800 yuan per square meter, generating about 1.3 billion yuan in revenue. Considering the settlement period, we conservatively estimate real estate revenue of 2.3 billion yuan for the second half of 2009. Gross margins for Urban Forest and Champion Bay are expected to exceed 50%, driving overall profitability. For the full year, real estate revenue is projected to reach nearly 5 billion yuan, representing a 40% increase over the previous year.
The company remains optimistic about its real estate prospects, with land reserves totaling nearly 3.5 million square meters, of which 60% is in Ningbo, 20% in Suzhou, and 20% in Hangzhou. In early September 2009, the company acquired two new plots in Ningbo, including a large parcel in Dongqian Lake covering 329,100 square meters with an actual floor price of 18,400 yuan per square meter. The company is actively seeking new land opportunities in Ningbo, Hangzhou, and Suzhou, confident in the short-term and long-term growth potential of the real estate sector.
Short-term confidence stems from the company’s existing land reserves, most of which have favorable premiums. Long-term optimism is driven by the growing demand for real estate, especially given the current market prices. Overall, the company’s strategic moves suggest a robust future in both apparel and real estate sectors.
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