Annual revenue exceeded 1.3 billion, but the net profit of the big seller dropped by more than 80%

Recently, driven by "Fitness Coach Liu Genghong", a nationwide fitness craze has been set off in China. Liu Genghong has gained about 20 million fans in just a few days. In the relevant news, there is a piece of content "Should Chuangyuan Shares consider hiring Liu Genghong as a fitness coach?" which is particularly special. Some netizens can't help but ask, "Who is Chuangyuan Shares?"

Chuangyuan shares, whose full name is "Ningbo Chuangyuan Cultural Development Co., Ltd.", mainly conducts cross-border sales online through Amazon. One of its subsidiaries' products has sold 720,000 orders on Amazon. Because it is mainly aimed at foreign markets, it is not very well-known in China. According to the company's just-released performance report, revenue data exceeded 1.3 billion yuan, but net profit has dropped significantly compared to 2020.

Mainly selling in overseas markets, Chuangyuan shares' annual revenue exceeds 1.3 billion

According to the published financial report data for 2021, Chuangyuan’s annual revenue was approximately 1.383 billion yuan, a year-on-year increase of 27.19%, but its operating costs also increased by 38.15% year-on-year to 1.053 billion yuan. The net profit attributable to ordinary shareholders of the listed company was 9.4767 million yuan, a year-on-year decrease of 81.73%.

Although the profit has declined, considering the recent market and the fact that some big sellers have suffered losses, Chuangyuan’s performance this time is considered good.

Chuangyuan Holdings has several subsidiaries, and its revenue mainly comes from overseas markets, which account for more than 90%. Its main products are divided into six categories: fashion stationery, handmade educational puzzles, social emotions, sports and fitness, home life and other categories, among which cultural and creative products account for more than half of the revenue.

Its e-commerce business is mainly conducted through Amazon and its official website, with North America accounting for nearly 85%, and it mainly relies on its US subsidiary for category sales.

The subsidiary, American Ritfi, mainly sells home fitness products, such as dumbbell benches, trampolines, etc. The number of orders in 2021 exceeded 250,000, of which sales on Amazon US reached US$14.46 million and sales on the official website reached US$5.26 million, both of which increased year-on-year.

Another subsidiary, American Zhiyuan, specializes in fashion stationery and household products, and mainly sells online through Amazon. It has three sub-brands, "PAPERAGE", "Elyn" and "Heypop". Products include schedule calendars and office storage, etc. In 2021, a total of 720,000 orders were sold, and sales on the Amazon platform reached US$9.01 million , a significant increase of 87.49% year-on-year.

In addition to e-commerce channels, Chuangyuan Co., Ltd. is also actively developing offline businesses and selling its products in large retail stores in the United States. Its own cultural and creative brands have entered more than 180 chain bookstores, and both online and offline channels have jointly contributed to revenue growth.

Although Chuangyuan’s sales volume is growing, its full-year net profit has dropped significantly due to many factors.

Due to multiple factors, Chuangyuan's net profit fell by 81% for the whole year

Financial report data shows that Chuangyuan's full-year net profit fell by 81.73% in 2021. Judging from the content of the announcement, the reason for the decline in profits was mainly affected by several major factors, including the decline in the US dollar exchange rate, the increase in international logistics costs, and the increase in the company's internal capital investment.

Because it is oriented to the US market, Chuangye shares' revenue is mainly settled in US dollars, and the instability of the US dollar exchange rate will have a greater impact on its business. It can be seen from the report that during 2021, affected by the continued decline in the US dollar-RMB exchange rate , the comprehensive gross profit margin of its three major categories of cultural, educational and leisure products fell by about 7% compared with the same period last year .

In addition, due to the impact of the epidemic, Chuangyuan's increased costs in cross-border e-commerce shipping logistics, terminal distribution, etc. also affected its net profit. Data shows that the company's above-mentioned expenses increased by about 96% compared with the same period last year, with an increase of about 39.8 million yuan, and advertising expenses increased by about 63% compared with the same period last year, with an increase of about 9.6 million yuan. The increased costs have undoubtedly dealt a blow to net profit.

In addition to the influence of external factors, the capital investment based on its own internal development also had a significant impact on the decline in its profits. Data shows that the interest expenses in Chuangyuan's financial expenses increased by about 7.36 million yuan compared with the same period last year , an increase of about 87% . In addition, the company also established a new subsidiary during the reporting period in 2021 , but because its subsidiary was in the early stages of business expansion and had a small sales scale, it incurred losses .

In response to the profit decline, Chuangyuan shares stated in the announcement that it will continue to increase investment in research and development, improve the research and development incentive mechanism ... increase the market share of new product categories and own brands in the industry, thereby improving its overall operating profitability.

In recent years, R&D and innovation capabilities have become the core competitiveness of major companies. If cross-border e-commerce companies competed on price in the early stages of their development, now is the era of competing on products and scientific research capabilities. Chuangyuan shares also understands this well, and its R&D investment has increased year by year.

Data shows that the R&D investment from 2019 to 2021 was 58.4559 million yuan, 66.2746 million yuan and 72.5161 million yuan respectively. At the same time, a system for rapid transformation from design to production has been established, and R&D teams have been set up in China. Strong support has been received in new product development, production line speed-up and diversified layout.

Although the net profit of Chuangyuan shares has declined significantly this time, the company's development momentum remains strong thanks to the industry trends and the expansion of its internal strength. Its main products such as cultural and educational leisure , sports and fitness maintain a dominant position among its peers.

In the post-epidemic era, cultural and sports leisure products have set off a "hot selling trend"

Behind the rapid development of Chuangyuan shares, we can see the good development prospects of the industry. In the post-epidemic era, with the changes in consumers' consumption concepts and habits, people pay more attention to culture and physical and mental health, and cultural and sports leisure products have once again ushered in a wave of hot sales.

According to relevant statistics, the scale of the global sports and apparel market is expected to reach US$551.47 billion by the end of 2027 , with a compound annual growth rate of approximately 5.7% from 2021 to 2027. Among them, North America is the largest region in the global sports market .

In addition, due to the epidemic prevention and control, many people at home and abroad choose to exercise at home, which has set off a trend of exercising at home and promoted the sales growth of indoor and outdoor sports and fitness products. In terms of product categories, sports shoes and clothing, rackets, treadmills, sports water bottles, etc. have become long-term hot-selling products.

The scale of the global stationery market should not be underestimated. Data shows that global stationery revenue in 2021 is about 80.8 billion US dollars, and it is expected to reach 97.9 billion US dollars in 2028. The compound annual growth rate from 2022 to 2028 is about 2.8%. The repurchase rate of products such as school bags, stationery storage boxes, sticky notes, puzzles, calipers, etc. is relatively obvious. At key nodes such as the start of the school season, it is common for the search growth of some products to reach thousands at the highest.

As daily consumables, cultural and creative products have a stable market demand. In addition, the increasing popularity of the national fitness craze in Europe and the United States in recent years has also helped the development speed of Chuangyuan Shares, attracting more sellers to join the market. However, sellers should note that making their main products solid and excellent is the long-term plan for future development.

Chuangyuan

Big Sell

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