Amazon's big-name supplier terminates IPO due to performance error of nearly 40%

With the rapid development of cross-border e-commerce, many big sellers have begun to capitalize and seek listing after reaching a certain stage of development. Some big suppliers are no exception. Sanwen Home Furnishing, a big Amazon supplier, also applied for listing earlier.

However, Sanwen Home Furnishing's road to listing has been quite bumpy. Its listing application was terminated in September 2021. Now there is news that Sanwen Home Furnishing has withdrawn its listing application again . What is going on?

With a performance error of nearly 40%, Sanwen Home Furnishing terminates its IPO again

Judging from the inquiry materials of Sanwen Home Furnishing, the termination of the IPO may be an inevitable situation. In the financial data from January to September 2021 updated on January 6, 2022, its net profit fell by more than 60%, which was nearly 40% lower than the data predicted in the inquiry on August 30, 2021.

As a service-oriented trader with original design as its core competitiveness, Sanwen Home Furnishing mainly provides retailers and brand owners with specialty home textiles, home apparel and specialty fabric products , such as cushions, blankets, pajamas and sportswear. Its customers are spread across more than 30 countries including the United States and the United Kingdom. Amazon home brands Barefoot Dreams and Vera Bradley are its clients.

Judging from the data in the financial report, Sanwen Home Furnishing has achieved good results and its overall operating conditions are good. Among them, the company's operating income in 2020 was 1.791 billion yuan, and its net profit attributable to the parent company was 109 million yuan. Compared with a number of companies applying for IPO on the Growth Enterprise Market, this size is already ranked very high.

However, since Sanwen Home Furnishing Company's main products involve textile products and the proportion of exports exceeds 90%, we have to consider the significant impact of the COVID-19 pandemic on its performance.

On January 27, 2020, the regulatory agency conducted its first inquiry into Sanwen Home Furnishing and asked about the impact of the COVID-19 pandemic on the company. The company disclosed the number of orders on hand as of the end of March 2021. Among them, the number of orders on hand for medical care was 137 million yuan, a significant difference from the 740 million yuan in 2020.

In addition, it is worth noting that Sanwen Home Furnishing's revenue in 2019 increased by 2.13% year-on-year, but its performance in 2020 increased significantly to 62.26%, which is a huge difference. This increase is related to the above-mentioned medical care of 740 million yuan.

Excluding the medical care revenue of 740 million yuan, Sanwen Home Furnishing's revenue was in a negative growth state of -4.78%, which also laid the groundwork for the Listing Committee to inquire about its business status again.

In the second round of inquiries, the Listing Committee inquired about Sanwen Home Furnishing's relevant financial status after the audit closing date , and required it to disclose its performance forecast for the first half of 2021, which became the focus of the Listing Committee's attention. The response given by Sanwen Home Furnishing was that it predicted that its net profit from January to June 2021 would drop by more than 90% year-on-year.

In three rounds of inquiries, the regulatory bureau directly asked Sanwen Home Furnishing to provide additional information on its performance from January to September 2021, and to explain whether the company's performance has declined and whether it will affect its listing.

Sanwen Home Furnishing’s response was that the net profit for this period is expected to be between 50.2 million yuan and 68.2 million yuan, of which the non-medical net profit will also exceed 50 million yuan. The expected growth in non-medical performance will not affect the company’s listing.

But the reality seems not to be the case. The 2021 semi-annual financial report data disclosed on January 6, 2022 showed that its operating income fell by 7.07%, and its net profit was 30.2818 million yuan, a year-on-year decrease of 67.23%. Compared with the data disclosed on August 30, 2021, it has fallen by nearly 40%.

Expanding the medical products business, the new profit exceeded 700 million!

Founded in 2013, Sanwen Home Furnishing has its own unique approach to product innovation and supply chain management .

In terms of product innovation , taking the development of women's home clothes as an example, Sanwen Home Furnishing tries to incorporate popular fashion elements including mix-and-match styles into home clothes, while strictly selecting fabrics in pursuit of comfort and fashion.

In terms of supply chain management , most of Sanwen Home Furnishing's orders are outsourced, with customized purchases from textile and garment factories in the Yangtze River Delta, while also empowering suppliers. After years of exploration and development, Sanwen Home Furnishing has now established a complete supply chain management system, focusing on product quality, brand protection, and other aspects, and is committed to meeting the needs and preferences of overseas consumers.

Data shows that by the end of 2020, Sanwen Home Furnishing had long-term cooperation with more than 150 factories. On the other hand, affected by the rising domestic labor costs and the development of the textile industry in Southeast Asia , Sanwen Home Furnishing has already begun its layout in Southeast Asia .

In fact, before the outbreak of the epidemic in 2020, the company's main revenue came from home textile products , including pillows, blankets, cushions and other products, with sales of over 2.1 million, accounting for half of the total revenue. The outbreak of the epidemic in 2020 was a challenge for many companies, but Sanwen Home Furnishing, which has advantages in supply chain management and sales channels, went against the tide . After the outbreak of the epidemic, Sanwen Home Furnishing expanded its export business of medical products in the shortest time, which not only met the needs of overseas consumers, but also demonstrated the strength of the company's supply chain management, and successfully achieved a substantial increase in new profits of over 700 million yuan .

In addition, providing customers with product solutions is also one of the core advantages of Sanwen Home Furnishing. It is reported that Sanwen Home Furnishing has provided product scene extensions to Amazon fashion brand and American company Vera Bradley , and has achieved good response and benefits.

Overall, Sanwen Home Furnishing, which has been developing continuously in recent years, has strong capabilities and advantages in many aspects such as supply chain management, sales channels, and product research and development . Judging from the data, Sanwen Home Furnishing also meets the GEM stock issuance and listing review standards of "net profit has been positive in the past two years and the cumulative net profit is not less than RMB 50 million . "

For many companies, when the revenue scale is large, the next step is to prepare for listing, and some companies even regard listing as the ultimate goal. In the past 2021, price increases and difficult business were the real feelings of many practitioners in the home building materials industry. Although listing can indeed "quench the thirst" for these companies, what are the chances of success?

In the entire industry, Sanwen Home Furnishing is not the only company that has stopped its IPO plan. The IPO plan of Yuanyue Wisdom , a home furnishing company founded in 2016, has also come to an end...

According to statistics from industry insiders, more than 40 home furnishing companies rushed to go public in the first half of 2021 alone, but the road to listing for about 30 companies was not smooth, and there were reports of suspension or failure of listing. In this regard, some practitioners believe that based on the current market situation, for companies, it is more important to lay a solid foundation and work hard in multiple aspects such as products and supply chain management to improve the "inner" rather than rushing to go public.

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