Vancl Dresses in Black For IPO Ball 凡客诚品扭亏为盈 或重启IPO计划
After a long period of silence, online clothing specialist Vancl has stitched its way back into the headlines following a major internal meeting where the company disclosed it finally turned profitable in last year’s fourth quarter. The reports don’t specify if the profit was on a net or operating basis; but profits of any kind for younger Internet firms like Vancl will undoubtedly be welcome by investors, who have been avoiding loss-making firms like e-commerce firm Dangdang (NYSE: DANG) and video sharing specialist Youku Tudou (NYSE: YOKU). All that said, this big meeting and news of its first-ever profit seem to indicate the company has probably restarted the process for its long-delayed New York IPO, and I wouldn’t be surprised to see Vancl make its first public filing in the next 2 months.
Before we talk more about the IPO, let’s step back and take a look at the latest reports on Vancl’s recent high-level pow-wow. That meeting saw the company’s top managers gather in the Beijing suburbs to listen to CEO Chen Nian discuss the latest state of the company, following a painful 2012 that saw Vancl make numerous adjustments in a bid to quicken its move into the profit column. (Chinese article)
The content of the actual meeting doesn’t sound all that interesting, which isn’t surprising since it was targeted at Vancl’s top managers rather than a more general audience. According to the news reports, Chen said he will give his managers more autonomy to meet their targets, which include making their own individual units profitable by the end of this year.
The reports add that Vancl is focusing on 4 core product areas, in an effort to avoid becoming a more general clothing seller where the competition is fiercest. All 4 areas are focused on clothing for cold weather, and include down coats and jackets, snow boots, sweaters and knitwear.
Vancl originally hoped to make a New York IPO nearly 2 years ago, but had to scrap the plan when US investors suddenly lost their appetite for Chinese companies following a series of accounting scandals. Following a nearly 2 year clean-up of the sector, investor sentiment finally seemed to improve at the end of last year with the successful IPO of YY (NYSE: YY), a marketing-focused social networking site. (previous post) YY’s shares now trade at nearly double their IPO price.
The only other Chinese Internet company to make an IPO last year, discount e-commerce firm Vipshop (NYSE: VIPS) has seen a recent surge in its shares, which now trade at 4 times their IPO price as the company recently posted its first quarterly profit. (previous post) The common theme is that investors want to see that Chinese Internet companies have a sustainable, profitable business model before they will give them their money. Companies that meet that standard are then rewarded nicely with big share gains.
On the surface at least, Vancl’s turnaround story looks encouraging. I particularly like its decision to focus on niche products rather than trying to compete in all clothing areas where competition is high. My one reservation might be its heavy focus on winter-weather clothing, which means the company could see big downturns in its sales during the summer months. But if it continues to post profits, I would expect to see the company get a positive reaction from investors when it makes its first public IPO filing, perhaps by the end of April.
Bottom line: Vancl’s move into the profit column by focusing on niche clothing areas should make it an attractive option for investors when it makes its first IPO filing, perhaps by the end of April.
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