Step 3

“You have to understand accounting and you have to understand the nuances of accounting. It’s the language of business and it’s an imperfect language, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself” – Warren Buffett

Company Image

Working on this step has been quite a challenge. Putting into words what this company is all about. Reading through the reports I have found that the Menswear is only one section of a bigger picture with this company. From the companies that have invested finance into the company such as Kolberg Kravis Roberts & Co. (KKR) to those who have gone into a joint venture with the company like Henry Cotton’s, MCS Group and Emerisque just to name a few.

From the time that China Outfitter Holdings limited was founded the company has evolved into a mega operation within the industry of menswear. It not only manufactures, markets and distributes middle to high range casual menswear it with the merging of different company is able to enhance its operation through other means. The company has an ever-changing and challenging market it is seen to be taking positive measures to continue to increase investments in brand, digitalisation and logistical warehousing for laying a foundation for future growth.

Financial Reports     

China Outfitters Holdings Ltd makes it quite clear in its reports that revenue primarily comes form retail sales of their products to the end-consumer through self-operated retail points within department stores and shopping malls in major cities in the People’s Republic of China (PRC).

The revenue of the company is stated at the net invoiced value of goods sold after trade discounts. The company saw a decline in returns in 2018 which was attributable to the decline in proceeds from sale of products to third-party vendors.

Returns to Shareholders

Regarding the shareholder the board of China Outfitters Holdings Ltd through their corporate governance standards has set in place a framework that will safeguard the interests of its shareholders that will enhance corporate value and formulate its business strategies and policies. Also, to enhance the value of shareholders’ investments and preserve assets the company has set in place a risk management and internal control systems to manage and mitigate business risks.

Accounting Standards

It has been stated the annual reports that the company has its Consolidated Financial Statements prepared in accordance with International Reporting Standards (IFRS) and International Accounting Standards (IAS) which have been issued by the International Accounting Standards Board (IASB) and the disclosure requirements of the Hong Kong Companies Ordinance. Also, the reports have been made under the historical cost convention. However, the equity investments that have been designated at fair value through the comprehensive income and financial assets have been measured at fair value through profit and loss. The Consolidated Financial Statements have been presented in Renminbi (RMB) currency and all values are rounded to the nearest thousand except when otherwise indicated.

Economic Drivers

Acquisitions  

The business combinations within China Outfitters Holdings Limited have been accounted for through the acquisition method. Each business combination of the group may choose to measure non-controlling interest in the acquiree that are present proprietorship interests and warrants their holders to an equivalent share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

Sustainability

China Outfitters Holdings Limited has a commitment to contribute to the sustainability of the environment and community where it conducts its business and considers this to be essential to maintain its long-term competitiveness within the business sector.

E-Commerce

January 1 2019 saw China bring in new e-commerce law to improve the regulation of its booming e-commerce market and giving consumers and brand owners extended legal protection. There were several changes made when the law was introduced which included three recognised types of e-commerce operators, strengthening IP protections and regulating against unfair competition. One of these key changes was the inclusion of non-traditional shopping channels susch as social media platforms like We-Chat that can be used for e-commerce places.

The e-commerce sector has seen significant growth since 2015 and in 2018 e-commerce consumers can now use social marketing and e-commerce tools such as WeChat Public Account and Weimob and its WeChat business system to enhance their customer sales choice.

Economic Environments

The company through the establishment a provision matrix which was based on its historical credit loss experience and adjusted for forward-looking factors to the debtors and economic environment. There are risks and uncertainties that can affect the Retail and Apparel Industry.

Through the changes in macroeconomic conditions may significantly affect business, financial condition, results of operations and prospects which may lead to instabilities in consumer spending. With the slow-down in economic growth in the past years robust growth rates cannot be guaranteed. Any further declines in the China Economy or consumer spending could materially or adversely affect the economic flow of the operational aspect of the business.

Sourcing Materials

China Outfitters Holdings Limited prefer manufacturers that pass quality control certifications such as ISO 9001-2000. The company will conduct a sample inspection of the products and require the raw materials and products to be certified by the quality control inspection agency designated by the relevant government authorities in China.

Strategy

Perusing through the Annual Report 2018 it has been noted that the company has a firm strategy set in place for the future. The key for sustaining expansion and growth will be through a continued implementation of the multi-branding. China Outfitters Holdings Ltd during the 2018 year completed the acquisition of MCS that has now become a brand wholly owned by the company in the Greater China Region. The company believes that having self-owned brands will benefit its strategic objectives to increase sales proportion from the self-owned brands. As well as the brand acquisition the company will further embrace a brand awareness through sponsored sports and culture events and film and television works from a number of their brands.

China Outfitters Holdings Limited also through a combined science and technology and retail has seen China’s retail industry gone into a transformative stage where conventional retail has been replaced by new retail. Through the new technologies’ customer experience has been enhanced and a reformation of their model of operations to adapt to new retail models has taken place. This is where the digitalisation driven retail terminal empowerment was launched.

Opportunity or Challenge?

Opportunity knocks at China Outfitters Holdings Ltd Door when we can see that the Jeans market is set to grow even more. Many companies that produce this product know that for this particular market to grow the company will need to find new ways of marketing and selling their product. The opportunity here is that the door is open for any company to take the market to the consumer and grow. A company with vision can lead the way and China Outfitters Holdings Ltd are leading the way.

The Challenge for China Outfitters Holdings Ltd is to remain focused on what the company wants to achieve in the future. From the ‘Digitalisation driven, retail terminal empowerment’ to engage in attracting new customers, stimulating current customers and improve their consumption experience. The company will need to remain competitive in such a diverse market and safeguard the measures are set in place for increasing and developing the retail network of self-owned brands.

STOCK PRICE as at August 23 2019

PRESS RELEASE

https://media.kkr.com/static-files/6c73cabe-9d8f-4a58-a53b-3d11d1ab6dbf

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MY TOP BLOGS

These were my top bloggers – Sharon Field, Kim Chisholm, Nicole Cartlidge, Billy Van Moolenbroek & Nicole Olsen.

• Sharon Field – http://sharonsaccountingdecision.blogspot.com/
• Kim Chisholm – http://www.everydaymoola.com/?p=139&fbclid=IwAR1_FMB-a4A16Ud3FDr211cqiZ-nfrL-0BZcb9fgs9cDLv9JbbTfvidzTRk
• Nicole Cartlidge – https://nuckersaurus.home.blog/2019/08/25/steps-3-5-6-8-ass1-drafts/?fbclid=IwAR0ZftoTQB-OiEN1SE6gK4j3-c-wLaIygNBhAeePJuSgKXXUlbJxS7cq_yo
• Billy Van Moolenbroek – https://billyvanmool.wordpress.com/ 
• Nicole Olsen – https://nicolsenblog.wordpress.com/

Each one in their own way were my top blog. Each had a different focus on what they wrote but their interpretations of the content made it difficult to pick a winner. To me anyone who has written a blog is a winner because you have attempted and succeeded in doing something that may or may not be easy for you to do.

Feedback Sheets

Sharon Field

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Kim Chisholm

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Nicole Cartlidge

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Billy Van Moolenbroek

peer-feedback-sheet-assessment-1-billy-van-moolenbroekDownload

Nicole Olsen

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ASSESSMENT 1 – STEP 3-5,7 & 8

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My Experiences

Looking back over the past six weeks and seeing where I started to today has been one big rollercoaster ride. I stepped onto the ride and way I went. There were obstacles, high points and low points, followed by the long stretch where I wondered if I would ever get off the ride. Well I have got there. Between the different posts on Facebook, to emails from other peers and the feedback occasionally from lectures it has been an experience. I’m thankful that this course has been one where there has been much engagement. I can honestly say that at the beginning I saw a mountain that could not be moved and today that mountain was smashed.