Letter to Shareholders
Dear Shareholders:
Le enphants has devoted itself to baby and kids business for more than 50 year. We insist on carrying out our corporate vision, mission and value to each family, and helping parents to have the best service and product for their child, as well as their love. In last year, although the consumption on dining, recreation and domestic or aboard travel sectors has significant growth, the fertility rate still gets lower and lower. Evan we already had improvement on cutting losses, the overall performance still can not meet others’ expectation in the market. In the future, Le enphants will keep setting baby and kids as our core business, while looking for new opportunities to expand our scope and market at the same time, hence to maintain our advantage position in both Taiwan and China.
Market Overview
The economy in 2023 was struggling. GDP growth rate is only 1.31%, according to Taiwan's latest public statistics, a huge decline from 2.59% in 2022 and 6.45% in 2021. The GDP growth rate in the first quarter of 2023 was negative 3.49%. It was mainly caused by weak demand all over the world in global recession after covid, and as mentioned previously, the consumption only increased in leisure-related industries in Taiwan. Total trading amount decreased by 13.6% comparing to previous year, including 9.8% decrease on exporting and 17.8% huge decrease on importing. The new-born children is 135 thousands, lower than 138 thousands in 2022. The continuous decrease of new-born numbers and increase of aged generation both make our population getting less and less over last few years, the market size of Taiwan getting smaller than ever.
China also recovered from covid in 2023, however, its consumption decreased instead of booming up. The trading war between China and U.S. government is still tight, accompany with local demand’s heavily shrink. Although its GDP growth rate is 5.2%, higher than expectation, the confidence of companies and consumers toward future still collapse. This mainly comes from real estate market and employment. In 2023, investment amount on real estate decreased by 9.6%, the transaction value of residence houses decreased by 6.5%, and the square meters of new constructions decreased by 20.4% comparing to previous year. The unemployment rate for nationwide cities is 5.2%, among it the youngers’ age is 14.9%, way higher than other age groups. New-born child keeps hitting new low number, 9.02 millions, that decreased by 5.6% from 9.56 millions in 2022. Population has decreased for consecutive two years. China government relieved their one-child policy in 2016, then allowed the third child in 2021. Other regulations, limits, penalties were also cancelled or removed in next few years. Central and local governments also provided different subsidies, health-care incentives or tax waivers for families having new-born child during last couple years. But the result ended not good.
The Operating Result of 2023
As end of 2023, we have 404 physical self-owned stores, 184 in Taiwan and 220 in mainland China. It is 88 stores less than end of 2022, 33 less in Taiwan and 55 less in mainland China.
Due to number of stores decreased, our consolidated revenue was NT$3,073 millions, decreased by 8% from 2022. Taiwan contributed 62.7% of the revenue, and mainland China did 37.3%. Gross margin rate is 40.3%, lower than 2022 by 0.9%. Operating expenses was NT$1,800 millions, cut by 10.6% from NT$2,014 millions in 2022. Consolidated operating loss is NT$561 millions, NT$78 millions decreased from previous year, around 12.1%.
Net non-operating income is NT$47 millions. Net loss after tax was NT$523 millions, decreased by 16.5% comparing to 2022. ROA (Return of Asset) was -11.20%, ROE (Return of Equity) was -46.10%, the EPS (Earning per Share) was NT$-3.83 dollar in 2023.
Opportunities and Challenges in the Future
Although challenges are everywhere, parents nowadays have more stable income, and higher standard of living quality due to the late-marriage. Familiy members, especiall grandparents, are willing to invest more on children. They can afford more than ever. According to report: Research of China Mother-and-child Market published by iResearch Consulting in 2022, the market size will keep growing and reach RMB4.6 trillions in 2025. Average growth rate is expected to be 8.2% per year during 2022 to 2025. That comes from the higher dispendible income, higher demand of better quality, stronger royalty and the higher spending on education… etc.
In competitivity’s aspect, people are now moving back to regular life, it will be getting more dramatically by the recover of leisure and sports activities. The pandemic changes the consumers' habits, increases people's dependence on internet and mobile devices, and empowers the influence of KOIs or Youtubers. All these are turning the tradition retail strategy and method to a different dimension. And, most adult fashion brands are now trying to extend age of their products range down to kids and babies, and providing more and more kids products in the market.
In order to stand out from the market, we have to put the trends of consumers' demand as basis for developing new products and providing customer’s experience. Enhance our brand royalty by combining online and offline retail, and devoted ourselves to increase the brand exposure and market share. Besides, we can not ignore the tilt toward online business of people. Companies need to improve the service and experience to online customers, then satisfy their growing demand. In addition, we will target on corporate expansion. Baby and kids will still be our core business, while we will look for other market or business opportunities, not just Taiwan and China.
No matter nursing products evolving all the time, love from parents never less. In the future, we will be proactive, creative and embracing the changes. We will keep carrying our vision, mission and value as what we had achieved for over 50 years. We invite all our employees, customers, and shareholders to be the guardian of children together!
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