Naf Naf-owner La Chapelle caught in China’s storm
Chinese group La Chapelle, the owner of Naf Naf since 2018, is currently undergoing a period of severe turbulence. This fashion distribution giant owns more than a dozen brands, spanning womenswear, menswear, footwear and children’s clothing, and had to reduce its operations in 2019, after the departure of its CEO and the bankruptcy of one of its brands.
Overwhelmed by disappointing sales, low traffic and a contracted local market, the company’s reach has shrunken over the last year. Across its domestic market, there has been a large number of store closings: the 9,200 points of sale in 2018 were reduced to 6,800 in mid-July 2019. This represents close to 2,500 store closings in only six months, approximately 26% of its outlets.
According to FashionNetwork.com sources, the La Chapelle group has decided to close the two Naf Naf stores that were meant to open in the Chinese market in spring 2019. Two years ago, the objective was to reach 500 points of sale. However, the French brand continued to operate independently with a stable performance this year across France and Europe.
The stores aren’t the only ones to suffer from the group’s streamlining. In January, its menswear brand Jack Walk officially declared bankruptcy, after the firm first filed in October 2019 due to persistent losses. In regard to this, management specified that the liquidation “would not have a major impact on the existing operations of La Chapelle Fashion Co.”
The founder’s departure
As for the group’s lifeblood, La Chapelle President and Chairman Xing Jiaxing tendered his resignation in late October. leaving Yu Qiang, one of the group's managers, at the helm. However, after his resignation as CEO, Jiaxing, who owns a 25% stake in the business, retained his role as director of the board. This was until his decision in February to leave this role as well, according to Reuters.
Aware of these difficulties for several months now, the group also faces the emergence of the coronavirus epidemic which has grown to new proportions in the past couple of weeks. The Chinese health crisis could severely affect the group’s activity and further reduce its sales. If this commercial lethargy persists, it could complicate the group’s long-term survival, seeing as the Chinese economy is expected to slow to 6.1% this year, the lowest it’s been in 30 years.
Listed on the Shanghai Stock Exchange, the La Chapelle group reported an 18.8% decline in turnover for the nine months of its 2019 financial year, at 5.757 billion yuan, or 749 million euros. At the start of this year, a profit warning was issued signaling an up to 2.1 billion yuan loss for the fiscal year. In Shanghai, La Chapelle's company share price has dropped by 93% since 2015.
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