On September 1, Sleemon, known as "China' s No. 1 Mattress Share," issued an announcement that it intends to implement an employee stock ownership plan at a price of not more than 40.77 yuan/share (inclusive) to repurchase shares, with a total capital of 1.5 RMB 100 million to RMB 200 million, accounting for 0.95%-1.27% of the company’ s current total share capital.

According to incomplete statistics, since the beginning of this year, in addition to Sleemon, a number of listed A-share home furnishing companies have implemented or announced stock repurchase plans, including many industry leaders such as Kuka Home, Sogal, and Mlily. The main purpose of repurchasing shares is mostly to implement employee equity incentives or employee stock ownership plans.

In the fast-growing home furnishing market, why are the leading home furnishing companies running at the forefront of the home furnishing track have initiated share repurchases and implemented employee stock ownership plans?

100 billion gold track, undervalued stock price

The scale of China' s software home furnishing industry has gradually increased in recent years, and its growth is also the most prominent. According to ISPA data, from 2002 to 2019, our country' s total mattress consumption increased from 30.6 billion yuan to 76.8 billion yuan (a compound annual growth rate of 12.2%), and it has surpassed the United States to become the world' s largest mattress market.

Zheshang Securities' Mattress Industry Depth Report pointed out that our country' s mattress penetration rate still has room for continuous improvement, and the demand for updates is constantly released. Therefore, it is estimated that the size of China' s mattress market in 2022 is expected to reach 103.6 billion yuan, and by 2020 to - In 2022, it will maintain a compound growth rate of more than 10%.

The Special Study on the Software Home Furnishing Industry: Top Brands Usher in a Period of Accelerating Development released by IFC Securities in April 2021 believes that the scale of China' s software home furnishing industry will be about 189.3 billion yuan in 2020, of which the bed and mattress market will reach 1,300. According to estimates, the software home furnishing industry will grow by 9.7% year-on-year in the next five years. The overall domestic scale is expected to exceed 280 billion yuan in 2025, of which the bed + mattress industry is expected to exceed 198 billion yuan.

As the core section of the software home furnishing field, the mattress industry occupies the "golden track" position, full of imagination. From the perspective of market performance, the performance of the black swan after the 2020 epidemic has been remarkable, but it has not been satisfactory. Although the home furnishing sector has performed well, it is limited to this.

As of September 2, the share price of Kuka Home Furnishing Co., Ltd. fell from the February peak of 90.22 yuan to 67.35 yuan, a 25% drop from the highest point; Sogal fell from the February highest point of 37.57 yuan to 19.46 yuan, a 48% drop from the highest point. ; Mlily fell from the February highest point of 37.20 yuan to 15.72 yuan, a 58% drop from the highest point; Sleemon fell from the July highest point of 33.88 yuan to 26.69 yuan, a 20% drop from the highest point.

In comparison, many furniture companies have chosen to repurchase shares recently. To a certain extent, it can be regarded as a "silent cry" of underestimated companies, expressing confidence in the company' s future development and recognition of the company' s value, and passing  the ample "not bad money" signal on corporate cash flow.

The repurchase of shares for employee stock ownership plans is more to coordinate the inconsistency of goals and conflicts of interest among employees, operators, and owners, and bind the three together to promote sustainable and high-quality development of the company. Choosing to repurchase at the low point of stock price fluctuations is generally considered to reduce the cost of repurchase and maximize benefits.

The industry is accelerating concentration, talents are the top priority

The status quo of the software home furnishing industry is "big industry, small business". But this status quo is being broken.

According to the research data of the Forward Industry Research Institute, in 2018, the concentration of our country' s mattress industry was about 9%; in 2019, the concentration of our country' s mattress industry increased to about 10%, and the market has not yet seen a leading brand. Although the growth of concentration is relatively slow, it shows to a certain extent that the speed of industry integration is accelerating, which means that competition will intensify during the integration process.

In the 2020 epidemic, as a large number of small and medium-sized brands have broken their capital chains and accelerated their withdrawal from the market, leading companies have accelerated the shift from fragmentation to concentration and increase of the domestic mattress industry share with the help of brands, channels, products and other advantages to a higher level.

In the Special Study on the Software Home Furnishing Industry: Top Brands Usher in a Period of Accelerating Development, SINOLINK SECURITIES pointed out that the domestic top brands are growing rapidly, and there is a lot of room for improvement in concentration. At present, the Chinese mattress market is led by DeRUCCI and Sleemon. Only about 16%, while the United States has reached 63%, the head brand space is still large. In recent years, the top brand mattress business has achieved rapid development. In the field of mattresses in China, Sleemon is clearly leading in scale. In 2019, revenue has reached 3.77 billion yuan, an increase of 20.8% year-on-year, and a three-year compound growth rate of 33.5%.

According to media reports, as a leading company in the mattress industry, Sleemon' s share price has risen by 173.2% in the past two years. From 2009 to 2019, revenue has increased from 500 million to 5 billion. In the next 10 years, Sleemon has set a goal of 50 billion in revenue and 100 billion in market value. Earlier, Sleemon issued an announcement saying that the board of directors has been reorganized. In the new board of directors, the average age is 4 years younger than the previous one, and 3 members are born after 85. Among the 6 directors, 3 have graduate degrees and 2 graduated from Peking University, one graduated from Fudan University. The re-election of the new board of directors is a microcosm, highlighting the high continuous investment in the field of talents by home furnishing companies such as Sleemon in recent years.

According to Flush IFinD data, from 2015 to 2020, the number of Sleemon employees increased from 3358 to 8,277, an increase of about 2.5 times in 5 years. In the same period, the number of Kuka Home employees increased from 6,769 to 16,250, an increase of about 2.4 times in 5 years; the number of employees in Mlily increased from 2,209 to 7,670, an increase of about 3.5 times in 5 years. Among the newly added personnel, the growth rate of mid-to-senior technology, sales, marketing and other personnel is significantly higher, which demonstrates that the leading companies in the industry such as Sleemon, Kuka Home, and Mlily are facing the high ceiling of the industry in the future, and they are young to the management team. The determination to become more professional and professional.

According to industry insiders, the mattress industry has a high ceiling, obvious track advantages, and accelerated industry concentration, which will inevitably encourage leading companies to increase their continuous investment in talents, brands, products, and R&D. Talents are the top priority. How to coordinate the inconsistency of goals and conflicts of interest among employees, operators, and owners. Many home furnishing companies have chosen to repurchase shares at relatively low stock prices for equity incentives or employee stock ownership plans. This is actually well understood.