As of the close of trading on September 22, Heilan Home was trading at 5.7 yuan, down nearly 11% from the stage high of 6.39 yuan in early August.

Why can a clothing company that is often ridiculed for its aesthetics continue to spend so much cash? And why did it fail to drive the stock price even after allocating so much money?

Where do shareholders’ red envelopes come from?

Heilan House is willing to pay dividends, but first it has to have money to share.

In the first half of 2026, the company’s net profit attributable to the parent company was 1.488 billion yuan, and the net cash flow from operating activities reached 2.657 billion yuan. This ability to generate cash is related to the business model it has built over the past two decades.

When making clothing, the biggest fear is that the money is spent but the clothes are not sold. Production and store opening require investment. If the inventory is not cleared in one season, new products must be released next season.

Heilan House’s approach is to let suppliers and franchisees jointly bear the investment.

Production is mainly handed over to the upstream, and the company is responsible for product planning, product selection and brand operations. Some products can be returned to the supplier if they meet the contract requirements. At the end of 2025, among the company’s inventory products and consigned products, the book balance with returnable clauses reached 7.69 billion yuan.

Franchisees participate in opening a store, and the headquarters manages merchandise and operations uniformly. A large number of goods are sold on a consignment basis, and placing them in a franchise store does not mean they are sold. They are still considered Heilan Home’s inventory. At the end of 2025, the book balance of consigned goods was 4.264 billion yuan.

This style of play is really smart:Franchisees do not need to buy out all the inventory, and Heilan House can also hand over part of the unsalable risk back to the upstream.

More importantly, Heilan Home pays its suppliers not very quickly.

In 2024 and 2025, the company’s accounts payable turnover days (including notes payable) will be 330.41 days and 335.53 days respectively, which is approximately 11 months.

Taking companies in the Shenwanfei sportswear sector with revenue exceeding 5 billion yuan in 2025 as a sample, the second-ranked data during the same period were 204.76 days and 215.05 days, respectively, and the medians were 134.85 days and 134.09 days.

The median of peers is more than four months, and that of Heilan Home is close to 11 months. Although this is not equal to the contract period of each purchase, the longer payment cycle does leave room for the company to turn around.

Someone does the production, someone invests in opening the store, some goods can be returned, and the payment does not need to be settled immediately. Under this model, Heilan House does not have to pay every money first, and can open “men’s wardrobe” to more places.

But that doesn’t mean it can make a profit without losing money.

Suppliers not only have to bear part of the risk of missing goods, but also have to wait for payment. For suppliers with competitive products and many customer choices, these conditions may not be attractive. When Heilan House chooses suppliers, it must take into account “who understands consumers better” and “who is more accepting of cooperation conditions.”

Blue Shark Consumer put forward a point in a recent article:The risk of returns may lead suppliers to favor conservative styles and take fewer design risks.This can somewhat explain the saying on the Internet that “wearing Heilan House at the age of 25 can make you look 35 years old.” It also points out a key issue: being smart in the supply chain may not necessarily bring fashion in the eyes of consumers.

Today, Heilan Home is clearing inventory and adjusting its store opening methods.

In the first half of this year, the book value of inventory dropped from 10.819 billion yuan to 8.795 billion yuan, a decrease of approximately 2 billion yuan, and the inventory turnover days were approximately 263 days. Among them, the book balance of consigned goods sold on consignment dropped to 2.964 billion yuan, and the balance of goods with returnable clauses dropped to about 6 billion yuan; the turnover days of accounts payable dropped to 274.7 days.

These indicators are not enough to prove changes in procurement policies, but channel adjustments are more direct:In the first half of the year, 190 franchise stores and other stores of the group were closed, a net decrease of 66 stores; 231 new directly-operated stores were opened, a net increase of 141 stores.

With more stores operated by itself, the company can manage goods and services more directly, and has to bear more corresponding expenses.

In the first half of the year, sales expenses increased from 2.472 billion yuan to 3.030 billion yuan, and the sales expense rate increased from 21.37% to 24.4%. Among them, store and online store operating expenses increased from 450 million yuan to 756 million yuan, an increase of approximately 67.75%.

There is less inventory, more direct-operated stores, and the cost of selling clothes has also gone up.

Men’s wardrobe, trying to make a family’s money

Heilan House wants to make more money, and it doesn’t just come from men’s clothing.

In 2020, 32-year-old Zhou Lichen took over the position of chairman from his father Zhou Jianping.

After taking over, Zhou Lichen proposed the “multi-brand, full-category, group-based” strategy to further advance the company’s previous multi-brand layout. Women’s clothing OVV, baby brand Ying’s, fashion brand HLA JEANS, plus Adidas FCC, JD.com Outlet and other businesses, Heilan House wants to do more than just add a few shirts and trousers for men.

Among them, the women’s clothing brand OVV takes an elegant, intellectual, and workplace-oriented route, and also invited Sun Li to serve as the brand spokesperson. Children’s clothing brand YeeHoO is targeting the infant and child clothing market. In the first half of this year, Yingshi won the “2026 Tmall Golden Baby Award-The Year’s Most Popular Children’s Clothing Award” and has entered Sam’s Club stores.

In both directions, we can draw on the original resources of Hailan House.

Over the past two decades, Heilan House has been best at supply chain integration, large-scale procurement and channel operations. Now, Heilan House has set up a huge machine from suppliers, production to stores and channels. As long as new brands such as OVV and Yingshi are plugged into this machine, it is expected to make them run faster and spread wider.

But while continuing its old advantages, Heilan House also faces certain challenges.

The aesthetic, design and trend changes that female consumers care about, as well as the quality, safety and brand trust that infant and child consumers value most, cannot be solved by opening more stores and finding more suppliers.

Heilan House’s strongest point in the past was “selling clothes efficiently”, but when it comes to women’s and children’s clothing, another question must be answered first: Why do consumers insist on buying yours?

Judging from the 2026 interim report, new brands and businesses still have some way to go before supporting new growth of Heilan House.

The company’s interim report did not separately disclose the overall profit data of brands such as OVV and Yingshi. However, “other brands” including these self-owned brands as well as new businesses such as Adidas FCC and JD.com Outlets had revenue of 1.94 billion yuan in the first half of the year, a year-on-year increase of 29.34%.

But at the same time, the gross profit margin of “other brands” dropped by 6.39 percentage points year-on-year, even more than the Heilan group purchase customized series. In contrast, as the main brand of Heilan Home, the gross profit margin slightly increased by 0.62 percentage points. At the same time, the gross profit margin of “other brands” in the first half of the year was only 42.68%, which was also significantly lower than the 48.94% of the Heilan Home series.

On the contrary, the old brand, which was regarded as “fashionable”, is still responsible for most of the business.

In the first half of the year, Heilan Home’s main brand revenue was 9.405 billion yuan, a year-on-year increase of 12.03%, and the scale was nearly five times that of “other brands”. New brands are growing up, and old brands are still growing. They have not reached the point where they have to rely on new business to save the situation.

What Zhou Lichen wants to solve is how to maintain this old business while allowing new investments to gradually bring more profits.

The money needs to be divided, and overseas stores need to be opened.

In addition to selling clothes to more people, Heilan House also wants to expand its business further.

In 2017, Heilan House opened its first overseas directly-operated store in Kuala Lumpur, Malaysia. That year, overseas revenue was only 6.1684 million yuan, and there were only 6 stores. By 2025, overseas revenue has reached 453 million yuan, overseas stores have increased to 147, and it has entered 12 countries and regions including Malaysia and Vietnam.

The first to establish a foothold was Southeast Asia. Since then, Heilan Home has opened stores in Australia and the United Arab Emirates.

In 2025, the first store in Westfield Business District in Sydney and the Festival City Mall store in Dubai opened successively, and “men’s wardrobe” began to face more consumers in different markets.

In the first half of this year, overseas business continued to grow, with revenue reaching 303 million yuan, a year-on-year increase of 47.16%, and the number of stores increased to 167. This growth rate is indeed brighter than the group as a whole. However, of the revenue of 12.42 billion yuan in the first half of the year, overseas revenue still accounted for only about 2.4%.

Overseas business is growing fast, but it’s not big enough right now. To have a more obvious impact on the group’s performance, it must continue to grow, and the wider the market, the more problems it needs to solve.

First of all, the same piece of clothing may not sell well in different countries.

The weather in Southeast Asia is hot, so it is necessary to increase the number of quick-drying, breathable, and lightweight products; Australian consumers prefer casual, outdoor and functional clothing, so the product structure must be readjusted; in the Middle East, business and daily dressing habits are different. Every time you enter a market, you almost have to do consumer research all over again.

Heilan Home has accumulated many years of experience in procurement, supply chain and channels, which can help overseas stores get started. However, domestic consumers are familiar with “men’s wardrobe”, while overseas customers may not know this brand. You have to convince them from the beginning as to why the clothes are worth buying and whether the price is competitive.

此外，Heilan House’s overseas expansion relies more on its own investment than domestic investment.

Overseas layout puts more emphasis on direct sales. The headquarters can directly manage site selection, decoration, goods and personnel. The brand image is easier to unify and it can also understand consumers more directly. However, store rent, team wages, and expenses during the new store cultivation period must be borne by yourself.

So when you see this, you will actually find an interesting contradiction:Heilan House has a lot of imagination for future growth, but almost all of these growth points cost money.

Increasing the proportion of direct sales requires more store investment; developing multiple brands such as women’s clothing and children’s clothing requires brand building and channel investment; not to mention overseas expansion, from store opening to team building and localized operations, every step costs money.

However, Heilan House has maintained a high dividend ratio of close to 90% for a long time, and is now preparing to go public in Hong Kong for financing.Looking from the outside, there is indeed a sense of fragmentation of “the left hand is paying a large amount of dividends, and the right hand is financing.”

However, for Heilan House, continued dividends are also a way to show potential investors a record of returns. The company is not only telling the growth story of new brands and overseas expansion, but also proving that it is indeed willing to share the money it earned in the past.

However, this record has not been able to prevent the recent weakness in the stock price. As of the close of trading on September 22, Heilan Home was trading at 5.7 yuan, down more than 10% from the stage high of 6.39 yuan in early August.

If investors buy at this recent high, the book loss per share will have reached 0.69 yuan, and the interim dividend is planned to be 0.27 yuan per share.The money lost in more than a month was more than two such mid-term dividends.

If the time is extended, even if the dividends already received are taken into account, the capital may not be recovered.

On March 10, 2025, the closing price of Heilan Home (without restoration of rights) was 8.18 yuan. If investors had bought and held it until September 22 this year, they would have received a total cash dividend of 0.59 yuan per share during the period, but the stock price fell by 2.48 yuan. Regardless of taxes and reinvestment of dividends,Still losing about 23.1%.

Heilan House is willing to share money, but shareholders may not make money.

References:

Golden Horn Finance “The King of Chinese Men’s Wear, His Last Stand”

Jiuzhou Business Observation “The main brand is stable, multiple brands are accelerating, and overseas leads the way-Where has the transformation of Heilan House gone? 》

New Consumer Finance Research Institute “Hailan House’s military acquisition failed, why is Zhou Lichen’s entrepreneurial path getting narrower and narrower? 》

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