We Discuss Why China Outfitters Holdings Limited's (HKG:1146) CEO Compensation May Be Closely Reviewed

Key Insights

• China Outfitters Holdings will host its Annual General Meeting on 17th of May
• CEO Yongli Zhang's total compensation includes salary of CN¥2.49m
• Total compensation is 101% above industry average
• China Outfitters Holdings' EPS declined by 19% over the past three years while total shareholder loss over the past three years was 47%

China Outfitters Holdings Limited (HKG:1146) has not performed well recently and CEO Yongli Zhang will probably need to up their game. Shareholders will be interested in what the board will have to say about turning performance around at the next AGM on 17th of May. It would also be an opportunity for shareholders to influence management through voting on company resolutions such as executive remuneration, which could impact the firm significantly. We present the case why we think CEO compensation is out of sync with company performance.

View our latest analysis for China Outfitters Holdings

How Does Total Compensation For Yongli Zhang Compare With Other Companies In The Industry?

Our data indicates that China Outfitters Holdings Limited has a market capitalization of HK$334m, and total annual CEO compensation was reported as CN¥3.6m for the year to December 2023. Notably, that's an increase of 9.4% over the year before. In particular, the salary of CN¥2.49m, makes up a huge portion of the total compensation being paid to the CEO.

On comparing similar-sized companies in the Hong Kong Luxury industry with market capitalizations below HK$1.6b, we found that the median total CEO compensation was CN¥1.8m. This suggests that Yongli Zhang is paid more than the median for the industry. Moreover, Yongli Zhang also holds HK$876k worth of China Outfitters Holdings stock directly under their own name.

Component	2023	2022	Proportion (2023)
Salary	CN¥2.5m	CN¥2.3m	69%
Other	CN¥1.1m	CN¥1.0m	31%
Total Compensation	CN¥3.6m	CN¥3.3m	100%

On an industry level, around 94% of total compensation represents salary and 6% is other remuneration. It's interesting to note that China Outfitters Holdings allocates a smaller portion of compensation to salary in comparison to the broader industry. If salary dominates total compensation, it suggests that CEO compensation is leaning less towards the variable component, which is usually linked with performance.

China Outfitters Holdings Limited's Growth

Over the last three years, China Outfitters Holdings Limited has shrunk its earnings per share by 19% per year. The trailing twelve months of revenue was pretty much the same as the prior period.

Overall this is not a very positive result for shareholders. And the flat revenue hardly impresses. So given this relatively weak performance, shareholders would probably not want to see high compensation for the CEO. We don't have analyst forecasts, but you could get a better understanding of its growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Has China Outfitters Holdings Limited Been A Good Investment?

With a total shareholder return of -47% over three years, China Outfitters Holdings Limited shareholders would by and large be disappointed. Therefore, it might be upsetting for shareholders if the CEO were paid generously.

In Summary...

Given that shareholders haven't seen any positive returns on their investment, not to mention the lack of earnings growth, this may suggest that few of them would be willing to award the CEO with a pay rise. At the upcoming AGM, the board will get the chance to explain the steps it plans to take to improve business performance.

We can learn a lot about a company by studying its CEO compensation trends, along with looking at other aspects of the business. We identified 3 warning signs for China Outfitters Holdings (1 can't be ignored!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking at a different set of stocks. So take a peek at this free list of interesting companies.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.