Monday 14 September 2009
Mainland sportswear maker on firm footing
Xtep International Holdings reported satisfactory growth for the six months that ended on June 30. The company’s solid performance came thanks to its continued efforts to enhance the brand, its product design and development capabilities, and growth of its retail network.
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Mainland sportswear maker on firm footing
Dual strategy pays off as company continues to profit from skilfully combining entertainment and sports marketing
Ana Wang
14 September 2009
Xtep International Holdings reported satisfactory growth for the six months that ended on June 30. The company’s solid performance came thanks to its continued efforts to enhance the brand, its product design and development capabilities, and growth of its retail network.
The leading mainland-based fashion sportswear enterprise announced in its interim results a 25.1 per cent increase in gross profit to 647.8 million yuan (HK$736.4 million) compared with a year earlier, while the gross profit margin increased by 1.8 percentage points to 38.6 per cent.
Revenue for the period surged 19.1 per cent from 1.41 billion yuan a year earlier, to 1.68 billion yuan.
The group achieved a 20 per cent increase in profit attributable to shareholders, an increase from 254.7 million yuan a year earlier, to 306.5 million yuan. The board recommended an interim dividend payment of 7 HK cents per share, a 40 per cent increase compared with a year earlier, which represented a 44 per cent dividend payout ratio, and an increase of 6 percentage points.
The average number of shares for the period amounted to 2.17 billion, which is a significant increase from 1.59 billion a year earlier. However, the group announced an 11.9 per cent drop in basic earnings per share from 16.01 fen a year earlier to 14.1 fen for the six months.
The Xtep brand accounts for 92.3 per cent of the group’s total revenue. Sales of the two main product categories, Xtep-branded footwear and Xtep-branded apparel, surged by 10.7 per cent and 26.9 per cent respectively to 734 million yuan and 802 million yuan.
The increase in sales contributed to an 18 per cent increase in the revenue of the brand to 1.55 billion yuan and the gross profit margin rose by 2.2 percentage points to 38.5 per cent for the six months.
“Despite the unprecedented global financial crisis and the worldwide economic recession, the group showed remarkable achievements,” said Ding Shuipo, chairman and chief executive.
“The group continued to stand out from its peers through its strategy of combining sports and entertainment marketing. This dual strategy effectively strengthens Xtep’s position as the leader of fashion sportswear,” Ding said.
As at June 30, Xtep had established 5,405 outlets through its network of distributors or third-party retailers, including 10 new flagship stores in major commercial cities, such as Hunan, Shandong, Shanghai, Zhejiang and Guizhou provinces, bringing the total number of flagship stores to 22 nationwide.
The group’s extensive nationwide distribution network includes 464 retail outlets that carry other brands, such as Disney Sport and Koling.
“We intend to reach in total 30 flagship stores and raise the target number of retail outlets to 5,800 by the end of 2009,” Ding said. “We will also focus on expanding our profile in the second and third-tier market in the PRC.”
The company is banking high-profile events, such as the 11th National Games of China in Jinan, Shandong next month, the 2009 East Asian Games in Hong Kong in December and the 16th Asian Games in Guangzhou next year, to enhance the popularity of sport on the mainland and increase the demand for sportswear.
“At the same time, Xtep aims to expand its presence into emerging markets and Southeast Asia,” Ding said. “Following the PRC market, the group has successfully expanded the Disney Sport brand to Hong Kong, Taiwan and Macau and will further enhance its penetration internationally.”
The group’s technical team, which has more than 20 years of experience in the footwear business, has brought the group a step closer to its aim of becoming a leader and expand beyond the mainland.
With the expertise and hard work of the technical team, the group launched Xtep’s X-light shock-resistant shoes that are purposely designed for running and weigh 20 per cent less than traditional running shoes, while combining function and fashion.
The group plans to expand its running series into one of its key product lines by setting up a department of 60 to 80 staff responsible for designing and producing stylish running shoes and related products, and to help establish it as one of the most fashionable and popular brands for running shoes.
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