After one Asian footwear manufacturing group blamed lower Q1 sales and shipments on lower average selling prices of sport footwear, the largest group making footwear for the athletic and outdoor market is warning that profits for the quarter will come up short of last year’s Q1 level due to lower gross margins.

The Board of Directors of the Yue Yuen Industrial (Holdings) Limited, one of the largest footwear manufacturers in Asia, has informed shareholders of the company and potential investors that Yue Yuen (Group) is expected to record a decrease of not more than 25 percent in its profit attributable to owners of the company for the first quarter as compared to profit of $100 million for the corresponding period in 2024.

The profit warning is reported based on a preliminary review of the company’s unaudited consolidated financial statements for the three months ended March 31, 2025.

The company’s Manufacturing business, used by a large portion of major outdoor and athletic brands in the U.S. and Europe, posted a 5.9 percent for the 2025 first quarter, driven in part by a nearly 15 percent gain in February. Total net consolidated operating revenue generated in the 2025 Q1 period, including footwear manufacturing and retail stores throughout China, rose 1.3 percent year-over-year to $2.03 billion.

Yue Yuen and its footwear manufacturing business trade and report in U.S. dollar ($) currency.

Based on the information available to the Group, the expected decrease in profit for the quarter was reported mainly attributable to the negative impact on the gross profit margin due to “an increase in unit costs for footwear manufacturing, amid a volatile operating environment led by a complex and dynamic global economic landscape,” including:

  • Reduced production efficiency: Uneven production leveling across various manufacturing plants, the pace of the ramp-up of new production lines and the new upper processing factory not performing as expected, resulted in lower production efficiency, which fell short of the set targets. This situation has made it difficult to reduce the reliance on overtime and other associated costs as initially intended.
  • Increased labor costs: The number of employees in the Manufacturing business increased by a high-single-digit percentage year-on-year. This growth and rising wages across various regions drove up labor costs; however, the production efficiency did not meet expectations, leading to an inability to alleviate the pressure of labor costs.

The company said the information in its announcement is based solely on a preliminary assessment by the Board concerning the unaudited consolidated financial statements of the Group for the quarter currently available, which have not been audited or reviewed by the external auditor of the company nor reviewed by the audit committee of the company.

As the company is finalizing the unaudited consolidated results of the Group for the period, the company may adjust the actual results upon further review and may differ from the information contained in the announcement.

Image courtesy Yue Yuen Industrial (Holdings) Limited