Anta Sports Products Limited announced that fiscal first half revenues declined 11.6 percent to RMB3.93 billion for the period ended June 30. Net profit fell 17.0 percent to RMB769.6 million.
Results Highlights
| Six months ended 30 June | |||
| 2012 | 2011 |
Change | |
| RMB million | RMB million | ||
Revenue |
3,934.1 | 4,451.4 |
-11.6% |
Gross profit |
1,643.7 | 1,905.1 |
-13.7% |
Profit from operations |
899.7 | 1,096.5 |
-17.9% |
Profit attributable to equity shareholders |
769.6 | 927.3 |
-17.0% |
Free cash inflow |
827.1 | 600.2 |
+37.8% |
| RMB cents | RMB cents | ||
Basic earnings per share |
30.86 | 37.18 |
-17.0% |
| HK cents | HK cents | ||
Interim dividend per share |
23.0 | 26.0 |
-11.5% |
Gross profit margin |
41.8% | 42.8% |
-1.0% pts |
Operating profit margin |
22.9% | 24.6% |
-1.7% pts |
Margin of profit attributable to equity shareholders |
19.6% | 20.8% |
-1.2% pts |
Financial Summary & Operational Performance
|
Business Review
Maximised marketing effectiveness through well-defined brand management strategy
Facing difficulties that exist in the current sportswear market, ANTA Sports further maximises the marketing effectiveness through a well-defined brand management strategy. During the period, we further integrated our endorsement and sponsorship resources with our interactive promotions and featured products to enhance our brand and product differentiation. As the strategic sportswear partner with the Chinese Olympic Committee (“COC”) and Chinese Sports Delegation (“CSD”), ANTA’s winning outfit will be featured on the CSD at the award ceremonies and media interviews in the world’s largest sporting event, thereby capturing the attention of billions of sports fans. To capture the marketing potential from the London Olympics, ANTA Sports kicked off a comprehensive Olympics strategy which helps to enhance our brand desirability, allowing ANTA to stand out from our peers.
ANTA Sports is also determined to strengthening our professional image in basketball, women sports and running to capture the market potential in these frequently participated sports in China. Besides the cooperation with the CBA and the CUBA, ANTA Sports launched the Outdoor Street Basketball League to reach more basketball enthusiasts. With over 2,000 matches played, the league attracted a record number of over 10,000 players in 45 high schools in 12 cities. To echo the healthy and energetic image of women’s sportswear series as well as to boost the retail performance, ANTA Sports launched a marketing campaign featuring Jane Zhang, a famous pop singer in China, together with marketing campaigns on popular e-commerce platforms. To sustain the lead of our running products and promote the joy of running, the Group integrated TVC and in-store promotions in the “Comfort in all Conditions” marketing campaign during the period which highlighted the functionality and comfort of the new A-Silo products. Furthermore, the Group has sponsored the Olympic Day Run for the fourth consecutive years to promote the “Sports for All” spirit by encouraging the public to incorporate sports activities into their daily lives.
Progressive Development in the Fila business in China
The Fila business in the PRC, acquired by the Group, has helped tap into the promising potential in China’s high-end sportswear market. We exert every effort towards strengthening our presence through strategic store openings in key locations of major cities in China. As at 30 June 2012, our distributors and franchisees operated 236 FILA stores in China. Meanwhile, the Group also operates FILA stores in Hong Kong and Macao. More importantly, the FILA brand has become an Official Sports Uniform Sponsor for the Hong Kong, China Delegation at the London Olympics, further extending its reputation and desirability to the PRC market.
Maintained Stability of distribution network amid challenging industry environment
ANTA Sports’ strength in the mass market, particularly in second and third tier cities, has enabled us to secure a favourable position amid keen competition. To enhance network efficiency, the Group has focused on the size and location of stores rather than expanding the number of stores. As at 30 June 2012, the number of ANTA stores grew by 29 to 7,807. For the Sports Lifestyle series, the Group has consolidated smaller Sports Lifestyle series stores and integrated them into the performance-based sportswear stores with the aim to optimise the store efficiency. The number of Sports Lifestyle series stores dropped by 198 to 689 as at 30 June 2012. Meanwhile, seeing the potential of children sportswear in the near term, the Group strategically enlarged the product offerings to children aged 3-7 years old and expanded the network of the Kids Sportswear series. The number of Kids series stores up by 59 to 691 as at 30 June 2012.
Oversupply of goods in the domestic sportswear sector has affected all sportswear brands in the past few quarters. Thus, inventory management ranks as the Group’s top priority. The Group has proactively guided the trade fair order estimates in order to minimise inventory risk in the retail channels. The Group has also provided training on inventory management and customer service to improve the operating efficiency of retailers. Meanwhile, the Group has launched incentive measures to encourage retailers in delivering key performance targets on inventory level and retail discount. The Group’s monitoring system, including the real-time ERP system, weekly reports submitted by POS and frequent channel checks by our sales people, allows the Group to tightly monitor the retail performance so as to identify network issues. Furthermore, the Group has optimised clearance channels, including factory outlets and discount stores, so as to improve the inventory management capabilities of the retailers.
Furthermore, the Group further optimised the e-commerce channel while expanding our visibility in popular e-commerce platforms during the period. Meanwhile, the Group has prudently expanded our presence in Southeast Asia, Eastern Europe and the Middle East to fuel our long term growth.
Committed to enhance product innovation and supply chain management for future growth
The Group continues to invest in R&D, supply chain management and quality control measures in response to the ever-changing market while ensuring that we deliver the best product value. To enhance our product differentiation, the Group has further cooperated with external institutions, including DuPont and 3M, and has applied Teflon and 3D Vision on our products. During the period, the Group introduced approximately 1,100, 2,000 and 730 new styles to the footwear, apparel and accessories portfolios respectively, to meet the demand of different consumers. For instance, ANTA Sports unveiled the innovative sole technology, A-Silo, which has individual nodes that provide advanced springiness to enhance comfort and stability. A-Silo running shoes enable regular joggers to enjoy maximum comfort.
During the period, the Group supported the supply chain partners in enhancing workflow efficiency so as to improve their cost efficiency and responsiveness to market changes. Furthermore, ANTA Sports adopts a strategic mix of in-house and outsourced production to better respond to market conditions and to meet unforeseen demand. During the period, approximately 7.1 million pairs of ANTA footwear and 4.5 million pieces of ANTA apparel were produced in-house. The respective proportions of self-produced footwear and apparel being procured were 38.9% and 13.2%, respectively (2011 1H: 33.9% and 12.8%).
Prospects
Looking ahead, ANTA Sports remains cautious about the short-term sportswear industry outlook in China. Nevertheless, the Group continues to adopt a prudent approach with the aim of easing operating pressure and staying competitive.
In addition to maximising the marketing value of our sponsorship and endorsement portfolio, we also focus on the effectiveness of these efforts as well as the synergy between the Group’s branding and sales-driving strategies. To reinforce our brand leadership, we are well-equipped to strive for the next four-year COC sponsorship with our renowned brand name and products. Furthermore, we are devoted to strengthening our competitiveness in the basketball market segment by leveraging the strong influence of our endorsed NBA superstars and the popularity of our “Outdoor Street Basketball League”.
The Group will remain cautious in processing retailers’ ordering and store opening plans so as to reduce the potential risks in over-stocking and deep discounting. The total number of ANTA, Sports Lifestyle, Kids and FILA stores are predicted to be between 7,800 to 7,900, 450 to 550, 750 to 850 and 250 to 300, respectively, by the end of 2012. Moreover, more factory outlets and discount stores will be opened to clear off-season inventory. We will introduce a refreshing new image of Kids series stores, echoing the Group’s store refurbishment plan with an aim of optimising the efficiency of our distribution network in the long run.
The Group consistently optimises A-Jelly and A-Silo technologies to enhance the functionality, protection and comfort of running products which we sell at affordable prices. With the ever-growing demand for outdoor basketball gear among young basketball lovers, we will expand the use of light-weight materials and the highly durable A-HardcourtRB rubber in our signature basketball products. To better cater to the increasingly sophisticated demand from consumers, we will optimise our product portfolio by integrating more stylish designs as well as waterproof and breathable fabrics into our diversified women’s sports, Sports Lifestyle, Kids and FILA collections.
Mr. Ding Shizhong, Chairman and CEO of ANTA Sports, said, “The volatile global economy and the ongoing slowdown in China’s economic growth will continue to affect consumer sentiment, while the inventory and discounting risks remain high in the sportswear industry. We will strive to take effective actions and measures to ensure the steady development of the Group, our supply chain partners, distributors and franchisees, as well as to create value for our stakeholders over the long run.
