Anta Sports said it expects a low-double-digit decrease in revenues for the first half of 2020 due to the fallout from the coronavirus, but sales are expected do recover in the second half and growth is still expected for the year.
The Chinese sporting goods giant provided the update while reporting a revenue increase of 40.8 percent in 2019 to ¥33.93 billion, reflecting a strong growth of over 40 percent for two consecutive years. Revenue of the Anta brand reached ¥17.45 billion, up 21.8 percent and revenue of the Fila brand reached ¥14.77 billion, up 73.9 percent.
Profit from operations increased by 52.5 percent to ¥8.69 billion, of which profit from operations of the Anta brand reached ¥4.68 billion, up 26.2 percent and profit from operations of the Fila brand reached ¥4.02 billion, up 87.1 percent.
Profit attributable to equity shareholders was ¥5.34 billion, up 30.3 percent, reaching a new high and maintaining growth of 30 percent, or above, for three consecutive years.
Overall gross profit margin was 55.0 percent, operating profit margin was 25.6 percent and margin of profit, attributable to equity shareholders, was 15.8 percent. Free cash inflow was ¥6.43 billion.
The Group has a total of 12,943 stores: Anta (including Anta KIDS standalone stores) in Chinese mainland stood at 10,516, Fila (including Fila KIDS and Fila FUSION standalone stores) in the Chinese mainland, Hong Kong, Macao and Singapore stood at 1,951 and Descente in Chinese mainland reached 136.
Retail sales (in terms of the retail value) of Anta and Fila branded products for the full-year 2019 increased by mid-teens and 55-to-60 percent, respectively, compared to the same period of 2018.
Anta said that prior to the COVID-19 outbreak, brands under the Group had realized strategic plans of both online and offline development; in the early stage of the outbreak, the Group also reacted promptly to offset the fallout from the coronavirus implementing strict cost management, exercising community marketing, building more flexible supply chains, maintaining on-time logistics and deliveries, and promoting e-commerce innovation. The Group is estimated to be subjected to a low-double-digit business decrease for the first half of 2020; however, the momentum is also projected to be regained in the second half as the domestic economy is rebounding. Therefore, the Group is confident to achieve positive annual growth by the end of 2020.
Up until now, cash and cash equivalents in the Group’s books are worth nearly ¥18 billion, and financing channels of the Group are still reliable and stable indicating a secure and healthy financial position. Anta said, “From a long-term perspective, the Covid-19 outbreak will not last for an indefinite period of time, and consumers’ needs for health and fitness products will definitely be heightened which will contribute to the Group’s swift recovery after the crisis.”
Anta’s release also noted that in 2019 Anta initiated the globalization strategy and finalized the acquisition of Amer Sports. In terms of Amer’s post-acquisition business objectives, the Group proposed a five-year growth plan of “five 1 billion euros”, which means upgrading the value of Arc’teryx, Salomon and Wilson to brands of 1 billion euros in retail sales each and earning 1 billion euros respectively in the China market and through direct-to-consumer (DTC).
During the first two months of 2020, Amer Sports was on track as originally planned; however, the business became affected by the COVID-19 outbreak in March. Yet, given the seasonality of Amer Sports (AMER) core products, sales of fall and winter merchandise normally take up over 65 percent of its annual sales; so, if the virus can be contained before the fall and winter selling season, its influence of AMER’s full-year earnings will also be appropriately curbed.
“The unexpected coronavirus outbreak in early 2020 has undoubtedly brought unprecedented challenges to the global consumer market. However, the more challenging it is, the more decisive and persistent we should be. We should hold on to our core values, because this is an excellent opportunity to go for efficiency and carry forward effective reforms,” said Ding Shizhong, chairman of the Board of Directors and CEO of the Anta Group. “We will focus on consumers and reconstruct our mindset, believe in long-termism and go after high-quality growth. We will also uphold the principle of organic business operation, improve our management efficiency and hunt for opportunities in various crises. In the face of more lurking ‘black swan’ incidents, enterprises should not just rely on prompt and decisive reactions, but they should also assess whether their regular operations are reliable and solid or not, as this is the key to survival and success. Back to 2012, we accumulated a lot of practical experiences in the inventory crisis of the sportswear industry, and we were the first one to recover business performance successfully. Our persistence and resilience against risks and uncertainties have been fully validated. Therefore, we believe that the current coronavirus outbreak will push the health and sportswear industry to the next level and create critical opportunities for reforms and innovation in the industry. We are fully confident about the recovery of the sports market after the outbreak and the Group’s long-term growth. Given the status quo, brands under the Group will stand together and provide better products and services in innovative ways for consumers around the world. Our goal of achieving a retail sales value of 200 billion RMB by 2025 will remain unchanged.”
The full 2019 results release is here.
Photo courtesy Anta