In a statement, Pou Sheng said, “Subdued consumer confidence and elevated industry inventory levels in mainland China market led to aggressive promotional activities and pressured the group’s top-line performance. This resulted in operational deleverage, due to intense discount pressures and a decline in sales, which significantly constrained the group’s profitability.”
Yue Yuen Industrial Ltd. (YY, Group) and its Manufacturing business report in the U.S. dollar ($) currency, while the company’s Pou Sheng China retail business reports in the Chinese renminbi (RMB, Yuan) currency.
Profits for the year are expected to reach RMB211 million ($30.8 mm) for the year ended December 31, compared to RMB491 million in 2024. Sales are expected to decline 7.2 percent to RMB17.1 billion ($2.5 bn).
“The decrease in profit attributable to owners of the company for the year was primarily driven by operational deleverage,” said Pou Sheng in its statement. “The mainland China market encountered subdued consumer confidence and elevated industry inventory levels, leading to aggressive promotional activities and impacting the Group’s top-line performance. The Group’s retail stores experienced a further slowdown in sales momentum, driven by sustained weakness in foot traffic and a mid-teens percentage decline in same-store sales. Lower-tier cities also saw sluggish foot traffic, substantially undermining the performance of its sub-distributor channels.”
Pou Sheng said that despite “rigorous inventory management,” inventory mix changes, , digital capabilities enhancement, expense control and organizational adjustments, operational deleverage occurred “due to intense discount pressures and a decline in sales, which significantly constrained the group’s profitability.”
On the positive side, Pou Sheng said its “online sales momentum remained solid as it continued to enhance its omni-channel capabilities in mainland China’s highly competitive sportswear e-commerce landscape, while maintaining a high degree of agility and flexibility in its decision-making and systematically developing its online presence. This partly offset weak foot traffic in the Group’s retail stores.”
Pou Sheng concluded, “Against a still-uncertain economic backdrop, the Group maintained solid cash position through its holistic and disciplined approach to channel planning and inventory management. In January 2026, the company undertook a number of share repurchase transactions, demonstrating its confidence in its long-term prospects and intrinsic value amid a volatile market environment.”
Image courtesy WSJ
