Yue Yuen reported a modest gain in first-quarter sales as a high-single-digit gain in its manufacturing business offset a decline in the Pou Sheng China retail business. Profits declined 24.2 percent in the period ended March 31 due to lower margins in both segments.

Revenue Analysis

In the three months, Yue Yuen recorded revenue of US$2,029.5 million, representing an increase of 1.3 percent compared
to revenue of US$2,003.6 million in the corresponding period of last year.

Revenue attributable to footwear manufacturing activity (including athletic/outdoor shoes, casual shoes and sports sandals) increased by 7.8 percent to US$1,239.5 million, compared with the corresponding period of last year. The volume of shoes shipped during the period increased by 5.3 percent to 61.9 million pairs. The average selling price increased by 2.5 percent to US$20.04 per pair as compared with the corresponding period of last year, which was attributed to a high-quality order mix.

Yue Yuen’s total revenue with respect to the manufacturing business (including footwear, as well as soles, components and others) was US$1,328.3 million for the period under review, representing an increase of 5.9 percent as compared to the corresponding period of last year.

The revenue attributable to Pou Sheng decreased by 6.5 percent to US$701.2 million, compared to US$749.7 million in the corresponding period of last year. In RMB terms (Pou Sheng’s reporting currency), revenue decreased by 5.4 percent to RMB5,107.1 million, compared to RMB5,400.3 million in the corresponding period of last year, which was mostly attributable to volatile foot traffic amid an increasingly dynamic retail environment in mainland China, despite the relatively resilient performance of its omnichannels.

Gross Profit
For the period under review, Yue Yuen’s gross profit decreased by 7.7 percent to US$464.3 million, with the overall gross profit margin decreasing by 2.2 percentage points to 22.9 percent. The gross profit of the manufacturing business decreased by 7.6 percent to US$234.7 million, while the gross profit margin of the manufacturing business decreased by 2.6 percentage points to 17.7 percent as compared with the corresponding period of last year, mainly due to uneven production leveling across various manufacturing plants, lower production efficiency, and an expanding labor force and rising wages across various regions that drove up total labor costs.

For Pou Sheng, despite its efforts to optimize inventory mix and sales structure, its gross profit margin in the period under review decreased by 0.5 percentage points to 32.7 percent, due to aggressive promotions across the retail industry.

Selling & Distribution Expenses, Administrative Expenses and Other Income/Expenses
For the period under review, Yue Yuen’s selling and distribution expenses decreased by 4.3 percent to US$206.7 million (2024: US$216.1 million), equivalent to approximately 10.2 percent (2024: 10.8 percent) of revenue. Administrative expenses increased by 1.7 percent to US$141.3 million (2024: US$138.9 million), equivalent to approximately 7.0 percent (2024: 6.9 percent) of revenue.

Total selling and distribution expenses and administrative expenses decreased by 2.0 percent to US$348.0 million, equivalent to approximately 17.1 percent (2024: 17.7 percent) of revenue.

Other income decreased by 15.9 percent to US$31.2 million (2024: US$37.1 million), equivalent to approximately 1.5 percent (2024: 1.9 percent) of revenue. Other expenses decreased by 2.3 percent to US$38.7 million (2024: US$39.6 million), equivalent to approximately 1.9 percent (2024: 2.0 percent) of revenue. As a result, Yue Yuen’s net operating expenses for the period decreased by US$2.0 million.

Profit Attributable to Owners of the Company
Profit attributable to owners of the company in the quarter amounted to US$75.8 million, representing a decrease of 24.2 percent as compared with that of US$100.0 million recorded in the corresponding period of last year.

Yue Yuen recognized a non-recurring loss attributable to owners of the company of US$0.5 million, as compared to a non-recurring profit of US$0.4 million recognized in the corresponding period of last year. This included a one-off gain on the partial disposal of associates of US$2.4 million, which was offset by a loss of US$2.9 million due to fair value changes on financial instruments at fair value through profit or loss. As a result, excluding all items non-recurring in nature, the recurring profit attributable to owners of the company for the period under review was US$76.3 million, representing a decrease of 23.4 percent as compared with US$99.6 million for the corresponding period of last year.

Outlook
Yue Yuen said, “Despite the strengthening global economic headwinds, the Group remains optimistic about the long-term prospects of the sports industry and confident in its role as a strategic supplier, sustaining demand from leading international brands. However, the near-term business environment will remain unsettled, with the risk of volatile sentiment arising from global reciprocal tariff-related challenges and inflation, weakened consumer confidence due to macroeconomic uncertainties, and recurring regional conflicts further disrupting the stability of shipping logistics. These headwinds are currently affecting order visibility for the second half of 2025, particularly in the third quarter, which is traditionally a low season.

“The Group will proactively monitor the economic developments and remains committed to its mid to longterm capacity allocation strategy. This includes diversifying its manufacturing capacity into regions such as Indonesia and India, where labor supply and infrastructure are supportive of sustainable growth. To navigate short-term uncertainties and strike an optimal balance between growth and profitability, the Group will prioritize responsiveness as its core guiding principle, implementing a comprehensive plan that ensures the disciplined and steady ramp-up of capacity expansion, thereby better balancing demand with its order pipeline and labor supply to safeguard its production efficiency.

“Yue Yuen will further also strengthen its operational resilience through its highly flexible and agile manufacturing excellence strategies, while leveraging its core competitive edges and superior adaptability. Coupled with strict cost and expense controls and its long-term digital transformation strategy, it will continue to safeguard its profitability while maintaining a healthy cash flow and a solid financial position. It will also harness its strategy of balancing sustainable value and volume growth, capitalizing on the ‘athleisure’ trend and its integrated product development capability – which combines automation technology with R&D strength– to seek quality orders with a solid product mix.”

Photo courtesy Yue Yuen