Stella International Holdings Limited reported that consolidated revenue for the year ended December 31 increased by 5.9 percent to $1.63 billion, compared to $1.54 billion in 2021. Shipment volumes for the year rose by 0.4 percent to 56.0 million pairs from 55.8 million pairs in 2021, led by the company’s Fashion and Sports segments.

“We saw an expansion of our gross profit margin and operating profit margin as we successfully implemented our growth strategies and improved our product and customer mix, despite a weakening global economy and inventory challenges faced by some of our customers,” the company shared in a release. “We continued to add new customers, particularly in our Luxury and high-end Fashion segments and committed to growing with them in anticipation of them making a significant contribution to our profitability in the coming years.”

Reported operating profit for the year increased by 30.9 percent to $134.8 million due to “higher revenue, an improved customer mix, enhanced production efficiency, and cost controls.

The Hong Kong-based developer, manufacturer and retailer of footwear and leather goods recorded a net profit of $117.2 million for the year ended December 31, 2022, compared to $90.8 million in 2021.

“As we work towards implementing our strategies, we remain committed to returning profits and providing attractive returns to our shareholders,” the company shared. “After considering the Group’s free cash flow situation, the Board has resolved to declare a final dividend of HK45 cents per ordinary share, representing a full-year dividend of HK87 cents per ordinary share for the year ended 31 December 2022, representing a payout ratio of about 75 percent.”

“We are facing stronger headwinds in 2023 compared to 2022 with weakening economies and global inflation crimping consumer sentiment in both North America and Europe. At the same time, some of our customers, particularly in the Sports and Casual segments, are grappling with inventory challenges that may impact our order book, especially in the first half of the year,” the company commented.

“However, the sudden removal of all COVID-19 restrictions in China at the end of 2022 caught many of our brand customers by surprise and this may positively influence ordering activity, particularly in the second half of the year.”

As part of its long-term strategy, the company is embarking on a three-year plan, from 2023 to 2025, focusing on growth and margin expansion. Including:

  • enhancing category mix by deepening relationships with major global sports brands, luxury and high-end fashion brands to better align with the company’s strengths and capabilities;
  • expanding and diversifying its manufacturing capacity to protect its cost base, including ramping up the company’s new footwear factory in Solo, Indonesia that began production in 2022; 
  • working together with a brand partner to develop an exclusive sports footwear factory in Indonesia; 
  • committing to increasing production capacity in Bangladesh, starting in 2023;
  • optimizing management effectiveness and efficiency;
  • strengthening cost efficiency and improving working capital; and
  • increasing operational efficiency.

Chi Lo-Jen, CEO of the Group, said, “While 2022 posed more challenges than expected, we navigated these well, delivering higher gross and operating profit margins as we implemented our growth strategies and improved our product and customer mix. This is convincing proof that we are on the right path to secure future profitability growth and returns for our shareholders.”

Lawrence Chen, chairman of the Group, said, “As we continue to implement our strategies, we are optimistic about our medium and long-term growth. The goals for our Three-Year Plan (2023 to 2025) are to achieve an operating margin of 10 percent and a low-teens annualized growth rate on profit after tax during the period.”