Yue Yuen Industrial Limited, the Chinese footwear manufacturer for brands like adidas, Nike, Timberland and Puma, reported first half sales increased by 16.5% to $1.72 billion compared to $1.48 billion last year. The driver behind the revenue growth was Yue Yuens core manufacturing operation and increased wholesale and retail sales in greater China, which were up 110.7% to $138 million in the first half ended March 31. Excluding a one-time gain from the adoption of new accounting standards, net income would have risen 8.1% to $158.1 million. Gross margins, which declined 80 basis points to 23.4% of sales in the first half, continue to be impacted by rising raw materials and labor costs, but also got help from the increased retail contribution.
Sales to the U.S. increased 9.0% to $648.7 million during the first half while EU sales increased 12.2% to $448.3 million. Sales into Asia were up 29.1% to $502.9 million, passing Europe for the first time in a first half period. Canada and South America still posted the highest growth percentages, up 31.3% and 34.1% respectively, but off of a much smaller base. Sales to South America surged more than 50% in the second quarter.
While footwear manufacturing declined as a percentage of the overall business, down to 59.1% of revenues from 62.2% in H1 last year, the total number of shoes produced during the period increased 6.9% to 96.6 million pairs compared with 90.4 million pairs last year, nearly half the growth rate seen in H1 last year. Retail sales now account for roughly 8.0% of the groups total revenue, up from 4.5% in H1 last year, a percentage that increased even more in the second quarter.
After Athletic Footwear took a step back as a percentage of total footwear manufacturing in the first quarter as more revenue came out of Casual and Outdoor and Sport Sandals, the category outpaced the other footwear categories in the second quarter through March.
| Yue Yuen Industrial Ltd. | |||||
| 2006 Second Quarter Sales Breakdown | |||||
| (in $ millions) | 2006 | %/ttl | 2005 | %/ttl | Change |
| Category Breakdown | |||||
| Athletic | $496.2 | 58.8% | $443.4 | 62.1% | 11.9% |
| Casual & O/D | $142.2 | 16.8% | $134.0 | 18.8% | 6.1% |
| Sport Sandals | $14.3 | 1.7% | $16.9 | 2.4% | -15.4% |
| Soles/Comps | $107.7 | 12.8% | $93.0 | 13.0% | 15.8% |
| Retail Sales | $72.9 | 8.6% | $38.6 | 5.4% | 88.9% |
| Other | $10.9 | 1.3% | $5.6 | 0.8% | 94.6% |
| Geographic Breakdown | |||||
| United States | $329.9 | 39.1% | $306.2 | 42.9% | 7.7% |
| Canada | $13.9 | 1.6% | $12.5 | 1.8% | 11.2% |
| Europe | $194.2 | 23.0% | $180.2 | 25.3% | 7.8% |
| So. America | $19.4 | 2.3% | $12.9 | 1.8% | 50.4% |
| Asia | $265.5 | 31.4% | $202.3 | 28.4% | 31.2% |
