Yue Yuen Industrial Limited, the Chinese footwear manufacturer for brands like adidas, Nike, Timberland, Puma, and several other outdoor and athletic companies, reported sales for the fiscal third quarter increased 18.4% to $1.02 billion compared to $859.0 million last year. Most of the sales growth was driven by increased orders for outdoor footwear, athletic footwear, and components, while orders for sandals were up in the low-singles.
The company has produced 150.8 million pairs of shoes for the year-to-date period. Retail sales increased 83.7% during the quarter due to Chinese mainland retail and wholesale operations, which have doubled in size so far this year.
Gross margins increased 70 basis points during the fiscal third quarter to 22.4% compared to 21.7% last year in spite of “buoyant material prices and rising labor costs.” Much of the increase in gross margin was due to the jump in Chinese mainland retail and wholesale operations. Net income increased 22.8% for the fiscal third quarter to $101.0 million compared to $82.2 million last year.
During the quarter, sales growth in South America, Asia, and other countries outpaced the high-teens increases in the U.S. and Canada. Sales into European countries were up in the high-singles. Sales to customers in developing markets now account for over a third of Yue Yuens business with Asia accounting for the lions share of that number; sales to Asia are now a larger part of the business than Europe.
Looking ahead, Yue Yuen management expects fourth quarter sales to remain stable.
So far, fourth quarter sales are up 12.2% to $616 million. The companys manufacturing capacity expansion is on-track.
Yue Yuen is also focusing on expanding its reach into the China retail market even further and is looking to have over 1,000 shops by 2008.
| Yue Yuen Industrial Ltd. | |||||
| Fiscal Third Quarter Sales Breakdown | |||||
| (in $ millions) | 2006 | %/ttl | 2005 | %/ttl | Change |
| Category Breakdown | |||||
| Athletic | $603.4 | 59.3% | $527.2 | 61.4% | +14.5% |
| Casual & O/D | $169.5 | 16.7% | $152.8 | 17.8% | +10.9% |
| Sport Sandals | $5.9 | 0.6% | $7.4 | 0.9% | -20.3% |
| Soles/Comps | $141.5 | 13.9% | $116.5 | 13.6% | +21.5% |
| Apparel | $79.9 | 7.9% | $43.5 | 5.1% | +83.7% |
| Retail | $16.9 | 1.7% | $11.6 | 1.4% | +45.7% |
| Geographic Breakdown | |||||
| United States | $377.0 | 37.1% | $320.4 | 37.3% | +17.7% |
| Canada | $20.9 | 2.1% | $17.8 | 2.1% | +17.4% |
| Europe | $272.9 | 26.8% | $253.0 | 29.5% | +7.9% |
| So. America | $26.1 | 2.6% | $18.0 | 2.1% | +45.0% |
| Asia | $292.6 | 28.8% | $231.5 | 26.9% | +26.4% |
