Yue Yuen continued to diversify and reduce its dependence on the U.S. athletic footwear market. The first half of fiscal 2004 proved to be solid for the Hong Kong based manufacturer, with total company sales increasing 1.3% to $1.26 billion from $1.24 billion in H1 LY .
Gross margins continued to decline throughout the first half, falling 225 basis points from 26.9% of sales in 2003, to 24.6% of sales this year. The company said that “spiraling raw material costs” were the main reason for the decline.
In spite of these lower margins, the company posted a 10.1% increase in net profits, from $151.6 million to $158.3 million. This was due in large part to the sale of Yue Yuens interest in Pou Chen, which netted the company $26.3 million in early Q1.
Business slowed down for Yue Yuen in the second quarter. Sales declined 2.6% from 630.2 million to 613.7 million. Net profit for the second quarter fell 21.9%, from $82.5 million down to $64.4 million. The Pou Chen sale was recorded in Q1, so no benefits were recorded in Q2. Gross margins in the second quarter showed a slight increase over the first quarter 24.7% in Q2 compared to 24.5% in Q1. Second quarter margins declined 280 basis points year-on-year, from 27.5% last year to 24.7% this year.
>>> Look for Yue Yuen to make continued investments in the apparel market in advance of the elimination of quota at year-end
>>> Look for retail to expand as China heats up…
