Yue Yuen Industrial showed a 3.7% decline in net profits in the third quarter ended June 30, to $119.3 million from $123.9 million a year earlier. A booming business in China is being offset by weakness in North America and Europe.  Sales in the period gained 2.7% to $1.30 billion from $1.26 billion. Gross margins were relatively flat, at 21.8% versus 21.7% a year ago. Figures were broken out from nine month results.


In its statement, the Hong Kong footwear giant, which manufactures footwear for many of the world’s largest sports footwear brands, noted revenue growth of the Great China wholesale and retail operations “accelerated in light of surging domestic consumption for sporting goods.” But it said the overall operating environment “has been challenging due to [the] rise in material prices and labor costs.”


In July and August, sales rose 16% to $714.4 million reflecting a “solid position in [the company’s] footwear manufacturing businesses and the soaring contributions from China wholesale and retail operations.”  Yue Yuen said it will continue to expand its retail network in China through organic growth and acquisitions. The company has branched out into retail in China by launching shops and counters — both licensed shops, such as Reebok outlets, and under its own moniker, YY Sports. Yue Yuen also said its footwear manufacturing capacity expansion is on schedule.