361 Degrees International grew at a slower pace of 7.3 percent in the first half of this year, reaching a turnover of 3,236.8 million yuan renminbi (€407.4m-$451.9m), but the attributable profit went up by 9.7 percent to RMB 367.4 million (€46.2m-$51.3m), equal to a net margin of 11.3 percent. The gross margin declined by 0.7 percentage points to 40.9 percent, as the company decided against passing on higher production costs to consumers, and the operating margin contracted by 1.1 percentage point to 19.8 percent.
Volume deliveries declined, but average selling prices (ASP) went up, helping the company to record a high turnover, especially in apparel. The company says it continued to strengthen brand building and optimized its product line in response to a more diverse and sophisticated demand for sports products in China.
The company's revenues from clothing rose by 12.1 percent to RMB 1,355.7 million (€170.6m-$189.3m) in the first half, thanks to a shift to more signature items and a higher proportion of skiwear in the product mix, as winter sports are offering the biggest potential at the moment. The number of units sold actually declined by 15.0 percent to 14.7 million pieces, and the gross margin on apparel fell by 1.9 percentage points to 40.2 percent.
Sales of 361° footwear improved by 3.8 percent to RMB 1,414.3 million (€178.0m-$197.5m), but the number of pairs delivered fell by 4.4 percent to 13.3 million. On the other hand, the gross margin on footwear rose by 0.4 percentage points to 42.4 percent.
Sales of accessories dropped by 5.3 percent to RMB 38.4 million (€4.8m-$5.4m), although their volume increased by 19.9 percent. After its rapid expansion of the last few years, sales of the 361° Kids line grew by only 6.6 percent to RMB 388.4 million (€48.9m-$54.2m).
The number of 361° Kids stores remained steady at 1,837. On the other hand, the company continued to reduce the number of regular 361° stores in China to 5,444 from 5,539 at the end of last year. Only 6.6 percent of the stores are located in first-tier cities and 18.5 percent in second-tier cities. Products sold exclusively on the internet enjoyed a 28.5 percent sales increase, contributing 13.1 percent of group revenues.
Internally produced items represented 39.5 percent of the total cost of sales for footwear and apparel, up from 35.3 percent a year earlier.
International sales made up about 2 percent of the total turnover, up from 1.5 percent a year ago, but 361° had fewer retail clients in the U.S. and Taiwan. The company's products were sold at the end of June at 1,505 points of sale in Brazil, 739 in Europe, 476 in the U.S. and 107 in Taiwan. Comparatively, the store count at the end of 2018 was 1,446 in Brazil, 619 in Europe, 1,131 in the U.S. and 147 in Taiwan.
The Chinese sports brand marked the 10th anniversary of its listing on the Hong Kong stock exchange on June 18 by announcing a re-branding as a leading provider of technologically advanced sports products to the mass market, while upholding the concept of “One Extra Degree of Passion” to justify its brand name. The strategy is based a research showing that 20 percent of “mainstream consumers” account for 70 percent of total retail sales in China and that they are willing to pay a certain premium for good products with brand value.
The company said it would launch a campaign based on “The Starting Line,” whose name is obviously inspired by The Finish Line in the U.S. 361° is also making a push into the junior football market through the sponsorship of training centers and leagues, as the sport is getting more popular in China.