Anta Sports Products strengthened its position as the leading Chinese sports brand, with a sales increase of 22.5 percent to 8,922.7 million yuan renminbi (€1,253.5m-$1,426.5m) last year. It was the first major Chinese brand to report on a full year that marked a recovery for the Chinese sportswear market and nearly all of its main protagonists.
The group's gross profit margin increased by 3.4 percentage points to 45.1 percent, as it reaped more generous margins on sales of Fila-branded products and no longer had to provide the same level of incentives to its distributors to clear their inventories. Anta also reversed a previous write-down on inventories.
The group's operating profit margin advanced by 1.1 percentage point to 22.6 percent. It ended the year with net profit of RMB 1,700.3 million (€238.9m-$271.8m), an increase of 29.3 percent.
Several other Chinese brands and retailers have already reported improved results for the first half of 2014 and Anta's performance contrasts sharply with the situation at Li Ning, once the largest Chinese sports brand, which warned that it made a loss last year for the third year in a row.
Anta has navigated the issues caused by unsold inventories better than most of its competitors in the recent years, enabling it to gain substantial market share. The company has stuck to a brand strategy in which it targets the mass market but still invests in sports performance and marketing to distinguish itself from cheaper sports and fashion brands.
Anta is also one of the companies that most consistently tightened its relationship with its retail partners and implemented an ERP system to reduce gaps between supply and demand. It has been directive in its guidance on retail orders as well as the implementation of store programs to support its product ranges. It slightly reduced its network last year, down to 7,622 stores at the end of 2013 compared with 7,757 the previous year.
The brand's sales increased across the board last year. Apparel sales were up by 24.5 percent to RMB 4,451.2 million (€625.3m-$711.6m), while footwear sales moved up by 20.2 percent to RMB 4,110.5 million (€577.5m-$657.2m) and sales of accessories amplified by 26.2 percent to RMB 361.0 million (€50.7m-$57.7m).
Apparel recorded the strongest gains in gross margin, up by 4.9 percentage points to 44.5 percent, while the gross margin was up by 1.9 percentage points to 46.4 percent for footwear and by 3.2 percentage points to 38.0 percent for accessories.
The Anta brand has been aided by its association with the Chinese Olympic Committee. While China was not overly impressive at the Sochi Winter Olympics, many medals were won at the Asian Games in Incheon in September and October. Anta made outfits for 24 Chinese national teams. It also started its first collaboration with China's gymnastics, weightlifting, wrestling and judo sports management centers.
Furthermore, Anta made a splash in basketball through an agreement sealed in October with the National Basketball Association (NBA), turning Anta into the official marketing partner of NBA China and allowing it to sell co-branded products. This was the first time the NBA teamed up with a Chinese brand for such merchandise.
The deal gives Anta the right to make products adorned with the logo of the NBA and the thirty NBA teams. Anta started by making co-branded shoes for eight NBA teams, such as the Houston Rockets and the San Antonio Spurs, as well as Anta and NBA-branded backpacks, socks and wrist bands. Such products are sold in over 2,000 Chinese stores as well as online channels. The partnership with the NBA is also used for grassroots and other marketing events.
Anta's exposure in the basketball market was further heightened last year through an endorsement deal with Chandler Parsons, starting small forward for the Dallas Mavericks. The brand already has a roster of NBA players featuring Kevin Garnett, Luis Scola and Rajon Rondo, for whom Anta organized a well-publicized tour in China in September. Apart from store and office visits, the tour included the first Ball Control Training Camp, a program set up by Anta to help cultivate top point guards in China.
These players support Anta's Basketball is Priceless strategy: Unlike some other companies, which use the names of star endorsees to sell top-priced basketball footwear, Anta sells shoes endorsed by these players as National Basketball Shoes, which may be priced as low as RMB 399 (€56-$64).
When it comes to running, Anta scored strongly with its running shoes using A-Web 2.0 technology, retailing at about RMB 350 to RMB 450. The shoes are made with knitting technology producing a single-piece upper, and A-Loop technology for the sole.
Anta also sponsored the Olympic Day Run for the sixth consecutive time, to help support growing participation in running. Jointly organized by the COC and regional offices, the run started simultaneously in 19 Chinese cities and more than 80,000 runners participated. This time the effort was leveraged for an Olympic Day Run charity program. The sports marketing investments have been used consistently in stores through displays, including prominent Chinese Olympic Committee Corners and Grand Basketball Corners at key stores.
The group's sales were bolstered by demand for its Anta Kids range. It was sold by 1,228 stores at the end of the year, compared with 881 the previous year. The agreement with the NBA allows Anta to make co-branded children's products as well.
At the same time, Anta continued to pursue its multi-brand strategy with the opening of more Fila stores. The group had 519 of them at the end of the year in China, Hong Kong and Macao, compared with 416 at the same time in 2013.
Fila is sold as an upmarket sportswear brand. Its aspirational status was reinforced last February through a partnership with Lee Min Ho, a popular Korean actor. Among other commitments, he appeared at an event in Shanghai to promote the “Anna Sui for Fila” range, made by an ethnic Chinese designer. Fila also gained prominence by outfitting reporters of the CCTV sports channels during the football World Cup. Separately, Anta has been optimizing its Fila distribution network and improving retail management for the brand in a bid to lift its profitability.
Anta wants to develop along the same lines this year. The company predicts that it could gain market share through its strong presence at prime locations in high-potential cities. The group expects to have between 7,400 and 7,500 stores by the end of the year, as well as 1,500 to 1,600 Kids stores and 550 to 600 Fila stores in China.
The group also wants to support the growth of online retailing by launching more exclusive products for this channel. Anta's control over its distributors and franchisees should be reinforced through a business management platform that enables it to monitor retail store operations more efficiently, through data collected from its ERP system.
