Anta Sports Products saw the first signs of a possible turnaround at its latest quarterly in-house fair, where the Chinese company collected a higher value of orders than one year ago for shipments in the first quarter of 2014. Orders had been declining at the company's house fair since those that it had collected for the third quarter of 2012. The single-digit increase was attributed by Anta to continuing efforts in managing retail inventory levels, optimizing retail channels and enhancing its brand and product differentiation.
In releasing its results for the first half of 2013, the company's management said that China's sportswear industry will grow in the long term but is still facing uncertainties in the near term, associated with an unresolved problem of excess inventories, accelerating its consolidation. However, Anta's chairman and chief executive, Ding Shizhong, claimed that his company will bottom out at a faster pace than its peers because of “strong execution and proper management” of its retail network.
In the second quarter, the Anta retail stores operated by distributors and franchisees recorded flat sales on a same-store basis as compared to the same period a year ago. At the end of the period, the company had 7,834 Anta and Sports Lifestyle series stores in China, down from 8,075 at the end of 2012. It also had 811 Kids sportswear stores in China and 332 Fila stores in China, Hong Kong and Macau. The company has been encouraging its retail partners to upgrade their store image.
For the first six months of this year, Anta's turnover was down by 14.4 percent to 3,366.5 million yuan renmimbi (€413.5m-$549.9m). Footwear and apparel were down by 12.6 percent and 16.7 percent, respectively. Sales of accessories declined by 8.6 percent. The overall gross margin was off by 0.7 percentage points to 41.1 percent, but the margin on footwear rose by 0.1 percentage points to 42.6 percent, thanks in part to newly acquired production facilities.
The operating margin went down by 1.0 percentage point to 21.9 percent. A drop in advertising and promotion expenses to 9.9 percent of sales from 10.4 percent of sales in the period a year ago was offset by higher proportional spending on staff and R&D. As a result, net profits went down by 18.7 percent to RMB625.7 million (€76.9m-$102.2m). The gearing ratio declined to 9.5 percent.
The company indicated that it will continue to shut down stores in less than optimal locations, to improve the processing of replenishment orders and to further shorten lead times. It expects to end the year with about 7,600-7,700 Anta stores, 800-850 children's stores and 350-400 Fila stores.
