The Chinese company, which markets the Xidelong brand of sports shoes and clothing, announced that its revenues for the second quarter ended June 30 declined by 24.2 percent to 562.0 million yuan renminbi (€70.8m-$88.3m) compared with the same period of last year. The company added that it expects revenues to decline up to 43 percent in the third quarter, due in particular to the ongoing weakening of the Xidelong brand on the Chinese market.
Exceed produces or sells running, leisure, basketball, skateboarding and canvas footwear, as well as sports tops, pants, jackets, tracksuits and coats, and bags, socks, hats and caps.
Revenues from apparel decreased by 24.9 percent in the second quarter, with a 24.5 percent decrease in sales volume. Sports apparel, whose production is entirely outsourced, accounted for 49.3 percent of revenue for the second quarter.
In the footwear segment, which accounted for 48.7 percent of revenue in the quarter, sales went down by 25.1 percent compared with the same period in 2011. For the first six months of the year, however, revenues from footwear were up by 9.9 percent whereas apparel sales were off by 12.3 percent.
The gross margin for the quarter was off by 2.2 percentage points to 28.8 percent, compared with the year-ago period. The operating profit decreased by 67.7 percent to RMB 35.5 million (€4.5m-$5.6m). The net profit decreased by 81.1 percent to RMB 30.0 million (€3.8m-$4.7m).
The company added 60 Xidelong retail stores during the quarter, raising their total number to 4,982 by June 30.
The quarterly revenues ended up a little higher than expected. The company mainly attributed the negative performance in the second quarter of 2012 to the weakening consumer demand in China, which resulted in a decrease in overall sales volume across the main footwear and apparel product lines. In response to the difficult market conditions, the company began in the second quarter to proactively limit production and delivery of products to better manage inventory levels for its distributors.
For the remainder of the year, the company plans to focus on strengthening brand equity through effective marketing and a prudent expansion of its distribution network. The company pointed out that its expansion plans have not been finalized and may be subject to change in the future, but indicated interest in possible licensing agreements with foreign brands to target different market segments.
