Xtep Intl., the publicly traded Chinese company, whose business models consists of its own label for the nation’s mass market and four western brands (K-Swiss and Palladium, globally, and joint ventures for Merrell and Saucony in Mainland China) targeting the premium market, reported a 12.7 percent increase in H1 profitability to 665.4 million yuan renminbi (€88.9m) for the six months ended June 30.
Saucony became the first brand in the company’s professional sports unit, which also consists of Merrell, to turn a profit during a reporting period. The professional sports segment sales rose 120 percent year-over-year to RMB 344.2 million (€46.0m) and recorded an operating profit of RMB 19.1 million (€2.6m). Saucony became the group’s first brand to utilize the new Xtep Shanghai operation center in May, enabling the brand to better reach target consumers in higher-tier cities in China and keep up-to-date on market trends. Xtep opened the first third-generation Saucony store at the Shanghai Super Brand Mall in June. At period end, there were 80 Saucony and five Merrell doors in Mainland China.
Elsewhere, the mass market segment driven by the Xtep brand achieved 11 percent sales growth in H1 to RMB 5,429.6 million (€725.4m) and a 13 percent gain in period profitability to RMB 871.0 million (€116.4m). The group said the brand’s ninth-generation stores have “drastically enhanced” the brand’s image, store traffic, and demand among younger consumers. On June 30, there were 6,443 Xtep branded stores mainly operated by group distributors in Mainland China and elsewhere in the world.
The Athleisure segment underwent a rebranding in Mainland China during H1. At period end, there were 80 K-Swiss doors in Asia-Pacific and 60 Palladium locations. H1 revenues rose 19 percent to RMB 748.6 million (€100.0m). The group said that a decline in discretionary spending by European and U.S. consumers amid rising interest rates has clouded the outlook for the segment outside of Asia-Pacific. The company intends to accelerate the opening of new K-Swiss stores in higher-tier cities in Mainland China, adjust the product mix, and introduce professional tennis sportswear under the label. Palladium, meanwhile, will introduce more products geared toward younger consumers.
