Shifting to higher-end products, the world’s largest shoe manufacturer managed to raise the average selling price of the products made at its factories by 6.5 percent to $18.37 per pairs in the first half of 2021. This helped Yue Yuen Industrial (Holdings) to expand the gross margin of its footwear manufacturing operations by 4.5 percentage points to 18.3 percent, and the company said it plans to focus on the more expensive and profitable athleisure segment in the future to generate profitable growth in the long term.
The number of pairs delivered during the six-month period grew by 5.0 percent to 136.4 million. Sales of soles, components and other products jumped by 58.2 percent to $281.1 million, making a small contribution to a 15.2 percent increase to $2,786.6 million in revenues from the group’s manufacturing operations. While sales of athletic and outdoor footwear rose by 8.2 percent to $2,081.4 million, sales of casual shoes and sports sandals went up by 33.4 percent to $424.1 million.
Yue Yuen boasted a record high 89 percent capacity utilization rate and better operational efficiencies as further drivers of its improved profitability. Vietnam accounted for 45 percent of its production during the period, and Yue Yen said it is trying to reallocate it to other countries because of the temporary shutdowns ordered by the Vietnamese government due to the spreading Delta variant of Covid-19. Indonesia and China represented 41 percent and 10 percent of the production, respectively.
Yue Yuen’s retail subsidiary, Pou Sheng, experienced a higher rate of recovery from last year’s pandemic. In the first half, its sales went up by 21.2 percent to $2,020.5 million, although they lagged 5 percent below the corresponding level of 2019. As Pou Sheng is a major retail partner for major sports brands such as Nike and Adidas, it no doubt suffered in part from the Chinese boycott of western brands over sourcing in the Xinjiang region that started in March.
Pou Sheng’s gross margin rose by 6.1 percentage points to 36.1 percent as compared to a year ago, mainly due to an effective promotion strategy, disciplined discount control and an enhanced sales mix, said Yue Yuen, in addition to the higher sales.
The group’s total revenues rose by 17.7 percent to $4,807.1 million in the first half. Gross margins improved sequentially from the first to the second quarter in both the manufacturing and retail division of the group, which turned around to a net profit of $170.2 million in the first of half of this year from a loss of $136.7 million in the corresponding 2020 period. Excluding impairments and other extraordinary items, Yue Yuen recorded a net profit of $173.5 million against a loss of $123.6 million.
The company will forego a dividend in order to preserve cash until the global pandemic is under control, but said it was “cautiously optimistic about its continued recovery momentum” in view of the vaccination campaigns taking place around the world.
After rolling out the third wave of its SAP ERP implementation in its manufacturing business, it will continue to explore ways to digitalize its processes further to cater to a fast-moving market environment and increased demand from brand clients for greater versatility, flexibility, faster turnaround times, on-time delivery and end-to-end capability.