Stella International’s profits for 2019 soared by 54.2 percent to $95.9 million. It attributed this improvement in profitability to progress in migrating production capacity from Mainland China to Southeast Asia, including the ramping up of operations at its new manufacturing facility in Vietnam, which makes sports fashion footwear for Nike. It also believes that the efficiency gains it achieved as the result of the ongoing refinement of its manufacturing footprint enabled the company to become more responsive to its customers, while also raising its ability to defend its margins.
The Chinese company’s revenues were down by 3 percent from the previous year to $447.9 million. However, the gross margin rose by 1.6 percentage points to 19.0 percent, while the adjusted operating margin, which excludes finance costs, tax expenses and one-off items, improved by 1.2 percentage points to 8.2 percent.
Fashion footwear continues to be the largest part of its business, accounting for 38.0 percent of sales, compared with 36.2 percent in 2018. Sports fashion has grown to represent 35.1 percent of turnover, up from 32.7 percent for the previous period. Conversely, the share of the casual segment dropped from 29.3 percent to 25.6 percent.
By region, North America was responsible for 51.2 percent of sales, followed by Europe at 27.6 percent and China at 12.1 percent.
The management said that operational stability will be the focus in 2020, followed by margin optimization through efficiency improvements and changes to the product mix. It will also further diversify its manufacturing base from China to Southeast Asia.
In addition, Stella will integrate its leathergoods business into the listed company. Over the past few years, it has progressively developed a capability for manufacturing high-end handbags and small leather goods for luxury brands looking to outsource their production. Over time, it expects the leathergoods business to be a new growth driver, as it adds more high-end customers and explore synergies between this segment and its footwear manufacturing operations.