Xtep International Holdings of China recorded a 29.5 percent drop in net income for 2020, down to 513.0 million yuan renminbi (€66.1m-$78.8m), on revenues that inched down by 0.1 percent from the previous year to RMB 8,171.9 million (€1.05bn-$1.25bn). The gross margin declined by 4.3 percentage points to 39.1 percent, due to higher discounts, while the operating margin lost 2.6 percentage points, declining to 6.3 percent.
Representing 86 percent of the group’s turnover, the core Xtep brand saw sales decline by 8 percent to RMB 7,101.1 million (€914.9m-$1.09bn). Sales at Xtep Kids remained stable. Newly added operations contributed higher sales as well as financial losses.
As previously reported, the group acquired the K-Swiss and its various footwear labels in 2019, including Palladium and Supra. They are part of the company’s athleisure segment, whose sales more than doubled to RMB 999.1 million (€128.7m-$153.5m). However, the segment posted an operating loss of RMB 103.8 million (€13.4m-$15.9m). International sales of K-Swiss and Palladium decreased in the U.S. and Europe, despite strong online sales, which progressed by 45 percent in the U.S. and by 52 percent in Europe.
A smaller contribution came from the company’s new joint venture with Wolverine Worldwide, which sells the Merrell and Saucony brands in China. It forms the professional sports segment, which rocketed seven-fold to RMB 71.7 million (€9.2m-$11.0m), but lost RMB 30.0 million (€3.9m-$4.6m) in terms of profitability. At the end of 2020, there were 32 Saucony doors and six Merrell stores in operation.
Overall, the group’s footwear sales advanced by 9 percent to RMB 5,046.7 million (€650.3m-$775.6m), led by the Jlin One signature basketball shoe and the 160x flagship shoe.
However, apparel sales dropped by 11 percent to RMB 2,963.9 million (€381.9m-$455.5m). The Xtep x Shaolin collection proved popular. Accessories fell by 13 percent to RMB 161.3 million (€20.8m-$24.8m).
At the end of the year, there were 6,021 Xtep branded stores in operation, or 358 fewer than at the end of 2019.
Building on the improvement it saw in the second half of the year, Xtep forecasts a recovery in China in 2021, led by an aggressive campaign of store openings for its non-core brands. It said K-Swiss will benefit from a brand revamp and business restructuring this year.