The Chinese group, having proposed a strategic divestiture of its K-Swiss and Palladium businesses in May, is moving ahead with a streamlined business focused on its core Xtep brand for the mass market in China, the Saucony brand “for high-end, sophisticated consumers,” and Merrell for the trail running and outdoor markets. Xtep acquired the remaining interest in Saucony and Merrell joint ventures in the Chinese market from Wolverine Worldwide earlier this year. The Saucony brand will continue to focus on the performance running market and “social elites” in China and concentrate on localized designs and lifestyle offerings. New-look Saucony stores will be opened in higher-tier cities. As for Merrell, it will continue to explore growth through the e-commerce channel as its product line expands.
In H1, which ended June 30, Saucony and Merrell, making up the company’s Professional sports segment, generated a 72 percent year-over-year increase in sales to 592.5 million yuan renminbi (€74.3m) from RMB 344.2 million in the year-ago period. Meanwhile, the Xtep mass market segment generated a 6.6 percent improvement in year-over-year sales to RMB 5.79 billion (€725.9m), and the athleisure segment (K-Swiss and Palladium) reported a 9.7 percent year-over-year gain in sales to RMB 821.5 million (€103.2m). There were 105 K-Swiss and 114 Palladium stores across Asia-Pacific at the end of the period.
A deeper dive into Xtep’s H1 results shows a 13 percent increase in net profit to RMB 752.1 million (€94.3m) and an 11 percent gain in six-month operating income to RMB 1.09 billion (€137.2m). Total revenues grew by 10 percent year-over-year to RMB 7.20 billion (€906.6m) from RMB 6.52 billion in the year-ago period. Gross margin improved by 310 basis points to 46.0 percent from 42.9 percent. Footwear sales stepped up 14 percent year-over-year to RMB 4.45 billion (€557.5m) in H1 as apparel revenues grew by 4.3 percent to RMB 2.61 billion (€326.7m) and accessories sales expanded by nearly 12 percent to RMB 152.2 million (€19.1m).
