The operating income of Chinese sportswear brand Xtep International rose 34.8 percent to 922 million yuan renminbi (€130.9m) for the six months ended June 30, with attributable profit increasing 38.4 percent to RMB 590 million (€83.8m). The operating profit margin slipped slightly to 16.2 percent from 16.5 percent.
Total H1 revenues at the Chinese company, which also markets the K-Swiss, Palladium, Saucony and Merrell brands on the mainland, increased by 37.5 percent to RMB 5,684 million (€807.1m) from RMB 4,135 million with sales growth evenly divided between the mass market channel, up by 36.2 percent to RMB 4,898 million (€695.5m), and the athleisure sector, up by 36.3 percent to RMB 629 million (€89.3m). The group operated 6,251 Xtep branded stores in the PRC and elsewhere on June 30.
Meanwhile, sales in the professional sports channel, consisting of the Saucony and Merrell brands, soared 106 percent to RMB 157 million (€22.3m) from RMB 76 million. Xtep Kids’ sales jumped a whopping 84 percent to RMB 721 million (€102.4m) to account for 15 percent of all Xtep revenues for the six months.
Xtep says it remains cautious about the short-term business outlook for the athleisure segment due to ongoing pandemic-related impacts, geopolitical risks and slowing economic growth worldwide. But the company remains optimistic about the long-term prospects for the sportswear industry in China, supported by favorable national policies and market trends that will fuel the expansion of the group’s business.
Due to supply chain fixes, the group realized improved sales results from its K-Swiss/Palladium business in H1, with total revenues up 36.3 percent to RMB 629 million (€89.3m). But the segment’s gross profit margin slipped to 39.8 percent from 43.5 percent as it reported an H1 operating loss of RMB 54 million (€7.7m) against a loss of RMB 41 million. At period end, Xtep operated 50 K-Swiss stores and 71 Palladium banners in China. Plans are underway to adjust brand positioning, product assortment and the retail network for K-Swiss and “sustainably scale” the Palladium business for long-term growth.
With 46 Saucony and 7 Merrell door fronts operating in the PRC on June 30, Xtep intends to accelerate store openings for the Saucony brand in higher-tier cities and expand the brand’s exposure through Xtep Running Clubs in other cities. Additionally, plans are underway to expand the brand’s e-commerce availability in the market and increase apparel and localized product offerings. The Saucony/Merrell segment reduced its H1 operating loss of RMB 3 million from a loss of RMB 11 million in the year-ago period, but the segment’s gross margin declined to 44.2 percent from 45.4 percent in H1.
