Yue Yuen Industrial reported a 10.8 percent drop in first-quarter net profit to $97.1 million compared to $108.4 million in the year-ago period ended March 31, as growing manufacturing capacity was overshadowed by weak sales at its Pou Sheng Intl. retail subsidiary due to the resurgence of Covid-19 in mainland China. Profit attributed to company owners was 3.7 percent higher at $88.6 million against $85.4 million. Group revenues declined 4.0 percent to $2,394.4 million from $2,493.4 million, and Ebit slid 17 percent to $120.9 million. The gross margin declined 1.8 percentage points to 23.7 percent from 25.5 percent.
The world’s largest shoe manufacturer was pleased with the continued expansion of its manufacturing capacity, including the normalization of operations in Vietnam. But it added the overall effort was “uneven” due to pandemic-related lockdowns in China that impacted manufacturing logistics. YY did experience a 3.8 percent growth in total pairs made year-over-year to 70.9 million. The company, which is continuing to prioritize quality growth and higher-value orders by leveraging ”athleisure” and “premiumization” trends, also realized a 10.5 percent increase in average selling price (ASP) per pair to $19.65.
Sales of athletic/outdoor footwear rose 16.2 percent to $1,185.5 million from $1,020.2 million to represent 49.5 percent of dollar sales versus 40.9 percent in the year-ago quarter. Casual shoe and sport sandal sales as a segment increased 7.5 percent to $208.7 million against $194.2 million. But revenues generated by soles/components/other fell 8.9 percent to $137.7 million, and Pou Sheng sales were depressed 23.5 percent to $862.5 million versus $1,127.7 million.
The group is “cautiously optimistic” about continued growth in its manufacturing business as global demand for footwear remains solid as it maintains a more visible order pipeline. However, YY added that short-term risks persist, including the ongoing Covid-19 impact in China and labor supply issues in certain Southeast Asia countries.
