Yue Yuen Industrial Holdings reported a 6.3 percent increase in sales to $5,070.7 million for the first half of the year, driven by a double-digit increase in retail revenues, with footwear manufacturing performing better than before. The Chinese company's net income jumped by 10.5 percent from the year-ago period to $165.8 million.
With the group continuing to shift production away from China, revenues from the manufacturing segment improved by 3.7 percent to $2,930.8 million, including a 5.0 percent increase in footwear sales to $2,690.9 million. The segment's gross margin fell by 70 basis points to 18.1 percent, which the company blamed on investments in automation and the higher manufacturing costs of increasingly complex retro fashion.
The volume of shoe production was up by 2.7 percent to 163.2 million pairs. Sales of athletic shoes advanced by 5.2 percent to $2,101.5 million while casual and outdoor shoes were up by 1.5 percent to $530.3 million and sports sandals jumped by 32.5 percent to $59.1 million. Meanwhile, sales of soles, components and other items decreased by 8.3 percent to $239.9 million and the apparel wholesale business declined by 10.3 percent to $171.8 million.
Revenues from manufacturing were down by 2.4 percent in Europe, representing 28.8 percent of the total as compared to 30.6 percent for the year-ago period. They rose by 7.0 percent in the U.S., 9.1 percent in China and 4.6 percent elsewhere. We believe that the strong increase in the U.S. may have been prompted by the importers' desire to accumulate inventories prior to the possible imposition of new import duties from China on Sept. 1.
Retail sales in China from the company's Pou Sheng subsidiary gained 12.3 percent to $1,968.1 million. The gross margin there expanded by 1.0 percentage point to 34.5 percent, due to better sell-through and reduced discounting. The management said that consumer spending in China remained robust, with strong demand for sports apparel and footwear, especially athleisure styles.
Pou Sheng is expanding its online channels, and will soon open a new mega-store retail format that integrates various services, including online offerings. At the end of the period, the retailer had 5,895 owned stores, 247 more than a year earlier. In addition, Pou Sheng's sub-distributors opened 205 new stores in the country to reach at total network of 3,756 units.
Overall, Yue Yuen's gross margin gained 0.1 percentage point to 25.1 percent, while Ebitda went up by 16.7 percent to $235.2 million.