Peak Sport Products blamed sluggish economic conditions and intense competition in the Chinese market for a decline of 6.0 percent in sales to 1,298.1 million yuan renminbi (€173.7m-$194.6m) in the first half of this year, although it has been improving its store network and expanding in international markets.
Peak Sport saw its sales shrink by 10.3 percent in the Chinese market, while they advanced by 12.5 percent to RMB 296.2 million (€39.6m-$44.4m) in other markets. That amounts to 22.8 percent of Peak Sport's turnover, making it the most international of the leading Chinese sports brands. Peak Sport's gross profit margin crawled up by 0.2 percentage points to 38.1 percent but profit attributable to shareholders dipped by 3.8 percent to RMB 169.4 million (€22.7m-$25.4m).
The group has been consolidating its store network in the last two years and store closures have stabilized. Peak ended the six months with 6,001 authorized retail outlets, adding two stores. It expects the number to remain at a similar level until the end of the year, but indicates that there is substantial upside in the improvement of the stores' profitability. Peak has also been adjusting its network of distributors and encouraging them to open more of their own stores, instead of sub-franchising, in order to be more reactive.
Furthermore, Peak Sport has been working on alternative retailing channels, for example with the launch of new sneakers through a live WeChat group and the development of presale and promotion activities through crowdfunding. Peak is more broadly investing in social media for promotional purposes and to shift toward a more service-oriented business model.
As it continues to invest in basketball and tennis endorsements, Peak Sport's roster of NBA players has grown to eleven after an agreement with Matthew Dellavedova, currently with the Milwaukee Bucks. The Australian player was previously with the Cleveland Cavaliers, winners of the 2016 NBA Finals. Peak was also in the final of the basketball tournament at the Rio Olympics, worn by Miloš Teodosic from Serbia. The brand sponsored nine national basketball teams including Australia and Germany.
The group has also been intensifying its investments in the Chinese running market. In the first half of this year it sponsored the International Association of Athletics Federations World Challenge Beijing and the Dalian International Marathon.
Peak Sport is the target of an offer issued in July by Xu's Sport Co. to buy 38.81 percent of the sportswear maker's shares. Xu's Sport is a company owned by Xu Jingnan, the group's chairman. The remaining shares were already owned by vehicles that belong to the chairman and his family, meaning that Peak Sport would be privatized and that it could be delisted if the offer is accepted. The offer was issued at 2.60 Hong Kong dollars per share, a premium of about 35.4 percent above the closing price on the trading day before the announcement, and 10.6 percent over the closing price on the last trading day.
