Pou Sheng International, one of the two leading sports retailers in China, warned that it would suffer a loss for the six months until the end of March, while it recorded a profit for the same period last year. The company blamed the end of its licensing deal with Converse, which expired at the end of last year, when Nike took over the distribution of the brand. While the profit warning did not provide further details, our information is that the Converse business achieved equivalent wholesale sales of more than $250 million in China in 2011, with about 2,000 mono-brand stores. Another factor was the rise in selling and distribution expenses, particularly for staff and rental agreements. Furthermore, Pou Sheng stores had to offer more discounts, in order to reduce inventories. This tight situation in the Chinese sports retail market was analyzed in a special feature by SGI Europe last month.

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