Xtep International has warned that its net profit will be down by about 25 to 35 percent for 2017 because of a clean-up of inventories undertaken by the Chinese sports apparel and footwear intended to support a shift toward the running market – the last move in a transformation that is starting to pay off.

Xtep has resolved to spend up to 150 million yuan renminbi (€19.3m-$23.0m) to repurchase all products made before 2015 in retail channels, and to process them centrally. This should help to harmonize the brand assortment available in stores, and to stimulate sales of the latest product ranges. However, since the products to be repurchased are more than two years old, there will be a significant write-down of their net realizable value, which will have a significant impact on the group's profit for 2017.

Xtep reported net profit of RMB 527.9 million (€67.9m-$81.1m) in 2016, which was a decline of 15.2 percent compared with the previous year. The company's sales amounted to RMB 5,396.6 million (€693.8m-$829.2m) for the year, strongly weighted toward footwear. The brand has long had a stronger focus on running than most other Chinese brands, but it has been striving to reinforce that focus and to move away from the fashion sportswear market.

The transformation plan has already seen Xtep take more control of its retail business. While less than 20 percent of Xtep stores were owned by the company three years ago, the rate has increased to more than 60 percent. The average turnover per square meter in the newly opened or renovated stores in the last two years is more than 10 percent higher than in the old ones.

Xtep boasted in its profit warning that its positioning as a running brand appears to be well-accepted by consumers. A survey conducted by Joyrun at the Beijing marathon found that Xtep ranked fourth among all brands worn by participants who finished the full marathon within five hours, and it was first among the domestic brands. Xtep accounted for nearly 10.5 percent of market share among the participants who finished the full marathon within three hours.

Another favorable metric for the brand is that its sales jumped by more than 80 percent on Singles Day last November on the TMall flagship store, based on data provided by the online retailer. This was one of the highest rates of increase among all athletic brands.