The cleanup of the Chinese sports market badly hurt the quarterly performance of Exceed Company, the group that markets the Xidelong brand of shoes and apparel, which targets the mass market. Its sales shrank to 301.1 million renminbi (€38.0m-$49.1m) for the three months until the end of March, which was a decline of 66.3 percent compared with the same period last year, and its profits altogether collapsed.
Exceed said that it had striven to keep a grip on its inventories during the quarter, as consumer demand weakened in China. The issues in the market also led to a reduction in the number of Xidelong retail locations, down to 4,696 stores at the end of March, which was a net decrease of 213 doors. The company said that the decline was chiefly caused by the closure of smaller and unprofitable stores.
The group's footwear sales contracted by 66.7 percent to RMB143.6 million (€18.1m-$23.4m) for the quarter, with 62.6 percent lower volumes and 11.0 percent lower prices. When it comes to apparel, volumes were down by 70.8 percent but this was partly compensated by a hike of 15.3 percent in average selling prices to make up for production cost increases. Apparel sales landed at RMB152.6 million (€19.2m-$24.9m), down by 66.4 percent.
The higher production costs still affected Exceed's gross profit margin: It reached just 26.2 percent, down by 2.8 percentage points for the quarter. The group cut back sharply on marketing and promotional expenses. It only opened 20 new stores during the quarter, against 78 stores for the same period last year.
The group ended the three months with operating profit of RMB 15.1 million (€1.9m-$2.5m), down by 89.7 percent compared with the same period last year, and its net profit was almost entirely wiped out, down by 92.3 percent to RMB 9.9 million (€1.2m-$m). Despite the huge downturn, the company said it wanted to stick with its market positioning as a mass market brand and to invest in grassroots marketing, through programs like its support for the nationwide Fitness for All campaign.