While investing to upgrade its flagship brand, Anta Sports Products has accelerated its expansion with a sales growth of 44.1 percent to 10,553.5 million yuan renminbi (€1,341.9m-$1,521.8m) for the first half of this year, which led to an unprecedented profit for the Chinese group.
The company's gross profit margin firmed up by 3.7 percentage points to 54.3 percent for the six months while the operating margin was down by 0.4 percentage point to 25.5 percent. Anta Sports Products ended up with profit attributable to shareholders of RMB 1.94 billion (€246.7m-$279.7m), an increase of 34.0 percent.
The decline in the operating profit margin was chiefly caused by an increase in selling and distribution expenses. While the company is building on its multi-brand and omni-channel strategy, the focus remains on the Anta brand. The group's chairman explained in a statement that the target is to achieve a shift in perception from “the brand you can buy” to “the brand you want to buy.”
The sales growth in the six months was driven by apparel, with sales soaring by 64.6 percent to RMB 6,065.0 million (€771.2m-$874.6m) for the six months, while footwear sales were up by 21.3 percent to RMB 4,108.4 million (€522.4m-$592.4m). The remainder comes from accessories, which accounted for sales of RMB 380.1 million (€48.3m-$54.8m), up by 51.3 percent. The group sold 32 million pairs of footwear and 56 million pieces of apparel.
Across the group's brands, the gross profit margin for apparel was up by 4.3 percentage points to 57.8 percent, compared with an increase of 1.9 percentage point to 50.1 percent for footwear.
The Anta brand gained exposure through the Winter Olympics held in South Korea, where it provided apparel for Chinese athletes through its partnership with the Chinese Olympic Committee (COC). Chinese medal winners wore their Dragon Outfit from Anta.
Another focus for Anta was its partnership with Klay Thompson from the Golden State Warriors, which led to the launch of several KT3 basketball shoes. Thompson supported marketing efforts in June by taking part in an eight-day tour, Shock the Game.
The brand continued to expand in the football business, investing in a strategic partnership with Zhejiang Greentown Football Club in March. The Spartan Race held in Shenzhen, which drew more than 5,000 participants, was supported with Anta outfits as well.
The Anta brand alone had 9,560 stores at the end of June, up from 9,467 six months earlier, including Anta Kids standalone stores.
The group is preparing to take advantage of the extra interest in winter sports through the upcoming Winter Olympics to be held in and around Beijing in 2022. This applies for the Anta brand, which will again be an apparel partner for the COC, as well as the Descente brand, with which Anta formed a joint venture in 2016 for distribution in China.
The group's investments around Descente in the six months included a partnership with Daniel Wu, a Chinese movie star, director and producer, who has become Descente's first Chinese endorsee. Famous yoga instructors led a series of women's fitness classes in Shanghai, Chengdu, Beijing and Nanjing. Descente had 85 stores in China at the end of June, up from 64 at the end of December.
On the sports fashion side, the group has expanded its offering of Fila products with the Fila Fusion range, which was described as young, bright, trendy and sporty. Anta holds rights for the Fila brand in China, Hong Kong, Macao and Singapore. The number of stores with the Fila brand in these markets increased from 1,086 at the end of last year to 1,248 six months later. These numbers include standalone stores for Fila Kids and Fila Fusion.
Other points of sale include 189 stores for Kolon Sport, the South Korean outdoor brand with which Anta sealed a joint venture in 2017 to operate in China, Hong Kong, Macao and Taiwan. There were 81 stores for Sprandi at the end of June and another 63 for Kingkow, the children's apparel brand bought by Anta last year.
Anta Sports Products is projecting between 9,700 and 9,800 stores for the Anta brand at the end of this year, along with 1,400 to 1,500 stores for the Fila brand, 100 to 110 for Descente, 200 to 210 for Kolon Sport, 60 to 70 for Kingkow, and more than 100 for Sprandi.
In a separate operational update, Anta said that retail sales of Anta-branded products for the second quarter grew at a low-teens rate, while they were up by 90 percent to 95 percent for other brands in the Anta group, other than those that joined after the start of April 2017. For the first half of the year, the Anta brand's retail sales moved up at a high-teens rate, compared with a rise of 85 percent to 90 percent for other group brands.
Anta shares reached a high of 49 Hong Kong dollars (€5.5-$6.2) in June but they have since lost about 20 percent. On June 12, a report issued by GMT Research from Hong Kong for its subscribers alleged that Anta's operating margins were so high that it was either the world's best-run sportswear firm or its accounting practices were questionable, Reuters reported. Anta rejected the allegations, describing them as inaccurate and misleading, and adding that the company reserved the right to take legal action.