The world's largest shoe manufacturer reported a 2.5 percent drop in net earnings to US$483.5 million after minority interests for the financial year ended last Sept. 30, in spite of a 21.7 percent increase in its total revenues to $7,045 million, as its gross margin declined by 2.3 percentage points to 22.1 percent. While Yue Yuen generated 22.2 percent more revenues from manufacturing on behalf of international brands, its direct labor costs increased by 38.5 percent and its material costs went up by 24.6 percent. It also spent 17.2 percent more on product development.

The margin pressure remained in spite of 7.7 percent higher average selling prices. The total number of pairs produced by the group rose by 14.0 percent to 326.6 million during the year. The number of production lines was raised by 16.7 percent to a total of 537. Most of the new lines were allocated to the group's key production bases in China, Indonesia and Vietnam. The geographical distribution of all the lines remained similar to previous years, with 255 lines now in China, 134 in Indonesia and 140 in Vietnam.

As of Sept. 30, the group employed a total staff of about 370,000 people at its manufacturing facilities in Asia, up from 340,000 at the end of the previous financial year. Discretionary performance bonuses were given to employees who made creative suggestions to improve productivity.

Yue Yuen's sales of athletic shoes represented 52.2 percent of the total turnover and grew by 20.1 percent to $3,680.2 million. Casual and outdoor shoes showed the strongest momentum with a sales increase of 31.4 percent to $1,239.6 million, as leading brands in both categories launched new models with innovative designs. Sales of sports sandals went up by 26.5 percent to $81.2 million.

The company's retail business saw its revenues increase by 20.7 percent to $1,431.3 million, representing 20.3 percent of the total turnover, and its productivity improved sharply. The company directly operated a total of 3,055 stores and sales counters in China at the end of the period, down from 3,956 at the end of the previous financial year. The number of “sub-distributors” was reduced to 3,357 from 4,218. Other revenues, including those from the manufacturing of soles and components, grew by 15.6 percent to $613.1 million.

Partly because of its retail business, Asia remained the biggest source of revenues in geographical terms, making up 40.8 percent of the total turnover. However, while sales in Asia grew by 26.2 percent to $2,870 million, including $1,977.1 million generated in China, sales in Europe increased at a faster rate of 30.6 percent, reaching a level of $1,541.5 million.

The expiration at the end of March of the European anti-dumping duties on leather shoes from China apparently didn't have a major impact on the increase as Yue Yuen's sales to European customers had already risen by 29.8 percent in the first half of its financial year. On the other hand, the company's sales in South America, which had jumped by 72.0 percent in the first six months ended June 30, ended the full year with a rise of only 6.2 percent to $352.4 million, possibly because of the new barriers imposed by the Brazilian government.

Sales into the U.S. went up by 17.7 percent to $2,010.8 million, while sales to Canada declined by 31.0 percent to $99.2 million.

Dividends have been left unchanged. The management is maintaining a cautious outlook over the next financial year. In October and November, the group's turnover increased by around 15 percent, indicating a certain slowdown in its growth, probably due to the volatile economy, but there is hope that the European Football Cup and the Olympic Games in 2012 will inspire consumers to purchase more footwear and apparel, says Yue Yuen.