Lining KAPPA Frustrated: Mainland Sporting Goods Retail Industry Entered Early Winter

The rapid growth of China's sports apparel industry is slowing down. Following China's trend, orders for the second quarter of 2011 were lower than domestic industry and market expectations. Lining's orders for the second quarter of fiscal 2011 were also disappointing, showing a marked slowdown.

Insiders pointed out that, due to the pressure of distributors and retail sales and inventory, the mainland sporting goods retail industry may enter the cold winter early next year.

Lining announced recently that in the second quarter of the 2011 quarter of, the average retail price of clothing and footwear products rose by more than 8%, and the number of orders decreased by more than 7% and 8% respectively. The total amount of orders decreased by about 6% compared with the same period last year.

Before that, KAPPA's Chinese operator in China also handed out a bad report card. China's trend in the second quarter of 2011 increased the order volume by 2.8%, much lower than the previous growth rate and market expectations.

Analysts pointed out that due to the pressure of distributors and retail sales and inventory, China's orders for the third quarter and the fourth quarter will not be ideal.

As for the declining trend of orders, Zhang Zhiyong, chief executive of Lining, said that this year, the retail environment of the sporting goods industry is obviously facing more pressure: on the one hand, the retail operation cost is rising rapidly; on the other hand, it is too dependent on distributors to open shops to promote growth.

Zhang Zhiyong also said that the next two quarters of 2011, the order situation may still be under pressure.

Sports brands are too dependent on distributors to open stores to promote growth, especially in the two or three line sports brands.

Liu Song, a former marketing director of the second line sportswear brand, said that most of the sports brand dealers rely on distributors to set up shop to promote performance growth, and in recent two years the distribution speed of distributors has obviously slowed down.

"As far as I know, a large brand dealer has been withdrawn this year."

Liu Song said that the number of dealers is generally declining as a result of the double impact of rising shop costs and slowing sales.

Yesterday, Lining's share price fell sharply by 15.86% as a result of the decline in orders.

Affected by this, Chinese sports apparel, men's and footwear manufacturers listed in Hongkong are all tied up, including Anta sports,

In addition, investment banks have lowered the target price of Lining.

JP Morgan's latest research report points out that