Anta's High Single Digit Growth Is &Nbsp; Sustainability Is Yet To Be Tested.

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A bigger gap is reflected in the market value, as of April 7th, Anta.

It seems to be a direct reflection of the current situation of both countries. Anta's 2010 annual report is full of pride for the coming year, but Lining is cautious.

Anta said it would continue to expand its distribution network, which opened in the past five years.

Li Ning Co's expansion plan is also cautious. The company executives said in the performance note that 400 stores were expected to increase in the year, and the total number of stores reached 8300, an increase of about 5%. The reasons for the change were explained in the annual report. "The Group believes that the overstretched mode of overreliance on shops is not sustainable, and it must be pformed into a vertical growth mode with a focus on retail efficiency, so as to achieve long-term and stable development."

In 2010, Lining accelerated the reform of the distribution system, including the integration of low efficiency distributors, the reception of some distributors' shops, the improvement of store structure, and the increase of discount rates to dealers.

The two companies are different in positioning, subdividing crowd, brand strategy, business mode and so on. Outside, Lining's dilemma is generally attributed to his own strategic mistakes. However, we still believe that Lining's real difficulties are Anta's worries.

Taking Anta as a case in point, in 2010, the number of shoes sold by Anta increased by 10.9%, and clothing increased by 27.1%, while its total shop area was 872000 square meters, the growth rate was 23.5%. Assuming that the pattern of the increased store did not change significantly, the number of clothing sold in Anta stores increased slightly, while the number of shoes sold decreased.

In 2010, Anta's sales increased by 26.1%, excluding the increase in the area of shops.

However, the operating costs of the same period increased significantly.

According to public reports, PEAK sports (1968.HK) CEO Xu Zhihua (micro-blog) frankly, the profitability of retail outlets is declining, with shop rents as an example. In recent years, the average rental price of rents has increased by 30% to 50%, far exceeding the sales growth rate. "Before it might make 100 thousand of a store, now two shops earn 150 thousand."

So PEAK sports will subsidize retail stores with a rent of more than 600 thousand in a certain proportion.

The profitability of single stores is weakening and competition is continuously strengthening.

In the coming years, the industry generally expects that the sportswear market will still maintain an average annual growth of 10%-15%. However, the major domestic brands are still "fierce animals" and do not reduce the momentum of expansion. For example, XTEP (1368.HK) plans to set up about 800-1000 stores in the mainland in 2011; {page_break}

The number of new stores opened by PEAK is set at 800, although it is slightly lower than that of 1000 in 2010, but it will increase the proportion of more than 90 square meters. As of June 30, 2011, 1361.HK is also expected to open 600-800 new stores in one year.

With the increase of operating costs, the intensification of internal competition and the increase of production costs, the direct coping strategy of the mainland sports brand is to raise the price or increase the discount rate to the suppliers.

In the third quarter of 2011, according to the Lining product order meeting, the order amount decreased by more than 8% per year, according to the retail brand price. The wholesale price dropped by about 14%. The difference between retail brand price and wholesale price was widening, and the average retail price increased by about 10%.

These measures will eventually directly drive up the terminal price.

However, the appeal of domestic brands is not as good as the international brands such as Nike and Adidas. It is precisely that these brands are stepping up their penetration into the secondary market in the mainland.

Taking Adidas as an example, its strategic goal is to grow by 45%-50% in 2015 compared with 2010. It needs to achieve annual sales growth of high unit number (high-single-digitcurrency-neutral). The Greater China region is one of the three growth engines.

In the 2010 annual report of Adidas, it is clear that when the competitiveness of some competitors is weakened, the expansion of the sales network in China will be extended to the existence of low-level market forces. The downward penetration of this first-line brand can cater to the trend of "consumption upgrading" in the target area.

The collected data show that the current growth rate of domestic brand sales is generally higher than that of 10%, but the sustainability is still to be tested.

Let's go back to the previous year's achievements in Lining channel reform: in 2009, there were 7429 retail outlets in China, a net increase of 1004 in the year, a total increase of 16.1%, and a 25.4% increase in sales revenue during the same period.

Now, Lining has chosen to take the initiative to pform, and channel reform and brand remolding may not be the subject that Anta needs to face tomorrow.