From Manufacturing To Creation, Interview With Xu Jingnan, Chairman Of Sports Brand PEAK

Xu Jingnan, Fujian

The sporting goods industry is facing a crisis of general decline in performance.

The latest performance of Anta and XTEP shows that orders for enterprises are slowing down next year, while Lining's net profit in the first half of this year has also fallen by nearly 50%.

However, PEAK's recent mid 2011 earnings report showed that its turnover and gross profit increased by 24.7% and 32% respectively compared with the same period last year.

In August 24th, Xu Jingnan, chairman of the Peak Sport Products Co Limited (PEAK), told the author that PEAK's performance was better than that of its peers because he was focused on it. If PEAK were to do real estate like some other peers, maybe he could not escape the fate of declining performance.

The first half wins the market.

The author: Anta, XTEP and Lining's latest statements show that their orders and growth have slowed down significantly. What is PEAK's main support for the growth rate above their peers?

Xu Jingnan: the growth of PEAK mainly depends on three aspects: first, the growth of our single store sales. In the first half of this year, our single store business area increased by 18.4% over the same period last year, and the sales volume of single store has increased by more than 10%. Two, the speed of our new shop is still very strong. In the first half of the year, we opened 395 new stores, completed half of the annual target, and the sales of new stores also brought about growth. Three, with the deepening and upgrading of brand marketing, the internationalization of PEAK brand has gradually become popular among the people, which has brought a premium to PEAK's products.

The author: slow growth of other sporting goods enterprises, does this mean that the winter of this industry is coming?

Xu Jingnan: I don't think the sporting goods industry has entered the winter. It is still a sunrise industry.

There are two main reasons for the slowdown in the sporting goods industry: one is that because of high inflation, people are more cautious when they are consuming; the other is that this year is the year of sports marketing, there is no big event such as Olympic Games and no world cup, so the whole industry is relatively stable, or slightly lower than in previous years. This is a normal market performance.

Starting from last year's rising raw material prices, especially the rise in cotton prices, the sports brand has to raise prices, which will test some brands' affordability.

Brand height and popularity are not likely to be affected. Some rising brands, such as PEAK, can absorb this premium well and let consumers happily accept this fact.

{page_break}

Overseas sales soared

Author: how much does PEAK sell at home and abroad?

Xu Jingnan: at present, PEAK's products have been sold to more than 70 countries and regions in five continents, including Europe, America, Africa, Asia and Oceania.

In the first half of 2011, PEAK's overseas sales increased by 20.2% over the same period last year, accounting for 10.3% of PEAK's total sales revenue. Our strategic goal is to influence the global market through the US market.

From the moment we enter Europe and NBA, we have positioned ourselves as an international sports brand, so we have done a lot of things for this purpose.

From sponsoring Europe's top basketball All-Star game to the league's best basketball league NBA, signing Kidd, Battier and other influential international stars, we made every step of the way and left PEAK in the international market.

In June this year, PEAK's international marketing was upgraded again. It was officially upgraded from FIBA's "Asian partner" to "global strategic partner". This means that it includes considerable advantages such as "World Basketball Championship", "World Youth Basketball Championship" and "Olympic basketball project".

So far, in the field of basketball, PEAK has occupied two top resources of NBA and FIBA.

The author: PEAK in the process of globalization, and Nike, Adidas sports giants conflict is also exacerbated?

Xu Jingnan: for example, we can only pick some players who are not able to see Nike and Nike. Now we have already competed with them for the top players. We have enough strength and brand appeal to compete with our rivals, both All-Star players and young rookies.

Moreover, we have been looking for the next Yao Ming and the next Kobe to compete with them at the starting line.

PEAK has established a subsidiary in the United States, which will be a landmark step for PEAK to enter the international market.

We plan to open stores in the United States in the second half of this year. With the full distribution of the US market, PEAK's penetration in the international market will further improve, and international revenue is expected to further improve.

The PEAK R & D center, which has already been put into use, will provide the design and products for PEAK to attack the international market to meet the needs of the local market.

Author: from China made to China, what efforts do sports goods companies need to make?

Xu Jingnan: from manufacturing to creation, in the final analysis, is the assurance of the international trend.

Through these years of exploration in NBA and international basketball, PEAK has changed in subtle ways.

In the first half of this year, PEAK has doubled its R & D design fees to 1% of the company's total business.

At present, PEAK has opened four R & D studios in Beijing, Guangzhou, Quanzhou and Losangeles respectively.

These studios have recruited about 250 research and design professionals.

Keep cash against risk

The author: at present, there are still some uncertainties in the global economic situation. We are all afraid that the economic crisis will come again. Some manufacturers have cut down or shut down. What is the current cash flow of PEAK?

Xu Jingnan: you can see from the newspaper that we have 2 billion 600 million cash in hand and 130 million yuan in cash in the first half of the year. We can say that our development is very benign.

PEAK's board of Directors believes that in the face of the uncertain factors of the market, holding sufficient cash will help the company make timely and effective response to sudden changes in the market.

The author: what are the plans for PEAK in the second half and 2012?

Xu Jingnan: I believe that as the Chinese government increases its control over inflation, the Chinese consumer market will further improve, which will help the sporting goods industry as a whole.

PEAK's third quarter, fourth quarter and the first quarter of 2012 increased by more than 20% of the order volume.

In order to ensure the stable supply of products, PEAK will invest about RMB 80 million yuan in the second half of 2011 to continue construction of two production bases in Huian County of Fujian province and Shanggao County of Jiangxi province.

In addition, Shandong Heze production base construction plan has also been put on the agenda, the total investment is expected to reach 1 billion yuan.

As these factories are built and put into production, our product line will be more abundant and the product category will be more complete. This will enhance our competitiveness in various markets and countries.