What Should A Fearful Shoe Manufacturer Do?

How did Taiwan shoe manufacturer Stella International Holdings Ltd. (HK:1836) nine Hing Holdings Limited perform in the first half of this year?

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Xiaobian network to introduce the Stella Luna parent company nine Xingxing income double digit growth in the first half, self business is still weak, continue to close shop.

Taiwan shoe manufacturer Stella International Holdings Ltd. (HK:1836) nine Xing Holding Co., Ltd. announced its performance in the first half of fiscal year 2015 in the first half of the year, nine in the first half of June, with an income of $797 million 200 thousand, up 10.6% from the same period of 721 million in the same period of last year, of which the two quarter revenue rose by 11.7% to 499 million 200 thousand US dollars.

Nine Hing core manufacturing business rose 12.7% to $758 million 800 thousand in the first half, compared with $673 million 600 thousand in the same period last year.

The company said sales were resumed due to market demand for footwear products, while the group's self brand business continued to slump, and revenues continued to plummet, down 21.9%, from 49 million 300 thousand US dollars in the same period last year to 38 million 500 thousand US dollars.

Because of its sluggish business, nine Xing still implemented the strategy of closing stores, and operated in the first half of the year.

The brand closed 39 to 285 stores, including Stella Luna, What For and JKJY by Stella. The total number of global stores decreased by 8, 27, 4 to 179, 69 and 5 respectively, while Pierre Balmain stores were flat, closing 1 and adding one at the same time.

In the first half of the year, the company also released a notice on Thursday, announcing that it signed a supplementary agreement with Balmain Asia Limited in July 9th, and agreed to terminate the selling and subscription options issued by the joint venture agreement in 2011.

Tang Xiaotang, an analyst with luxury goods and apparel retailing industry, commented that the supplementary agreement of the contract may imply that nine Xing may divest the French brand Balmain's subsidiary line Pierre Balmain in the future.

In the announcement, nine Xing also admitted that "the joint venture project has been reviewed to the business mode, and it is considered that no option is needed for the proposed use, so the option to terminate the option is agreed."

In 2011, the Stella Fashion of nine Xing signed a joint venture agreement with the French fashion brand Balmain's Balmain Asia Limited to set up two companies: Couture Accessories Limited outside China, and China Couture joint venture company Couture Limited, which owns wholly foreign-owned enterprises in China, and is not responsible for other businesses.

In order to stimulate the development of Pierre Balmain brand in China and overseas markets, Stella Fashion and Balmain Asia Limited add mutual option subscription clause in the cooperation agreement.

However, in the past four years, the development of Pierre Balmain brand was extremely bad. At present, there are only two shops in the Chinese market.

Balmain Asia Limited has Balmain group licensed manufacturing licensing products and distribution, promotion and sale of licensed products, but "greedy" Balmain has been trying to maximize profits, prior to signing an agreement with the Italy clothing manufacturer Ittierre SpA, but then because Ittierre SpA is on the verge of bankruptcy, early termination of the cooperation agreement.

Due to the special authorization and cooperation agreement, the operation of Pierre Balmain brand in China is very complicated. The Chinese joint venture actually has only Pierre Balmain shoe sales rights.

The right to operate Pierre Balmain brand in China.

In the first half of the year, the volume of shipments of nine Hing Group's manufacturing business increased by 12.2%, from 23 million 700 thousand pairs in the same period last year to 26 million 600 thousand pairs. The average selling price increased by 0.4% to 28.5 US dollars. However, in the two quarter, the average selling price dropped by 1.3% to 30.5 dollars due to the fall in the cost of leather.

Nine Hing Group said that although some customers are cautious about orders, the Group expects that demand will continue to grow in the second half of the year, while the group will adopt strict cost control plans to maintain profitability while maintaining the target of capacity expansion before the end of the year.

On Thursday, the nine Xingxing group closed at HK $18.10, up 3.31% from the market, but the stock has fallen 11.7% this year, far less than the 3% increase in the Hang Seng Index over the past year.

As a result of the weakening of the industry, the share price of nine Xing shoes, which is the largest manufacturer of fashion shoes, has plummeted by more than 16%.

It seems that the market risks still exist.