The Sale Of Sports Shoes Is Dead, But Manufacturing In China Is Painful.

After announces sustained strong sales growth in July, sporting goods retailer Baosheng International Holdings (Holdings) Limited (3813.HK) announced a 39.3% rise in net profit on Tuesday.

Although China's retail industry has slowed down in the first half of the year, especially the apparel industry's growth rate has dropped by 620 basis points, the sports industry is thriving.

By the end of June, Baosheng international, which had 5895 direct outlets and 3756 franchisees in the Greater China market, rose by 19.4% to 13 billion 371 million 600 thousand yuan in the first half of the year. The median profit increased from 39.3% yuan to 427 million 400 thousand yuan from 306 million 800 thousand yuan to 38.6% yuan per share. However, the Taiwanese capital company still said it would not send medium-term interest.

The July figures released in August 12th showed that Baosheng international sales increased by 21.9% to 1 billion 996 million 500 thousand yuan in July, and sales increased 19.7% to 15 billion 368 million 100 thousand yuan in 1-7 months.

During the reporting period, Baosheng international gross margin increased by 22.9% to 4 billion 616 million yuan, sales promotion and discount reduced, allowing a gross margin in the industry to improve by 100 basis points to 34.5% over the same period of last year, and 774 million 400 thousand yuan in the operating profit period, up 46% from the 530 million 400 thousand yuan in 2018 compared with 530 million 400 thousand in the operating profit margin.

0551.HK, a Taiwanese foundry giant Yuyuan Industrial (Group) Co., Ltd., which owns 62.2% of Baosheng international, was stimulated by Baosheng international retail business in the first half of the year. Its revenue grew by 6.32% to 5 billion 70 million 700 thousand dollars in the first half of this year, compared with $4 billion 769 million 400 thousand in the same period in 2018.

On Monday night, Yuyuan industry said its sales increased by 3.2% to 812 million 200 thousand dollars in July, and sales totaled 5 billion 879 million 300 thousand US dollars in 1-7 months, up 6%.

In the first half of this year, Yuyuan industry recorded a net profit of 165 million 900 thousand US dollars, an increase of 10.52% over the same period of 150 million 100 thousand US dollars in 2018, and earnings per share increased by 12.47% to 10.28 cents. Excluding the sale of Texas Clothing Holding Corp. and Affiliated Companies's US $19 million 100 thousand earnings and the fair value of US $1 million 800 thousand financial assets, Yuyuan group's continuing business in the first half of this year has declined by 11.8%, from 165 million US dollars in the same period of 2018 to 145 million 600 thousand US dollars.

The interim results of Yuyuan Industrial and Baosheng international continue to show the duality of ice and fire, and also highlight the heavy blow of the macro environment and trade disputes to the manufacturing industry.

In the performance statement, Yuyuan industry indicated that the group faced many adversities, especially the US threat to impose tariffs on shoes made in China, and therefore many customers changed their purchasing strategies, which accelerated the group's adjustment of production capacity. At the same time, the group faces the fluctuation of brand customers caused by the more flexible purchase method and the change of consumer preferences.

All these factors have led to Yuyuan group's monthly orders being more volatile, unstable capacity utilization, low production efficiency and complex and varied product mix.

During the reporting period, Yuyuan group's income from shoemaking increased by 5% to 2 billion 690 million 900 thousand US dollars, and its output increased by 2.7% to 163 million 200 thousand pairs, and the average selling price rose 2.2% to 16.49 US dollars / double over the same period. Among them, footwear manufacturing accounted for 78.1% of sports shoes manufacturing revenue rose 5.2% to 2 billion 101 million 500 thousand U. S. dollars, casual shoes / outdoor shoes revenue increased 1.2% to 530 million 300 thousand U.S. dollars.

The whole manufacturing business, including sole, accessories and shoemaking, contributed $2 billion 930 million 800 thousand to Yuyuan group in the first half of the year, an increase of 3.7% over the same period last year.

During the reporting period, Vietnam, Indonesia and China accounted for the three largest production base of Yuyuan group, which accounted for 45%, 38% and 13% of the total volume of shoe delivery. China's production accounted for a further decline of 200 basis points over the same period last year.

In dollar terms, Baosheng international revenue increased by 12.3% to 1 billion 968 million 100 thousand dollars in the first half of the year, and the overall retail business, including Texas Clothing, grew by 10.1% to 2 billion 139 million 900 thousand dollars in the first half of the year.

In the first half of this year, Yuyuan group's gross profit increased by 6.8% to 1 billion 272 million 600 thousand US dollars, mainly benefiting from the growth of industry and the increase of Baosheng international revenue.

During the period, the gross margin of manufacturing operations fell by 70 basis points to 18.1%, mainly due to the manufacturing process of "retro tidal current" products, resulting in inefficient productivity in different countries.

Excluding the holding company Baosheng international, Yuyuan industry has a gross profit margin of 19.1% in the first half of this year. Author: Chen Yifei