Manufacturing Industry Profits Hindered, Shoe Giant Yu Yuan'S Three Plight

Yuyuan group (00551), the world's largest sportswear maker, also plays an important role in the sportswear industry.

The veteran Taiwanese investor, who is both a sports footwear manufacturer and a retailer, has a revenue of 9 billion 695 million US dollars in 2018 and is a leading company in the upstream industry.

　 Manufacturing profits blocked

In the first half of this year, the overall consumption of China's sporting goods industry rose. Yuyuan group, which is involved in manufacturing and retailing business as a footwear apparel industry, has benefited from the industry's continued rebound in the first half of this year.

In the first half of 2019, Yuyuan group's operating income was $5 billion 71 million, an increase of 6.32% compared with the same period last year, and the profit attributable to the company's owners was $166 million, an increase of 10.52% over the same period last year.

Business income from footwear activities (including sports shoes, casual shoes / outdoor shoes and sports sandals) increased by 5% to $2 billion 691 million compared with the same period last year, while the number of shoes increased by 2.7% to 163 million pairs. The average selling price increased by 2.2% to 16.49 US dollars per year compared with the same period last year.

During the reporting period, the group's sales revenue amounted to $2 billion 140 million, up 10.1% from the same period last year.

In addition to the decline in the revenue of the two businesses, including wholesale clothing and soles, accessories and other businesses, during the reporting period, other business revenue grew, especially in the retail sales business, which achieved a 12.3% increase. The revenue during the reporting period reached $1 billion 968 million, which is close to the revenue of the sports shoe manufacturing business.

From this we can see that the expansion of Yuyuan group's performance in the first half of 2019 is retail business.

Profit growth in manufacturing industry was blocked. Gross profit margin of Yuyuan group's manufacturing business fell by 0.7 percentage points to 18.1% during the reporting period.

There are three reasons for this decline.

One is to shift domestic production facilities to Southeast Asia, resulting in a decline in operating interests.

The second is the trend of "retro fashion", which leads to the complexity of product technology. What the company needs to do is to sense and seize the trend of fashion change in time. Otherwise, it may lead to unsalable products, a sharp increase in inventory level, and adverse effects on the sales of the company's products.

The third is the optimization and upgrading of manufacturing industry, which takes time and money.

Therefore, the three major factors facing Yuyuan group's manufacturing business are difficult to fundamentally reverse in the near future. It will last for at least a few quarters. The gross profit margin of this year will continue to decline, thereby dragging down the overall performance of the company.