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Chinese sportswear firms plan to trim retail presence
17
Mar '12
Several sportswear producers in China are planning to cut down the number of their retail outlets in the face of mounting raw material costs, labour charges and rent.

The sportswear companies feel that closing some of their less lucrative outlets would enable them to cut costs and enhance profitability.

The current plight of the Chinese sportswear industry can be gauged in results of three domestic firms.

Peak Sports Products Co Ltd's profits for 2011 dipped 5.4 percent year-on-year to 777.7 million Yuan or US$ 122.8 million. The decline in profits is in spite of a 9.5 rise in the firm's revenues for the period, which grew to 4.65 billion Yuan.

The company attributed this fall in profits to high cotton prices and increasing promotion and labour costs.

Likewise, Li Ning Co Ltd estimated its profits to have plummeted by seven to eight percent, with a six to seven percent drop in its revenues during 2011, which the company attributed to sluggish order flow and mounting inventories.

The third firm, Anta (China) Ltd, whose revenues grew by 11.5 percent to 1.7 billion Yuan, stated that its net profit decreased by 10 percent.

Analysing the situation, the firms are now developing an opinion that this is a time for adjustment, and that the future of sportswear industry is in product quality and branding, and not in the number of retail outlets or price levels.

According to experts, the time has elapsed when enterprises looked at multiplying their profits by boosting their retail presence. They say more retail outlets reduce profits per outlet and shoot up inventories.

They add that the Chinese sportswear industry is passing through a mid-life crisis stage, where it is difficult to distinguish between a brand's design and quality.

Peak last year added 582 new outlets, which took its total store count to 7,806. However, it is expected to bring this number down to 7,000 outlets this year.

Li Ning, which operated over 7,900 outlets by 2010-end, also plans to reduce costs and increase profits, by reducing staff and cutting expenses, excluding expenses related to promotion and research and development.

Fibre2fashion News Desk - China

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