Business / Industries

Sports brands to see sales chill continue

By Wang Zhuoqiong (China Daily) Updated: 2012-12-27 10:25

High inventories caused by quick expansion, product homogeneity, price surges and sliding purchasing power are expected to pressure international and local sports goods brands this winter.

That's on top of a dismal first half for the industry this year.

Nike Inc's sales in China - including footwear, apparel and equipment - declined 11 percent to $577 million, according to the company's second-quarter fiscal report.

Nike's reported future orders, scheduled for delivery from December through April, dropped by 6 percent. In comparison, Nike's revenue has grown 11 percent in other emerging markets to $1.05 billion.

Domestic brands are also struggling due to the weak market demand, a reminder to investors to dilute their investments.

Sequoia Capital, a venture capital fund that has invested in Google and Cisco, has reduced its stake in one of the leading Chinese sports apparel companies, Peak Sport Co Ltd, from 6.22 percent to 3.65 percent.

In 2009, Peak received $60 million from Sequoia Capital China, CCB International and Legend Capital. Analysts said the reduction of Sequoia Capital China's stake in Peak is a result of the depressed sports goods market and the company's sliding performance.

In the first half of 2012, Peak's net profit dropped 43.3 percent to 240 million yuan ($38.5 million). The company has closed 747 of its smaller and less profitable shops since the end of 2011.

Now with 7,059 shops, Peak is a leader among local sports brands, and its network is mainly developed in second- and third-tier cities.

Meanwhile, Anta Sports Products Ltd saw its first-half revenue down 11.6 percent year-on-year to 3.93 billion yuan. Anta said that its orders for the first quarter of 2013 have fallen by 20 to 30 percent.

Research reports from China Merchants Securities Co Ltd estimated that the four major domestic sports brands - Li Ning Co Ltd, Anta, Xstep and China Dongxiang (Group) Co Ltd - have stocks that are worth more than 10 billion yuan.

In sharp contrast with the efforts to clear up the inventory, apparel prices at sports shops keep climbing.

The increase in apparel prices has seen market conditions deteriorate and pushed up stocks, Xiong Xiaokun, an industry researcher with the CIC Industry Research Center said.

Inflation and increases in costs such as labor, logistics and rents have encouraged the apparel retail channels to boost prices, Xiong said.

A sluggish global economy has also weakened demand, the researcher said, adding that a lack of specific characteristics when it comes to branding and positioning from local sports brands is also a major reason for the high stocks.

Xiong has some hope for the apparel industry next year due to the positive economic expectations.

But he said that acquisitions and reshuffles may be seen in 2013 if the industry remains depressed.

Next year will be a critical time for Chinese sports companies to get back on the growth track.


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