High dividend payout sparks rally in Anta Sports Products shares

Stock rises as much as 4.7 per cent after the mainland sportswear retailer announces special payment despite sharp fall in profit

PUBLISHED : Tuesday, 26 February, 2013, 12:00am
UPDATED : Tuesday, 26 February, 2013, 4:54am

Shares of Anta Sports Products rose as much as 4.7 per cent yesterday, driven by the mainland sportswear retailer's plan to pay high dividends despite a sharp fall in profit.

Some analysts said the sportswear industry on the mainland had not bottomed out yet and this year would be even tougher for major players such as Anta.

Anta rose to HK$7.82 from HK$7.47 after the board recommended a final dividend of 17 HK cents plus a special payout of eight HK cents per share for last year. The stock closed at HK$7.56, up 1.2 per cent.

The proposed dividends, along with that for the interim period, would represent a distribution of 72 per cent of Anta's annual net profit, against 61 per cent in 2011.

"Anta's business performance is lower than market expectation, but it's apparent that the company is intending to boost its share price with a high-level dividend policy," said Felix Kwok, an analyst at Core Pacific-Yamaichi Securities.

Turnover fell 14.4 per cent to 7.62 billion yuan (HK$9.48 billion) due to sluggish consumption demand, a high inventory level and increasing discounting pressure.

Net profit dropped 21.5 per cent to 1.36 billion yuan, while gross profit margin shrank by 4.3 percentage points to 38 per cent.

Anta also said the order value at its latest trade fair for the third quarter to January declined 10 to 20 per cent, which was relatively moderate compared with the previous two quarters.

Same-store sales operated by distributors and franchisees dropped by a mid-single-digit percentage during the October-December quarter last year.

"Some optimistic investors had expected the industry to show warming trend in the third quarter. However, the situation could be worse as there's still no significant improvement in the retailers' inventory level yet," Kwok said.

Not only Anta, but almost all its local rivals are facing similar challenges.

Xtep International earlier reported the order value for the second quarter of this year fell 15 to 20 per cent year on year, while Peak Sport Products said its orders dropped more than 20 per cent.

Li Ning forecast a full-year loss in December and planned to raise HK$1.87 billion through convertible securities to restructure its sales channels.

"In view of the uncertain market conditions, we will remain cautious in processing future orders and store-opening plans of our retailers," Anta said.

As of December, Anta had 8,075 Anta-brand stores, 300 Fila-brand stores and 833 children's sportswear stores on the mainland and overseas. The company plans to cut the number of Anta stores to 7,600 but increase the children's stores to 1,000.