Sportswear retailer Xtep looks to smaller cities for future growth

PUBLISHED : Saturday, 16 March, 2013, 12:00am
UPDATED : Saturday, 16 March, 2013, 3:32am

Mainland sportswear retailer Xtep International plans to enhance its presence in third and fourth-tier cities this year to cash in on the potential increase in consumption demand driven by the country's urbanisation policy.

Net profit for Xtep for last year dropped 16 per cent to 810 million yuan (HK$1.01 billion), while revenue edged up 0.2 per cent to 5.55 billion yuan.

The company blamed the drop in profit to tax increases and said its prudent approach in regard to provisions also played a part.

As a result, the net profit margin fell 2.8 percentage points to 14.6 per cent last year.

Shares in Xtep rose up to 4.2 per cent before closing flat at HK$3.08 yesterday, after the company proposed a special dividend to celebrate the brand's 10th anniversary. The Hang Seng Index dipped 0.38 per cent on the day.

The company announced a special dividend of 4.5 HK cents and a final dividend of 10 cents per share.

The management said it expected the sportswear market in the country to remain challenging this year. Intense competition, excessive inventory and high retail discounts would persist in the industry, it said.

The sports apparel and footwear seller plans to consolidate 100 to 200 underperforming and remote retail outlets this year.

It also plans to open more shops in smaller cities, especially in the northern areas.

To counter the weak market environment, the company said it would continue to offer higher wholesale discounts and additional incentives to distributors and franchisees. It would also advise them to be conservative when placing orders, the company said.

During the reporting period, revenue generated from footwear rose 9 per cent to 2.7 billion yuan, accounting for nearly 49 per cent of the total revenue. Apparels contributed 2.7 billion yuan, down 7 per cent year on year.