Anta Sports Products (2020), which makes and retails sportswear on the mainland, fell 14 per cent on October 14. The drop came the day after an industry event in Beijing in which the firm told analysts about an expected sales slowdown.
On Monday, after the market closed, Anta Sports published an announcement via the Hong Kong stock exchange saying it expected slowing growth in the third quarter. Its stock fell 15.7 per cent more the next day. The events triggered downgrades on the stock and fuelled a sell-off in the sector, which included mainland sportswear makers Li Ning (2331) and China Dongxiang (3818).
Samantha Kwong (Kim Eng) says Li Ning has been leading price cutting in stores on the mainland, which has now pressed Anta to follow. She says the sector expanded too quickly following a 2008 Beijing Olympics-inspired mania for sports gear.
She questions why certain brokerages were given a heads-up on the revenue warning ahead of others. Her firm was not invited to the Beijing event and was not given guidance of a revenue slowdown when she inquired to the firm before Monday's announcement.
The result was two sell-offs, one when certain brokerages issued their alerts on the firm in the week before last, and a second one following the official warning from the firm last week. That made 'a lot of people really upset', she says.
Eugene Mak (Core Pacific-Yamaichi) also says the mainland sportswear sector has grown too fast, resulting in an oversupply of inventory. Sportswear makers have been aggressive in making arrangements with independent retailers in selling their apparel. Retailers often take their products on the expectation they could return them to manufacturers if sales were poor.
'On one street there would be several shops selling the same products,' Mak says, adding that international brands such as Nike and Adidas are adding pressure. 'We don't see this problem being cured in the short term,' Mak says.
The views stated here are those of analysts and are not stock calls by the South China Morning Post