Share prices of mainland sportswear makers rebounded yesterday as Xtep International, 361 Degrees and Peak Sport reported better-than-expected interim results and announced they would pay dividends despite declining profit.
The shares of the three companies, which have fallen dramatically this year because of an industry slowdown, rose up to 9 per cent as investors bet the stocks had been oversold.
Elyse Wang, an analyst at Haitong International Securities, said the gains were a short-term technical rebound.
"There's no major improvement in the sportswear industry," Wang said. "We have no reason to be optimistic about this market in the second half."
Xtep International, the best performer of the three, said net profit for the six months to June remained almost flat at 468 million yuan (HK$572 million), while revenue rose 1.4 per cent to 2.6 billion yuan.
361 Degrees reported a 23 per cent decline in net profit to 596 million yuan for the period and a 9.9 per cent drop in turnover to 2.9 billion yuan.
The third company, Peak Sport, posted a sharp decrease of 43 per cent in net profit to 240 million yuan, with a 29 per cent slump in turnover.
The stock prices of Xtep, 361 Degrees and Peak rose 8.9, 8.5 and 3.7 per cent respectively, closing at HK$2.94, HK$2.16 and HK$1.39 per share. That compared with a minor fall of 0.02 per cent in the Hang Seng Index.
Wang said investors showed more interest in 361 Degrees because the company had signed a deal with Chinese swimmer Sun Yang, a gold-medal winner at the London Olympics, to be its spokesman. "This will raise the brand's profile at a relatively low cost," she said.
The rise in share prices of the three companies triggered increases in other sportswear companies on the stock market as well. Li Ning Company gained 6.9 per cent, Anta Sports rose 5.54 per cent and China Dongxiang jumped 11 per cent in Hong Kong trading yesterday.361 Degrees proposed a dividend of 8.5 HK cents, Peak proposed 5 HK cents, and Xtep announced 13.2 HK cents per share for the period.
As of the end of June, 361 Degrees operates 8,050 outlets, Xtep has 7,603 and Peak has 7,059.
The sportswear industry is expected to remain weak in the second half as both Xtep and Peak said the values of the orders they received from distributors at their latest trade fairs were either flat or recorded double-digit declines. Companies including Xtep and Anta have cut their wholesale discount rates to distributors to stimulate sales, although the move may hurt their profit margins.