China’s sportswear makers begin to sweat

This year is unlikely to be a wining one for sportswear sellers in China, with some companies expected to see profit growth slow, say analysts.

Peak Sport last week revealed low-single-digit decline in trade fair orders for the fourth quarter this year and flat same-store sales growth in the first quarter. The slide in orders was caused by warmer winter and weak consumer sentiment, the firm said.

“While we remain positive on the long-term growth outlook for the sportswear sector underpinned by supportive policies and peoples’ increasing participation in sports, we see greater downside risk than upside force in the short term,” wrote Albert Yip of GF Securities Brokerage Limited in a research report.

It has downgraded Peak Sport from “buy” to “hold”, saying it expects Peak’s net profit to grow only 1.8 per cent this year and 5.6 per cent next year, compared with a 22.3 per cent growth last year.

“[Peak’s order decline] affirms our view that 2016 is unlikely to be another year when all sports brands in China win, given a higher base, but one with more limited share gain potential from smaller unlisted brands,” Goldman Sachs said in a report.