Hong Kong-listed sportswear maker Xtep reports rise in net profit, says ‘double-digit’ growth still possible in 2020

Hong Kong-listed mainland Chinese sportswear maker Xtep International Holdings said on Wednesday that the Covid-19 outbreak might lead to a price war in the short term, but that it could maintain double-digit growth this year.

“We think that there might be a price war in the short-run,” Ricky Yeung, the Fujian-based company’s chief financial officer, said during its annual results webcast. “Because of this epidemic, the market stopped operations for a month or so. So there is accumulated inventory.”

But as the demand for sportswear remains strong, Xtep was confident it could resume growth in the second half. “We can still maintain fast growth, in double digits,” Yeung said.

The outbreak has forced the company to exercise cost-cutting measures, as well as to turn to online platforms for sales. Store openings for foreign brands in Xtep’s portfolio have been postponed.

“The first Saucony store [in China] will open in the third quarter this year. For Merrell, it will happen at the end of the year,” Yeung said.

The company reported a 10.8 per cent increase in net profit to 728 million yuan (US$103.7 million) for 2019, having gained from a boom in China’s sportswear industry, according to its filing. It, however, proposed a final dividend of 7.5 HK cents per share, down from 9.5 HK cents a share in 2018. Its shares fell 4.1 per cent to HK$2.32 on Wednesday.