ANTA Sports expects weak demand in first quarter of 2013

ANTA Sports Products Ltd, one of the largest sportswear makers in China, received at least 20 percent fewer orders from distributors in the first quarter of 2013 compared with a year ago, suggesting a continued bleak outlook for the sector despite its multi-million sponsorship of the Olympic Games and other sport activities.

"The (sportswear) industry is still facing great challenges, (and) the competition between retail stores is fierce," Lai Shixian, chief operating officer of ANTA, told a media briefing in Hong Kong on Monday after the company reported a 17 percent fall in its interim net profit.

ANTA's distributors and franchisees are being more conservative about placing orders as they also see difficulties in the industry, said Lai, adding that the company has lowered the average selling price by a single-digit percentage to help ease the pressure on its distributors. All of these factors contributed to a 20 to 30 percent plunge in the total value of the orders it received for the first quarter of 2013.

He said that it is still too early to say whether the industry has hit bottom, as retail stores still needed to clear inventories and the discounts they are offering are very aggressive.

ANTA's same store sales growth fell by a mid-single digit percentage in the first half, the company said.

"I think more (sports wear) retail stores will have to be closed before the industry gets better," said Lai, explaining that pressure is mounting for the distributors and franchises as costs increase and the retailer's profit margins are squeezed.

During the first half, the number of ANTA stores increased by 29 to 7,807, while the number of its Sports Lifestyle series stores decreased by 198 to 689. The company forecast at the beginning of this year that the number of its stores will increase to 8,000 by the end of 2012, but now, Lai expects the number of stores to only "remain stable".

Despite the challenges and uncertainties facing the industry, ANTA did not cut its budget on advertising and promotion, and instead introduced a series of advertising campaigns recently in relation to the ongoing London Olympics.

While refusing to disclose the specific sponsorship amount for the London Olympics at the press conference, Lai said that the sponsorship is crucial for its brand building.

Dickie Wong, director of Kingston Securities Research, also said the sponsorship should benefit the company, as the Olympics is a good event for ANTA to present its logo to audiences from all over the world.

"But it is very hard to say the sponsorship will single-handedly boost its sales in the short term," said Wong.

He also sees challenges in the sportswear industry, due to a high inventory level as well as prolonged account receivable days.

But Wong pointed out that although the industry is facing difficulties, ANTA is better positioned than its rival Li Ning Co Ltd, which won the CBA sponsorship contract after ANTA's 5-year contract expired.

Wong said that Li Ning is now suffering from the consequences of its over-expansion in the past and it has to spend a lot on repurchasing its inventories.

Li Ning issued a profit warning in June, saying its net profit for the year is expected to see a rather substantial decline compared with its results in 2011, mainly due to intensified competition within the sporting-goods industry, increased discount promotions and strong inventory clearance pressure at the retail level.

ANTA said on Monday that for the first half of 2012, the company's profit attributable to shareholders dropped 17 percent to 769.6 million yuan ($120.6 million) from a year ago, beating the market consensus. The company declared an interim dividend of HK$0.23 per share.

Shares of ANTA jumped 17 percent to close at HK$4.85 in Hong Kong on Monday due to its better-than-expected results.

sophiehe@chinadailyhk.com