Xtep said it will continue to improve brand equity through sponsoring “powerful” sporting events.  Photos: Xtep

FASHION SPORTSWEAR firm Xtep International Holdings Ltd (HK: 1368) boosted its first half bottom line by 25% year-on-year to 466 mln yuan on strong footwear sales.

And Xtep had a very aggressive retail expansion campaign in the first six months.

This helped the Hong Kong-listed firm boost its revenue in the January-June period by 26% to 2.57 bln yuan.

Xtep Chairman Ding Shui Po said the group’s strong growth in the first half of 2011 was mainly attributable to four key competitive strengths of the Xtep brand, namely: brand building, innovative products, channel establishment and management capability.

“Under the continuous support of the PRC government’s policy, the overall retail industry and the sportswear segment in the PRC are still expanding steadily. From January to June 2011, China’s total retail sales of consumer goods increased by 16.8% when compared to the same period in 2010, indicating that the Chinese economy remains healthy and that consumer demand for quality goods is still growing at a steady pace,” he said.

The Xtep brand continues to target second- and third-tier cities within the PRC with high growth potential.

"We will create another 'Xtep Heatwave' by organizing music concerts in the PRC for our Xtep brand celebrity spokespersons,” said Xtep Chairman Ding Shui Po. Photo: Xtep

“With the growing number of consumers and increasing average salaries in these cities, consumers’ average disposable income and purchasing power will also continue to rise.”

In the first half, revenue from the Xtep brand alone increased 29.0% year-on-year, reaching 2.45 bln yuan.

The overall gross profit margin also increased to 40.9% from 40.7% a year earlier.

Xtep said the satisfactory results and the adequate surplus cash balances have resulted in the board recommending payment of an interim dividend of 13.0 HK cents per share (2010:10.0 HK cents), a payout ratio of approximately 50%.

“The group has set a steady pace in increasing the number of retail outlets in line with the pace of urbanization in the PRC. We have continued to execute our expansion plan and increased the number of Xtep brand retail outlets by 407 in the period under review, reaching a total of 7,438 of retail outlets as at 30 June 2011,” Mr. Ding said.

The Xtep brand nationwide distribution network continued to expand in line with the firm’s strategy with a coverage of approximately 80% located in second- and third-tier cities in the PRC.

“This continues our early-mover benefit and strengthens our competitive advantage in these key growing markets. We believe that the steady pace of urbanization and the increase of consumption power of the PRC nationals can support a sustainable economic growth for the next few decades.”

Under such steady growth at home, the overall retail consumption and sportswear industry is expected to grow at a healthy pace.

“Hence, we are confident in the future prospects of the sportswear and retail industries. We acknowledge that we still face fierce competition from both domestic and international brand players in this growing industry. We have delivered satisfactory results in the first half of 2011 and we are confident that we will continue to meet our strategic goals,” said Mr. Ding.

Brand enhancement through effective marketing

Xtep recent price: 3.94 hkd

Xtep said it will continue to improve brand equity through sponsoring “powerful” sporting events.

“We have secured numerous events such as being the sole sponsor of the US Team and Great Britain Team in the 26th Universiade in Shenzhen, the most important international sporting event in 2011 in the PRC.

“We will continue with our commitment to sponsoring running events including four international marathons in the second half of 2011. We will also bring world-class football club Villarreal C.F. to China to jointly promote the club and the Xtep brand, and we will create another 'Xtep Heatwave' by organizing music concerts in the PRC for our Xtep brand celebrity spokespersons.”

See also:

XTEP, CHINA AUTOS: What Analysts Now Say...

XTEP 2010 Net Up 25.7%: What Analysts Now Say...