* ANTA records third straight quarter of order growth
* Xtep, Peak, 361 Degrees see improved order figures
* Nike distributor Belle books rising growth in same-store
* Li Ning to announce earnings this week
(Adds share movement)
By Donny Kwok
HONG KONG, March 17 China's sportswear makers
appear to be emerging from years of overzealous expansion
fuelled by Beijing Olympic Games fever, after the country's
biggest player demonstrated sustained recovery with its third
straight quarter of order growth.
ANTA Sports Products Ltd and smaller rivals such
as Xtep International Holdings Ltd and Peak Sport
Products Co Ltd were caught out after the 2008 games
when demand fell far short of expectations. Massive inventories
and the cost of maintaining a sprawling outlet network outlet
soon ate into margins.
Foreign competitors including Nike Inc and adidas AG
also took a knock from an ensuing war of price
discounts, in a market widely regarded as a growth engine while
demand is sluggish in Europe and the United States.
Sportswear makers have since been clearing stocks and
closing stores. ANTA - the biggest by market value at $4 billion
- finally offered a sign of industry recovery last month by
booking a high single-digit percentage growth in orders for
"The sportswear sector is back on a growth track and ANTA is
the leader of the trend. Positive order growth for ANTA will
likely be sustained in the next few years," said Hong Kong-based
UBS analyst Spencer Leung.
At both Xtep and 361 Degrees International Ltd,
third-quarter orders fell on year by a single-digit percent, but
the rate of decline has narrowed over the past year.
Peak even booked percentage growth in the mid-teens, saying
orders for delivery in the first to third quarters pointed to
"With substantial clearance of inventory, leaner sales
networks, stricter cost control measures and a prudent approach
in placing and accepting orders, the stronger sportswear
manufacturers are now in better shape," 361 Degrees Chairman
Ding Huihuang said in an earnings statement on Monday.
The chairmen of both Xtep and Peak expressed similar
turnaround sentiment, though both saw net profit fall 20 percent
last year as a result of operational reorganisation. At 361
Degrees, the profit decline was 70 percent
"Even though we see the inventory issue has been taken care
of, the industry is still not yet in a stage that we see solid
organic growth. It may take a while," said Linus Yip, chief
strategist at Hong Kong-based First Shanghai Securities.
Shares of 361 Degrees closed down 1 percent on Monday after
the company announced earnings which missed analyst estimates.
Xtep and Peak ended higher last Wednesday after reporting
figures in line with forecasts.
GRADUAL SALES GROWTH
China's biggest distributor Belle International Holdings
, which sells sportswear from Nike, adidas and Puma SE
, offered further indication of the industry gradually
getting back on its feet.
Last week, Belle said same-store sportswear sales grew 7.0
percent for the three months to February compared with the same
period a year earlier. That was an improvement from the 5.0
percent of October-December and 4.5 percent of July-September.
ANTA, which kitted out China's delegation to the Sochi
Winter Olympic Games last month, plans to open more stores in
prime locations, in contrast to its pre-Beijing Olympics
strategy of opening stores in even far-flung locations.
The company beat estimates by posting net profit of 1.31
billion yuan ($213.49 million) for last year, pushing its shares
higher on the day. The result represented a 3.2 percent on-year
decline, but was much narrower than the previous year's 21.5
It said average inventory days, or the time taken to sell
goods produced, was 59 last year from 51 in 2012 and 44.1 in the
Beijing Olympics year. The higher the number, the lower the cost
of sales. In mid-2012, the figure spiked to 102.5.
But ANTA's most significant indicator of recovery is last
month's quarterly trade fair orders.
"People will pay attention to other players for signs of a
similar phenomenon as at ANTA, which saw growth in orders," said
Sunwah Kingsway Group Research analyst Steve Chow.
Li Ning Co Ltd is scheduled to report earnings on
($1 = 6.1361 Chinese Yuan)
(Reporting by Donny Kwok; Editing by Christopher Cushing)