Mainland Sportswear Industry: Brand Leading Value
Over the past two weeks, major mainland sportswear companies have released surprise results in the first half of 2008. Driven by sales network expansion and product upgrading, its revenue growth ranged from 52% to 174%, with profit growth ranging from 68% to 214%. Most surprising is that although the production costs continued to rise in the first half of the year, the profit margins of most companies continued to rise. Two of the top 3 sportswear companies, two of them increased profits and one was flat.
We believe that the excellent performance of profit margins should be attributed to the company management's hedging strategy for commodity and raw material prices, the increase in the proportion of high Maori apparel to the product mix, and the bargaining power with the increasing popularity of the brand. Besides, the Olympic events in Beijing not only enhance the sports consciousness of the masses, but also promote the overall demand of sports apparel in China. According to market estimates, the sales of sports apparel in the mainland can still exceed 20% annual growth from 2007 to 2010.
With the closing of the Beijing Olympic Games, many investors believe that the popularity of Olympic Games on sports brand and garment industry will disappear, and the growth of sales will also slow down, resulting in the problem of overstock in retail stores. The price of mainland sportswear companies has dropped sharply from last year's peak, which has reflected the views of some investors. So is the prospect of the sports apparel industry after the Olympics really as dim as its share price?
From the management guidelines and exciting quarterly sales performance of sportswear companies, we can see that the actual situation is quite different from the stock price performance. The management of one of the major sportswear companies believes that its distributors can still sell 80% of the stock in the current quarter and maintain normal sales. In addition, in recent years, the number of major sports apparel companies held in the first quarter of 2009, the total sales order still maintained 40% to 50% annual growth. Such amazing marketing shows clearly that the growth of the industry's leading brands after the Olympics is not as pessimistic as expected.
In the long run, due to the relatively limited financial resources, coupled with the rising demand for high-grade products by the more affluent consumers, low-end brands with smaller market share will be unable to compete with well-known brands at home and abroad. Those who can devote resources to product research and development, logistics management, enhance the efficiency of distributors' operations, and establish a unique image for the brand through targeted advertising campaigns, will eventually gain greater market share.
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