XTEP HOLDINGS (HK: 1368), China’s top fashion sportswear play, won “most improved brand image” honors in a comprehensive sector survey by CLSA with Erke -- flagship brand of SGX-listed China Hongxing Sports (suspended since Feb 2011) -- faring less well
Meanwhile, the research note warns that just 2 or 3 domestic brands might survive in the very crowded and hypercompetitive PRC sportswear industry.
In a survey of leading sportswear brands serving the Chinese market, including Singapore, Hong Kong, US and German-listed firms, Xtep Holdings (HK: 1368) came out on top in terms of boosting its brand reputation.
“Xtep is ranked by consumers as the one that has most improved its brand image in recent years,” CLSA said.
Photos: Xtep
Xtep’s aggressive sponsorship of marathons and other road races, including the upcoming Standard Chartered Hong Kong Marathon, has apparently been paying off.
Also, the slogan “Love Running, Love Xtep” as well as a continuous effort to promote the Xtep brand via high-profile athlete and entertainer spokespersons has become a cornerstone strategy of the Hong Kong-listco’s marketing campaign.
Industry consolidation needed
The French research house said sportswear retailers with a significant market presence in Mainland China see competition among brands as their biggest challenge today.
“Feedback from consumers shows that Nike, Adidas and Anta are still the most desirable brands in both the apparel and footwear categories. According to retailers, the best performing sportswear brands in their local markets are Nike, Adidas and Anta while the worst are Erke, Peak and Li Ning.”
Despite the recent share price rebound, levels among sportswear firms remain low compared to 2011.
“The market is waiting for an industry turnaround but our conversations with 267 sportswear retailers (and 303 consumers) reveal that the inventory problem was still serious and that sales had not warmed up when we did the research,” CLSA said.
Distributors and retailers are profitless and are calling for market consolidation, the research note added.
“Only two or three domestic players may survive in the end.”
Inventory overhang remains; Xtep & Adidas best inventory controls
CLSA said its recent visits to sportswear shops reveals that last year’s sales were down on 2011.
“More retailers report a higher inventory level than three months ago and one year ago than report a drop in inventory.”
Xtep and Adidas had the best overall inventory control measures among sportswear plays operating in China.
Current inventory turnover of the nine brands at surveyed stores stands at 0.23-0.29, better than at the trough (in 2012) of 0.14-0.17, with inventory turnover referring to volume sales in a month/average inventory in a month.
“But it’s far below the normal level if stock held at distributors’ independent warehouses is taken into account,” CLSA said.
Expect recovery this year
With inventory pressure remaining, CLSA said most retailers do not expect discounting levels to ease in the next six months.
By early December, fewer than half of the retailers had seen a pick-up in their store sales.
Of the 171 retailers who have not seen any recovery yet, 105 expect it to come before the end of 1H13.
“Our conversations with 300+ Chinese consumers show they are still buying sportswear, with most (55%) expecting to spend the same amount on sportswear in 2013 as last year while 35% expect to spend more.
“Most retailers see year-on-year growth in value sales hitting 4-11% in 2013.”
See also:
XTEP ‘One Of Two Survivors’; China Property Boosting White Goods
HSBC Upgrades XTEP; UNI-PRESIDENT Started ‘BUY’
China Retail Rundown; XTEP ‘Buy’; ANTA Mixed
XTEP ‘Buy’; Bocom Downbeat; MAGIC Shines; PAX Impresses
XTEP Kicking Things Up A Notch; CHOW SANG SANG Target Hiked
