Despite the ongoing retail rut amid the viral outbreak, Hong Kong-listed sportswear company Xtep International Holdings remains confident of double-digit growth this year. The company announced on Wednesday that it does expect a price way in the short-term but its business' growth should remain mostly unaffected.
During the webcast of its annual results this week, the company's chief financial officer, Ricky Yeung, stated that retailers will likely have an inventory surplus given the low demand. The situation will likely lead to a short-term price war between retailers and manufacturers to empty out their remaining stocks.
Yeung explained that demand for sportswear still remains high despite the overall retail slump and the company is confident that growth will resume during the second half of the year when the crisis is resolved. The executive claimed that the company still expects growth in 2020, likely still in the double digits.
In the short-term, Xtep did express some concerns over the impact of the coronavirus outbreak. The company stated that it was not exempted from the global health and economic crisis and that it too had to implement countermeasures to offset the negative effects of the pandemic.
Similar to other Chinese firms, Xtep was forced to implement cost-cutting measures and other strategies to cope with the demand slowdown. One of its core strategies was to turn to online platforms to increase sales. This included the formation of new partnerships to make its products more widely available online.
Xtep was also forced to postpone a number of store launches this year. The company announced that the launch of its first Saucony store in China will be postponed to the third quarter this year, while the launch of its Merrell store will be moved to the end of the year.
For the long-term, Xtep stated that it expects to see a boost in the industry given how more consumers will likely become health conscious after the crisis. The company remains positive for the outlook of the country's sports industry moving forward.
Yeung stated that they have seen a gradual recovery of sales for the month of March following the 20 percent drop it had experienced in January and February. The executive elaborated that they have seen marginal improvements each day as more stores resume normal operations. The industry's supply chains have also gradually come back online, providing stores with ample supply to meet demands.
Last year, the company reported a 10.8 percent increase in its net profits, hitting $103.7 million. According to its filing, the company managed to ride the sportswear industry boom in 2019, lifting its overall sales for the twelve-month period. Despite its profit growth, the company proposed a lower final dividend when compared to the previous year.
