Xtep will march into China’s Second and Third Tier Cities
As one of the most famous sports supplies brand like Nike, 361, Erke etc., in China, Xtep, as a brand of running shoes which was created by Shuibo Deng in 2001. At the beginning of 2011, Xtep Company announced that amount of order in the third quarter will be increased to 24% yearly, rate of increase is between the ones in the first quarter 23% and the second 25%. Thus results meet what we wanted. What’s more, average sales prices of fashion and footwear both obtained rising with a single or double number. The management layer believe that sales volume in the fourth quarter will increase 20% in 2011. In the first half of the year, income from fashion and footwear separately accounts for 56% and 42% of the total revenues, until the end of 2010, Xtep owned 7,000 stores which meet our expectations. Discounts of wholesale for fashion dress keeps at 60%, while for footwear, reduced to 60% in 2010 from the 65% in 2007. Now the management layer have no intention of changing the wholesale discounts. As the average sales price rises, rate of gross profit should keep it stable and promote the inner production, can further reduce the effects from price’ rising of raw material as well.
Running sports is still the focus of strategic development for Xtep, and so, Xtep company promoted the fully-new running shoes series of Tiple X. We believe that running shoes will maintain the increasing power for the company. Xtep will also take a good part in the sponsor actions, and obtained the opportunity to be as a sponsor in several international marathons in mainland and Taiwan. Which also improved the value of brand in the sports item. Until now, contribution from running shoes accounts for 20-25% of shoes income in company. Management layer look forward to 12% and 11-13% separately for advertisement and publicity against to the sales ratio in 2010 and 2011.
Operating data in the fourth quarter in 2010 was stable, and sales in the same store keeps great in this quarter which exceeds the one in the third quarter with rate of 8-10%, over 10% yearly. Amount of orders increase 25% in the fourth quarter and has been carried out fully. Amount of replenish orders was less than 5%.
For the future development, Xtep would focus on Hunan, Anhui, Sichuan, Shandong and some other second tier and third tier cities. They plan to increase about 800-1000 stores in mainland. Clients of Xtep are mainly in central cities, especially young consumers, so the price is reasonable. Price of Xtep may increase for people with mid-low salary that is rising, Xtep can also benefit from the government for which improve the development of economy in cities and towns.