Yue Yuen Industrial posted a net profit of $85.4 million in the first quarter, in the middle of the $80-90 million range that it predicted in April, compared with a loss of $56.3 million the year earlier. The gross margins of its manufacturing business and its Chinese retail subsidiary, Pou Sheng, expanded by 2.5 percentage points to 18.2 percent and by 3.6 percentage points to 34.3 percent, respectively.

The world’s largest shoe manufacturer had previously reported consolidated operating revenues of $2,493.2 million for the first quarter, up by 27 percent from the year earlier.

The final figures for the first quarter, which were released on May 13, showed that revenues from the manufacturing sector increased by 8.3 percent to $1,365.6 million, benefiting from a recovery in the demand. The volume of shoes shipped during the quarter decreased by 4.5 percent to 68.3 million pairs as a result of the group’s efforts to refine and optimize capacity and product mix, and the average selling price per pair increased by 8.7 percent to $17.79, led by growing demand for high-end categories in the company’s product portfolio.

Sales of athletic footwear rose by 3.0 percent to $1,020.2 million, while those of casual shoes & sports sandals rose by 8.7 percent to $194.2 million. Sales of soles, other components and other categories surged by 64.3 percent to $151.2 million.

The 2.5 percentage point improvement seen in the manufacturing segment’s gross margin was attributed to a higher order fill rate and a more balanced capacity utilization of around 87 percent, thanks to increased operational efficiency.

Pou Sheng’s revenues soared by 59.3 percent to $1,127.7 million, with a growth of 48 percent in the local currency, amid a sustained consumer recovery in China. The 3.6 percentage point improvement in its gross margin was attributed mainly to an enhanced sales mix.

Despite a “good” start to 2021, Yue Yuen highlighted uncertainties on its outlook due to the risk of continued volatility in consumer sentiment and operational risks associated with the resurgence of Covid-19 in Vietnam and some other Southeast Asian countries where the company has a small number of production sites.

“The company will ensure a smoother ramp-up of its manufacturing capacity in the coming quarters, in line with increasing demand and the order pipeline on the manufacturing side,” the company said. “The group will continue to swiftly adapt to the changing operational environment and will resume its capital expenditure program in strategic areas, which includes investments in automation, capacity migration and optimization, SAP ERP implementation, as well as in the expansion and upgrade of experience-driven retail stores in Greater China.”