Kingmaker admits to a “rather abrupt shortage” of labor due to growing manufacturing activities in Guangdong, China. For a few months, several factories in China have mumbled complaints about the lack of personnel, but Kingmaker is the first one willing to go on the record. Kingmaker says its labor costs have increased by 3-4 percent year-on-year as it paid higher rates to retain quality workers. In the company’s financial year ended last March 31, costs were also driven up by the group’s new premium casual line, which required more specialized training and higher R&D expenses.

Kingmaker’s turnover for the year increased by 9.7 percent to HK$1.36 billion (€145.1m-US$174.4m), but net profit fell by 14.7 percent to HK$103.1 million (€11.0m-US$13.2m). The gross margin fell by 3.9 percentage points to 17.5 percent due to rising material and labor costs. The group’s exclusive distributorship of Lotto in China, Hong Kong and Macau narrowed its losses to about HK$7 million.

Sales of baby and children’s footwear rose last year by 6.0 percent to HK$580.6 million, while casual footwear increased by 10.9 percent to HK$431.0 million and rugged footwear grew by 18.3 percent to HK$335.6 million. The 43-32-25 production ratio brings the group closer to its long-term 40-40-20 goal.

Despite lower-than-expected growth in European sales, which went up by only 7.7 percent to HK$407.4 million (€42.3m-$52.2m), the Chinese group remains confident in the market because of a continued trend toward outsourcing in Asia. During the year, Kingmaker added Pony and Nautica among the footwear brands shipped to European customers. The group’s expansion plans are designed to cater to more growth from Europe. During the current financial year, Kingmaker plans to spend HK$50 million (€5m-$6m) to add new lines including four explicitly for Europe in Vietnam. The Vietnam production base now accounts for some 30 percent of group turnover.