Yue Yuen Industrial Holdings reported a 5.1 percent increase in sales to $7,519.6 million for the first nine months of the year, driven by its own retail operations. The Chinese company's net income jumped by 12.1 percent from the year-ago period to $229.4 million.
Adding the months of October and November, total revenues were up by 4 percent in the first 11 months of this year, but revenues from manufacturing were off by 6 percent in November.
Revenues from Yue Yuen's large manufacturing segment improved by 2.9 percent in the nine months to $4,437.3 million, including a 4.0 percent increase in footwear sales to $4,086.7 million.
The segment's gross margin fell by 1.1 percentage points to 18.2 percent, which the company blamed on a combination of increased complexity of products resulting from the current “retro fashion” trend and growing demand for flexible production set-ups such as dual-sourcing, with some companies using two preferred suppliers to provide the same product.
Several big sports brands have reported that they have been outsourcing the production of some models in China as well as in another country in reaction to the higher import duties imposed by the U.S. government on imports of shoes and other products from China. Yue Yuen said that its gross margin was also impacted by the fact that it continued to shift some production away from China during this year.
Average prices rose as the volume of Yue Yuen's shoe production went up by 1.4 percent to 239.7 million pairs during the period. In terms of value, sales of athletic shoes advanced by 5.0 percent to $3,242.4 million, while casual and outdoor shoes were down by 2.1 percent to $766.1 million. Sales of sports sandals jumped by 33.4 percent to $78.2 million. Meanwhile, sales of soles, components and other items decreased by 8.3 percent to $350.6 million and the company's wholesale business tumbled by 41.2 percent to $171.8 million.
Revenues from manufacturing were down by 3.6 percent in Europe, representing 28.1 percent of the total as compared to 30.0 percent for the year-ago period. They rose by 5.0 percent in the U.S., 11.3 percent in China and 3.6 percent elsewhere.
Retail sales in China from the company's Pou Sheng subsidiary gained 14.3 percent to $2,910.5 million. The gross margin there expanded by 1.1 percentage points to 34.2 percent, thanks to the improvement in the sell-through, lifted by a healthy sporting goods market in China. At the end of the period, the retail chain had 5,955 owned stores, 307 more than a year earlier. In addition, Pou Sheng's sub-distributors opened 318 new stores in the country to reach at total network of 3,869 units.
Across all its operations, Yue Yuen's gross margin lost 0.1 percentage points to 24.8 percent, while Ebitda went up by 18.3 percent to $701.5 million.