ANTA Group's 2020 First-half Earnings: Nearly 14.7 Billion RMB In Revenue And A Record High Gross Profit Margin

Rhea-AI Summary

ANTA Sports Products Limited reported its interim results for 2020, with revenue at 14.669 billion RMB, a slight decline of 1% year-on-year. The Group's gross profit margin reached a record high of 56.8%, outperforming peers. Earnings from the ANTA brand fell by 10.7% to 6.777 billion RMB, while FILA brand revenue increased by 9.4% to 7.152 billion RMB. Despite challenges from the pandemic, ANTA's e-commerce sales surged over 50%. The Group aims for full-year growth, supported by robust cash flow of 21.5 billion RMB.

Positive

• Record gross profit margin of 56.8%, up 0.7 percentage points.
• FILA brand revenue grew by 9.4%, indicating strong market performance.
• E-commerce retail sales increased by over 50%, showcasing effective digital strategy.
• Cash and cash equivalents reached 21.5 billion RMB, ensuring solid financial foundation.

Negative

• Overall revenue decreased by 1% year-on-year, indicating potential market challenges.
• Profit attributable to equity shareholders decreased by 20.1% to 2.377 billion RMB.

HONG KONG, Aug. 25, 2020 /PRNewswire/ -- ANTA Sports Products Limited (2020.HK; "ANTA Sports", the "Company" and all its subsidiaries together as the "ANTA Group") today released interim results for the year 2020. During the COVID-19 pandemic, ANTA Group, under the guidance of "maintaining sustainability, stabilizing growth and refining governance", faced up to difficulties and turned the crisis into an opportunity. Against the backdrop of international brands hitting strongly on the market, the Group's multi-brand matrix has generated strong synergy. In the first half of the year, the Group's earnings decreased by only 1% year-on-year, and its steady recovery pace took the lead in the sports industry. The Group's gross profit margin reached a record high of 56.8%, outperforming major competitors, and profit attributable to equity shareholders was placed at the forefront of the industry. ANTA brand followed the path of transformation and achieved the expected revenue. FILA's revenue grew strongly by 9.4%, climbing to the top of the sports industry. In addition to the two main brands, other brands, led by DESCENTE, grew by 8.3%. The Group's e-commerce retail sales value grew strongly by over 50% year-on-year, with a 78% growth rate during the sales promotion of the 618 Online Shopping Festival. Online business of FILA, DESCENTE, and KOLON SPORT grew more than 100% year-on-year.

In the first half of 2020, ANTA Group accelerated internal reform, reshaped the omni-channels model, and responded proactively to the impact of COVID-19. Putting consumers at its core, the Group restructured "people, product and place". By deepening digital transformation, the Group promoted the rapid online-offline retail convergence and speedily pushed forward the new online business model. Through innovative marketing approaches, such as "All Hands on Retail", e-commerce live-streaming, celebrity marketing, and influencer recommendation, as well as major marketing campaigns, such as the launch of the licensed collection of the national-flag-themed products for 2022 Beijing Winter Olympics, the Group created share of voice in different market segments for several brands and boosted sales. The Group adhered to the growth strategy of "Single Focus, Multiple Brands, and Omni-Channels" and explored the omni-channels convergence and coverage of different brands. It integrated and connected goods across platforms through insights into market trends. The Group made strategic adjustments in many aspects, including R&D, production, supply chain, and retail platforms. Immersed in its unique corporate culture and with strong execution capabilities, the Group built consensus, unified actions, and actively promoted forward-looking changes. Additionally, the Group focused on the digital strategy, as well as the transformation and upgrading of the direct-to-consumer business model. In the contexts of China having the pandemic under control, the sports market regaining traction, and China's consumer confidence index taking the lead globally, ANTA Group has the confidence to achieve its full-year high-quality, positive growth target.

Steady Recovery Pace Leading the Sports Industry

• During the pandemic, first-half earnings were flat year-on-year; revenue fell slightly by 1% over the same period last year to 14.669 billion RMB. Revenue of ANTA brand was 6.777 billion RMB, down by 10.7%, and revenue of FILA brand reached 7.152 billion RMB, up by 9.4%. The two main brands were on a par with one another. Despite the impact of the pandemic, the Group's steady recovery pace took the lead in the sports industry.
• The gross profit margin reached 56.8%, an increase of 0.7 percentage over the same period last year to a record level, outperforming international competitors on the whole.
• Profit attributable to equity shareholders (excluding losses of joint ventures) was 2.377 billion RMB, down by 20.1%, and margin of attributable to equity shareholders reached 16.2%, which was placed at the forefront of the industry.
• Profit from operations decreased by 15.3% to 3.604 billion RMB. Profit margin from operations was 24.6%, of which profit from operations of ANTA brand was 1.805 billion RMB and profit from operations of FILA brand was 1.766 billion RMB.
• The Group's net cash generated from operating activities amounted to 2.39 billion RMB, and free cash inflow was 1.902 billion RMB. The Group's total amount of capital (comprising cash and cash equivalents, fixed deposits held at banks with maturity over three months and pledged deposits) has reached 21.5 billion RMB. With robust cash flow and abundant cash, the foundational base of the Group's development is solid.
• Although the business has been impacted by the pandemic, investment in R&D did not reduce; R&D expense as a percentage of revenue increased by 0.3 percentage points.
• In the first half of this year, the Group operates over 12400 stores across the country to become the sportswear company with the largest offline coverage in China. All brands grew remarkably in online business. According to Tmall Industry Index. Anta brand ranks NO.1 among Chinese sportswear brands and NO.3 in the whole industry while FILA ranks NO.5 with its rapidest industry-wide growth rate. Growth rate of the Group's online business exceeded 50%.

"The Sixteen-character Guidelines" Ensuring Sound and Stable Growth

Throughout 2020, pandemic prevention has been extremely challenging. On the premise of protecting all employees and in the face of the changing pandemic situation, ANTA Group has put forward the sixteen-character guidelines, as in "long-term preparedness, dynamic management, cost control and reduction, and sustainable inventory", to mobilize the whole Group in the fight against the pandemic. Remarkable results were thus achieved in the "All Hands on Retail" initiative, e-commerce business, and cost control. The three brand groups - professional sports, fashion sports, and outdoor sports, deepened their distinct brand genes and improved brand health; the three resource-sharing platforms - supply chain platform, retail platform, and shared corporate services platform, improved synergy and efficiency tremendously. During the reporting period, the Group normalized in-pandemic leadership and management, and ensured the robustness of business operation, with all business metrics rising towards sound development.

ANTA Group, in partnership with IBM, carried out the strategic planning for digital transformation to improve management efficiency by developing a digital platform. At the marketing end, the Group made comprehensive plans on contact points for better interactions with consumers, accurately managed monetizable community traffic, and activated hundreds of millions of underused consumer big data assets, to build the basis for rapid and precision marketing. At the manufacturing end, teaming up with BCG in working on the Group's supply chain development strategy and by developing flexible supply chains and following the three innovative initiatives on digitalization, technology and material, the Group sped up product design, development and production to empower brands, as well as controlled inventories. At the logistics end, the online-to-offline model was established to integrate goods online and offline, which increased direct retail distribution capacity by 35%, reduced goods allocation and transfer, reduced operational costs, maximized inventory efficiency and saved expenses significantly. In the meantime, the second phase of the Group's integrated logistics base has started its planning and construction. The central warehouse to be completed in the future will achieve the goals of omni-channels, systematization, automation, and high yield.

Three Business Moats Built by the Professional Sports Brand Group

In the first half of 2020, the professional sports brand group centered on ANTA brand targeted Generation Z and emerging young office professionals as its core consumer, built three business moats of "professional sports, technology-leading, and ultimate value", and redefined the ultimate value by implementing the strategy of "edgy technology, appealing design, touching narrative and appropriate pricing" to satisfy needs of the mass consumers, especially young consumers, from top-tier and low-tier cities in China.

Diving deep into the professional sports category and focusing on running, basketball, training and athleisure, ANTA brand released a diversity of top-selling products leveraging hydrogen technology, cushioning technologies and other sole innovations. Specifically, ANTA brand has reached several milestones in the first half of this year: The China flag featured sportswear of Beijing 2022 official licensed product , with ANTA brand's newest technologies and of the highest product quality, has advanced the brand to a new height, and the product planning and integrated marketing themed on "KEEP MOVING" has strengthened consumers' sense of identity growing from national pride and patriotism, which has all contributed to rising sales; the C37 running shoes with perfect softness has re-interpreted the professional sports technology and the ultimate value, impressed runners with high price efficiency and exceeded 200,000 pairs in sales; ANTA brand and DuPont have jointly developed the "A-CHILL TOUCH" cooling fabric by using the latest "SORONA®+COOL" fiber technology and upgraded the sportswear; Multiple co-branding products have attracted the young consumers; ANTA brand's basketball live-streaming"Shock the Game"has attracted tens of millions of viewers, with over 150 million views on Douyin and Kuaishou and over 500 million views on Weibo, boosting both online and offline sales.

Strengthening brand resonance, with Fastest-growing FILA Leading the Industry

FILA, as a premium fashion activewear brand with century-old brand inheritance, has been committed to promoting a sporty, positive and elegant lifestyle; as a result, its brand preference has significantly improved. During the first half of 2020, young idols with highest Internet traffic such as Huang Jingyu and Cai Xukun became FILA's brand ambassadors, and helped create unique, avant-garde brand images wearing FILA's well-designed, top-quality products; collaborating with Wilson, a century-old brand, FILA reaped a considerable amount of loyal consumers among the mass in top-tier and mid-tier cities; FILA's online-to-offline model was rapidly enhanced, and its official online store became a critical channel for direct-to-consumer sales, which has maximized the efficiency of all products sold through all channels, greatly raised the ratio of sales, and achieved growth in both goods circulation and business performance; new images of FILA 5G, FILA Fusion 2.0 and FILA Kids 3.0 were launched and images of physical retailers were upgraded, largely improving the store performance; FILA Fusion, FILA Kids and FILA Athletics have formed a complete brand ecosystem, continuously offering consumers a differentiated professional sports experience and a sense of novelty.

Insisting on High-end Market Positioning and Achieving Growth against Market Trends

DESCENTE has been part of ANTA Group for more than 4 years. Along the way, as a top-notch professional sports brand, it has been highly consistent with its market positioning and brand identity, and actively involved in community management. During the first half year and in the middle of the COVID-19 pandemic, DESCENTE achieved growth in both online and offline business and its offered a great variety of experiences to its audience, for instance online fitness sessions, and transformed its member base into monetizable traffic. In collaboration with acclaimed celebrities Daniel Wu and Xin Zhilei, FILA's ALLTERRAIN and MOTION KNIT series have gained profound recognition from high-end consumers. In July, an agreement was signed with Descent Global that Descent Global would license 90% of trademark and related intellectual property rights to DESCENTE China, which would accelerate DESCENTE's expansion significantly in China. Currently, DESCENTE has penetrated deeply into tier one and tier two cities in Chinese mainland and opened physical stores in premium shopping malls at great locations, leading the industry in both store performance and sales per unit area. KOLON SPORT, as a high-quality outdoor lifestyle brand, has seen great potential in further growth.

Unwavering Commitment to Social Responsibilities and Global Citizenship

Despite the urgency of cost reduction and control posed by the pandemic, the Group has not ceased to fulfill its social responsibilities. As one of the first enterprises making donations to regions seriously affected by the pandemic, ANTA Group donated over 35 million RMB in cash and in-kind to support healthcare staff in fighting the COVID-19 pandemic; the Group opened a new chapter regarding sustainable development practices - after more than a year of negotiations, ANTA Group reached a global strategic partnership with the World Wildlife Fund(WWF), the world's largest non-governmental environmental protection organization, ready to commit to the sustainable development of the textile industry, the sustainability transformation of supply chains and biodiversity conservation. This year also represents the third year of ANTA Group's Happy & Healthy Growth Charity Program - the Group has invested cumulatively over 200 million RMB cash and in-kind in teenagers from underdeveloped regions across the country, benefiting nearly 1 million teenagers, and it will continue investing more resources in this program in the second half of 2020.

Ding Shizhong, Chairman of the Board of Directors and CEO of ANTA Group, said, "At the moment, pandemic prevention and sustainable development of our businesses are the top two priorities. Since there are still many sources of uncertainty and volatility in both the international and domestic scenes, all we can do is strengthen our foresight and predictions of industry changes and consumer trends, because taking the initiative to change is the only way to counterbalance all the potential uncertainties. Yet, what remains unchanged should be 'creating value for consumers' as our fundamental standpoint and 'effective management and control' as our core operation principle so as to maintain a health operation. From our perspective, having survived from all the challenges in the first half of 2020, we should continue pursuing digital transformation of the Group, implementing the "direct-to-consumer" strategy and upgrading our business model, in order to guard our leading position in the industry and maintain our brand vitality. As China has done a remarkable job in fighting against the pandemic, we remain positive and confident about China's consumer market and the growth of China's sports industry."

About ANTA Group:

ANTA Group is a comprehensive and multi-brand sportswear company specializing in the design, production, marketing, and operation of sportswear, accessories and other sports equipment. It was founded in 1991 and listed in Hong Kong in 2007. Through more than 30 years of development, ANTA has transformed from a traditional private company into a public company that has the ability to compete internationally with a modern corporate governance structure. ANTA follows the development strategy of "Single-Focus, Multi-Brand, and Omni-Channel." The Group owns many well-known Chinese and international sports brands such as ANTA, FILA, DESCENTE, and KOLON SPORT, to fully meet the diversified demands of consumers. In March 2019, the investment consortium composed of ANTA Sports and other investors completed the acquisition of Amer Sports, and ANTA became a global enterprise.

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SOURCE ANTA Group

FAQ

What were ANTA's interim results for the first half of 2020?

ANTA reported revenue of 14.669 billion RMB, a 1% decline year-on-year, with a gross profit margin of 56.8%.

How did FILA perform in the first half of 2020?

FILA's revenue increased by 9.4% to 7.152 billion RMB, highlighting strong growth amidst the pandemic.

What is ANTA's cash position as of the first half of 2020?

ANTA had cash and cash equivalents totaling 21.5 billion RMB, providing a solid base for future operations.

What challenges did ANTA face during the COVID-19 pandemic?

ANTA experienced a 1% decline in revenue and a 20.1% drop in profit attributable to equity shareholders due to market conditions.

How has ANTA adapted its strategy in response to the pandemic?

ANTA accelerated its digital transformation and focused on e-commerce, achieving over 50% growth in online sales.