ANTA Sports Products Ltd, China's largest maker of athletic shoes, expects slightly higher than mid-single digit growth in same-store sales for 2011, the company said Monday after reporting a 22 percent gain in first-half net profit.

Net profit for the six months ended June 30 rose 22 percent year-on-year to 927.3 million yuan ($144 million) on revenue of 4.45 billion yuan, up 28.9 percent from the first half of last year. Basic earnings per share shot up 21.9 percent to 37.18 yuan cents from a year ago. The company declared an interim dividend of 26 HK cents per share, a 30 percent increase year-on-year.

The company opened another 295 retail stores during the first half, taking the total to 7,844. ANTA said last year that it plans to operate a total of 8,200 stores by the end of 2011, a goal that the company said remains on target Monday.

Ding Shizhong, chairman and chief executive officer of ANTA, was cautiously optimistic.

"We are optimistic about the market outlook, but we will be cautious in our business," said Ding. He predicted ANTA's same-store sales to grow by marginally higher than mid-single digit rates in 2011. Same store sales recorded high-single digit growth in the first two quarters of this year, according to Ding.

Mark To, head of research at Wing Fung Financial Group, said, however, that it will be impossible for ANTA to maintain its current same store sales because the company "has been expanding too fast in the past several years".

To expected the downtrend in ANTA's gross profit margin to continue due to rising costs for raw materials and excess inventory. The company's gross profit margin inched down to 42.8 percent in the first half from 43.7 percent a year ago.

For China's sporting good industry as a whole, which has shown signs of slowing compared with last year, Ding projected double-digit growth for 2012, but "whether the growth will be high double-digit or low double digit is hard to say," he added.

Competition in the sporting goods industry is intensifying. As home-grown brands like ANTA thrive, global players which set eyes on a bigger share of the Chinese pie are expanding themselves into wider areas of China.

Adidas said several days ago that sales value from the Greater China region jumped 38 percent to 552 million euros in the first half from a year earlier, while the number of its chain stores in China had grown by 400 to 6,000 at end-June from the end of 2010.

But some are losing their edge, such as Li Ning and China Dongxiang, both of which have issued profit warnings recently, alerting of shrinking revenue and margin erosions.

In a note issued on July 7, Li Ning estimated that its overall sales revenue for the first half will decline 5 percent year-on-year, whereas its first-half net profit margin is expected to drop to 6-7 percent from 12.9 percent a year ago.

Share prices of listed sportswear makers including ANTA, Xtep and 361 Degrees plunged following the news as investors were concerned about the sector outlook. The period between July 8 and August 5 saw ANTA shares plummet by 18.4 percent and Xtep tumble 26.3 percent. Li Ning declined by 9.4 percent over the same period.

ANTA shares closed trading Monday in Hong Kong down 0.54 percent at HK$11, valuing the company at HK$27.43billion. The company's shares have dropped 9.9 percent year-to-date.

China Daily

(HK Edition 08/09/2011 page2)