Mainland-based sportswear maker 361 Degrees International Ltd said Wednesday that the orders it received for the third quarter of 2011 jumped 23 percent year-on-year in value terms, thanks to increased volume and higher average selling prices.

However, the company did not give specific monetary figures.

Orders for apparel rose 10 percent in volume terms from a year earlier, while orders for footwear were up 8 percent, the company said. The average selling price, meanwhile, climbed 13 percent and 12 percent, respectively, for apparel and footwear.

The figures come just after Li Ning Company Ltd, the mainland's largest domestic supplier of sporting goods, posted a year-on-year decline in its second-quarter order volume as well as a rise in its costs.

Orders for apparel and footwear dropped 7 percent and 8 percent, respectively, at Li Ning for the second quarter of 2011 compared with the same period of 2010. This was the first contraction in order volume the company has seen since 2008 and also "the worst second quarter order book among its Hong Kong-listed sportswear peers", analysts at China Construction Bank (CCB) International Securities said in a research note released Wednesday.

Besides 361 Degrees, other mainland sports brands including ANTA Sports, Xtep and Peak Sport have all posted healthy order figures lately with 20 percent-plus growth seen in their second quarter 2011 order volume. ANTA announced a 21 percent increase year-on-year, while Xtep and Peak Sport recorded increases of 25 percent and 24 percent respectively.

According to the CCB analysts, Li Ning has "a major structural issue in lower tier cities", referring to Li Ning's lack of price competitiveness compared with its domestic competitors such as 361 Degrees, although the latter is a relatively small business in comparison with international players such as Nike, Adidas and even domestic powerhouse Li Ning.

With a market share of 16.7 percent, Nike topped China's sportswear market last year. Li Ning was second with a 14.2 percent share, while Adidas finished third with 13.9 percent, followed by ANTA Sports with 9.9 percent.

But the sportswear landscape may be in for a change as people's consumption habits and financial status keep changing, noted Linus Yip, an analyst at First Shanghai Securities. "Sports brands like 361 Degrees are targeting different markets from Li Ning. But no one knows what will happen going forward for Li Ning, as people's tastes always change and the company is still in the middle of restructuring," said Yip.

Meanwhile, smaller players such as 361 Degrees are making progress in terms of business growth as more wealth is flowing into the mainland's lower-tier cities, a market smaller players dominate. A McKinsey report released in July 2009 predicted that 75 percent of the nation's more affluent citizens will reside in lower-tier cities by 2015.

The average annual spending on apparel by Chinese consumers living in first-tier cities is the same as those living in third-tier cities, at 3,900 yuan. Fourth and fifth-tiers cities meanwhile, spend only 300 yuan less a year, global market research firm Synovate said in report released earlier this year.

SWS Research in their 2010 Consumption Report released on December 10 singled out 361 Degrees and ANTA Sports as their "top picks" in the sector on which SWS analysts said to remain "overweight".

Shares of 361 Degrees finished up HK$0.26 or 4.81 percent at HK$5.67 in Hong Kong trading on Wednesday.

China Daily

(HK Edition 12/23/2010 page3)