On behalf of the Board, I am pleased to present our annual results for the year ended 31 December 2012.
We Strive to Maintain Stability amid Challenging Market Conditions
In 2012, despite China’s economy maintaining steady growth, consumers were still concerned about the uncertain outlook of the global economy. In addition, some sportswear brands and their retailers still struggled with the problem of excess inventory. So, they offered deeper discounts to clear inventory, which further intensified the competition in China’s sportswear market. With an aim of minimising the potential risks in our retail channels, we took a prudent approach to control the amount of orders placed by our distributors. The decline in orders resulted in negative sell-in revenue growth, thereby causing our turnover to drop by 14.4% to RMB7.62 billion (2011: RMB8.90 billion) for the year. Profit attributable to equity shareholders also dropped by 21.5% to RMB1.36 billion (2011: RMB1.73 billion), and basic earnings per share were RMB54.48 cents (2011: RMB69.37 cents). To maintain a stable dividend policy, the Board proposed a final dividend of HK17 cents per ordinary share (2011: HK26 cents) and a special dividend of HK8 cents per ordinary share (2011: Nil) which, together with the interim dividend of HK23 cents per ordinary share (2011: HK26 cents), represent a payout ratio of 71.7% of profit attributable to equity shareholders for the year.
We Adopt an All-around Marketing Strategy to Make ANTA Stronger
Amid the challenges and intense competition in the sportswear industry, we continued to stay focused on our mass market positioning. Meanwhile, we further enhanced our strengths, including brand equity, distribution network and product innovation. Our exclusive four-year sportswear partnership with the COC offered us an excellent opportunity to stand out from our peers during the London Olympics. We cooperated with partners of the COC and the IOC for the first time, launching a cross-border Olympics marketing campaign and eye-catching IOC products across China. The ANTA-designed “Champion Dragon Outfit” was not only highly visible when worn by the CSD, but was also on display in our nationwide retail channels. Following the London Olympics, we shifted the focus of consumers to basketball, one of our key market segments. Our endorsed NBA superstar Kevin Garnett made his third visit to China, where he unveiled the brand new KG III basketball shoe and interacted with basketball lovers. Our Outdoor Street Basketball Leagues also set off a basketball boom from southern to northern China and successfully brought teenagers’ attention to ANTA as well as to ANTA’s basketball products.
We Innovate to Serve Both Athletes and Consumers
Innovation is one of the keys to our success. Our strong capacity for innovation continues to bring us greater differentiation and extends our leading position in China’s sportswear market. We achieved a significant breakthrough by enhancing the softness of our specially-designed shoe soles through the introduction of the A-Silo and Reflective A-Silo technologies. Our running shoe featuring Reflective A-Silo not only offers excellent comfort to recreational runners, but also improves safety for night runners. Moreover, our newly-introduced anti-slip rubber, A-StickyRB, has been widely adopted in outdoor footwear products. Its slip resistance ability has better traction on smooth and wet surfaces, making it suitable for outdoor activities. In addition, our highly durable and lightweight Badao outdoor basketball series also received a strong response from young basketball lovers. Due to our consistent efforts in innovation, we are able to meet more customer demand with our wide range of value-for-money products. More importantly, we have been named the top seller of travel and sports shoes in China in terms of market share for the 11th consecutive year. Our testing laboratory also received accreditation from the CNAS, demonstrating our strict quality controls.
We Take Prudent Approaches to Reduce Potential Risk in Retail Channels
We have been implementing a streamlined distribution structure, effective management systems and sound inventory control measures. However, our distributors and franchisees were unavoidably affected by the unfavourable operating environment and intensifying competition in China’s sportswear industry. During the year, we have taken effective actions to minimise inventory risks in our retail channels and being ever-responsive to changes in the market so as to maintain our retailers’ confidence in ANTA amid industry headwinds. First, we prudently and decisively adjusted the amount of orders and provided more precise guidance in ordering to distributors and franchisees. More factory outlets and discount stores were opened across China to help clear off-season inventory. Furthermore, we continued to enhance the efficiency of our retail channels by exercising strict control of new store openings, closing less efficient stores and revamping existing stores to the sixth generation layout standard. We also fully leveraged our extensive operating experience and cost-efficient management systems to support our distributors and franchisees to surmount the difficulties they currently face and to outperform their peers amid the challenging market conditions.
We Commit Ourselves to Achieving Sustainability in the Long Run
Looking ahead, China’s GDP will continue to grow steadily while inflation will remain stable. However, the volatile global economy will continue to affect China’s exports. The Chinese government is widely expected to reinforce its economic restructuring policies to expand domestic demand. Meanwhile, some sportswear brands are expected to continue to engage in inventory clearance and retail channels reform measures. As these measures will take time to take effect, competition in the sportswear industry will remain intense. To cope with the uncertain market conditions and to strengthen the competitiveness of our distribution network, we continue to take a prudent approach to controlling retailers’ inventory levels and store openings. In addition, we will increase the coverage of our ERP system in our retail channels so as to collect more timely market information for formulating precise product plans and ordering guidance. We will also work closely with our retailers and provide comprehensive support to help them enhance operational efficiency and achieve better retail performance.
More importantly, stronger brand equity and innovation capabilities will make our products more desirable to consumers, which would in turn generate higher sales revenue for our retailers and boost their confidence in ANTA. With the aim of differentiating ANTA from other domestic sportswear brands, we have successfully extended our exclusive sportswear partnership with the COC for the next four years. The CSD will continue to wear ANTA’s winning outfit at influential sporting events, offering a unique platform on which to showcase ANTA sportswear’s innovative designs and technologies to countless consumers. Also, we will further increase our influence and enhance our leading position in key market segments by maximising the effectiveness of our premium sports marketing resources. We will keep abreast of market trends and enhance the cost-saving and execution capabilities of our supply chain so as to optimise the product life cycle and shorten lead times. We will also fully utilise our R&D resources and design talents in order to cater to consumers’ specific needs and preferences.
On behalf of the Board, I would like to express my heartfelt gratitude to our shareholders for their steadfast support and to all of our staff for their unmatched dedication and for making valuable contributions to the industrial and social development with us. We will strive to take effective actions and measures to ensure the steady development of our business, supply chain partners, distributors and franchisees, as well as to create value for our stakeholders over the long run.
Hong Kong, 25 February 2013