The Group effectively hatched a few brands and conveyed reliable commerce execution, demonstrating itself solid and versatile within the times of showcase risks.
ANTA Sports Products Limited (2020.HK; “ANTA Sports”, the “Company” and all its subsidiaries together as the “ANTA Group”) today announced financial results for the fiscal year ended December 31, 2019. Breaking multiple records, the Group accomplished the most impressive annual report in its history. Most noticeably, ANTA Group’s earnings for the full year 2019 have exceeded 30 billion RMB and approximated 34 billion RMB, surging by over 40% year-on-year and maintaining the remarkably high growth for six consecutive years, allowing the Group to obtain a competitive position in the front rank of the entire sportswear industry.
In 2019, ANTA Group continued to further its comprehensive growth strategy of “One Focus, Multiple Brands and Omni-Channel”, advanced its course of globalization, and initiated the innovative business model of “three brand groups” and “three resource-sharing platforms”. As a result, brands under the Group have all attained better performance in their respective brand power, product power and retail power; meanwhile, the group sharpened its abilities in innovation and brand incubation, which helps to attract a new audience of younger consumers and leads to rapid growth in sales.
Measures set upon the principle of “high-quality growth, organic operation and strong cost management” and implemented by ANTA Group for years have laid a solid foundation for the Group to cope with market uncertainties especially in times of challenges posed by the global Covid-19 outbreak. Prior to the outbreak, brands under the Group have already realized strategic plans of both online and offline development; in the early stage of the outbreak, the Group has also reacted promptly to offset the blow from coronavirus – implementing strict cost management, exercising community marketing, building more flexible supply chains, maintaining on-time logistics and deliveries, and promoting e-commerce innovation are all among concrete moves that ANTA Group has made. The Group is estimated to be subjected to a low-double digit business decrease for the first half of 2020; however, the momentum is also projected to be regained in the second half as domestic economy is rebounding. Therefore, the Group is confident to achieve positive annual growth by the end of 2020.
Up till now, cash and cash equivalents in the Group’s books are worth nearly 18 billion RMB, and financing channels of the Group are still reliable and stable, which indicates a secure and healthy financial position. From a long-term perspective, the Covid-19 outbreak will not last for an indefinite period of time and consumers’ needs for health and fitness products will definitely be heightened, which will contribute to the Group’s swift recovery after the crisis.
Consistent Operation Results Ahead Of Other Players In Various Aspects
ANTA Group Maintains Double-Digit Growth In Revenue And Profit For The Sixth Consecutive Year
- Revenue increased by 40.8% to 33.93 billion RMB, reflecting a strong growth of over 40% for two consecutive years and earning the Group an exceptional position in the first rank of the industry. Revenue of ANTA brand reached 17.45 billion RMB, up 21.8% and revenue of FILA brand reached 14.77 billion RMB, up 73.9%,
- Profit from operations increased by 52.5% to 8.69 billion RMB, of which profit from operations of ANTA brand reached 4.68 billion RMB, up 26.2% and profit from operations of FILA brand reached 4.02 billion RMB, up 87.1%.
- Profit attributable to equity shareholders was 5.34 billion RMB, up 30.3%, reaching a new high and maintaining a growth of 30% or above for three consecutive years.
- Final dividend is HK 36 cents per ordinary share. Total dividends of HK 67 cents per ordinary share.
Stable and Healthy Cashflow and Cash Conversion Ability
- Overall gross profit margin was 55.0%, operating profit margin was 25.6%, and margin of profit attributable to equity shareholders was 15.8%.
- Free cash inflow was 6.43 billion RMB.
Strong retail performance
- The Group has a total of 12,943 stores, among which number of ANTA stores (including ANTA KIDS standalone stores) in Chinese mainland stood at 10,516, number of FILA stores (including FILA KIDS and FILA FUSION standalone stores) in Chinese mainland, Hong Kong, Macao and Singapore stood at 1,951 and the number of DESCENTE in Chinese mainland reached 136.
- Retail sales (in terms of the retail value) of ANTA and FILA branded products for the full year 2019 increased by mid-teens and 55-60%, respectively, compared to the same period of 2018.
Four Foundational Bases Defending Against Unpredictable Risks
Brand Base: Three Brand Groups with Upgraded Core Brands to Win Consumers’Mindshare
Professional sports brand group: ANTA is positioned to be a professional sports brand that offers products with superb price performance driven by technological innovation. For the next five years, ANTA Group plans to invest over 1 billion RMB in technological innovation to boost innovative product ratio to over 40%. The Group has applied innovative technologies such as hydrogen technologies, A-WEB, FLASHFOAM and environmental friendly technologies, and accumulated successful practices of launching crossover products with internationally known brands such as Marvel and Coca Cola that later went viral on the Internet and well-received among consumers, which also indicates that ANTA is transforming itself from an affordable brand to a preferable and even desirable brand. As shown in a Nielsen Consumer Survey, the post-1995 birth cohort accounted for more than 70% of ANTA’s consumers, which is still growing; first mention rate of collaborations between ANTA and other brands exceeded 50%; sales of the series of Basketball star Klay Thompson products increased by 60% year-on-year, and the overall annual sales also topped the market segment of basketball shoes. Moreover, as the official partner of the Chinese Olympic Committee, the Beijing 2022 Winter Olympics and 27 national sports teams and the official sportswear uniform supplier of the International Olympic Committee, ANTA further activated marketing potentials stored in sports assets and stimulated business growth.
Fashion sports brand group: FILA is positioned to be a premium, international fashion activewear brand that upholds a sporty, positive and elegant lifestyle. FILA’s Brand Health Index (based on a variety of related metrics including brand awareness, first mention rate, brand satisfaction, purchase rate, etc.) rose by a remarkable 60% compared to the previous year, a dazzling growth rate in the industry. FILA has put a lot of effort to attract younger target consumers: the brand has signed new brand ambassadors such as Kōki, and Wu Jinyan, partnered with the China Open exclusively, launched a limited edition of FILA Jagger in Tokyo, etc. In order to cater to consumers of different age groups under different circumstances, FILA has designed a series of novel images suitable for various retail scenarios including the “5G image” to offer consumers a more trendy and vibrant shopping experience. With an inclusive brand strategy covering all the retail scenarios and stages, FILA has successfully incubated two sub-brands that achieved a retail sales value of over 1 billion RMB each: FILA KIDS, targeting children of 3-15 years old, reached a retail sales value of over 2 billion RMB; FILA FUSION, a designer fashion brand targeting the Generation Z, reached a retail sales value of over 1 billion RMB.
Outdoor sports brand group: DESCENTE is positioned to be a high-end professional sports brand. The brand joined the Group at the end of 2016 and after a two-year incubation, its retail sales value increased by 75%. DESCENTE China has developed many high-end products to consolidate its considerable base of loyal consumers, including premium sportswear for training, women’s sportswear, the ALLTERRAIN series, ski apparel, etc. As for retail channel, DESCENTE has opened 136 stores all in high-profile shopping malls in 42 top cities; as for branding and marketing, it has also built a unique marketing model for China and made many moves to attract high-end consumers with a stronger shopping power, such as creating an exclusive private members’ sports clubs, fully sponsoring the World Golf Championship – HSBC Champions, etc. As a result, DESCENTE has become another global brand that the Group has successfully incubated.
Retail Base: Retail Platforms Sharing Resources via Omni Channels & Making Combined Efforts Both Online and Offline
The resource-sharing retail platform that ANTA Group has been elaborately building for all its brands are yielding positive, initial results. Meanwhile, the Group has upgraded its distributor system. With its big data resources, the Group has strengthened its grip on retailer, membership, inventory and supply chain management by digital means. Since ANTA, FILA, DESCENTE and other brands under the Group own a total amount of approximately 70 million loyal members, repurchase rate among members has been greatly raised. In 2019, ANTA launched its 9th-generation image stores in several top tier cities, and continued to transform its retail channels, raising the proportion of retail stores in key shopping malls of key cities to over 40%; ANTA KIDS unveiled the new image for its 4.0 stores; FILA presented the new 5G image to the market. Better store images and shopping experiences have thus made evident contributions to sales growth of the upgraded stores.
In respect to e-commerce, ANTA Group has precisely executed plans on online community management, and experimented innovative digital marketing models targeting the Generation Z. By cooperating with key e-commerce platforms including Tmall, JD and VIP, the Group has boosted the amount of sales by over 40% year-on-year, an exceptional growth rate in the industry. and made the daily orders peak at 8 million. During the Tmall Double-11 Shopping Festival, ANTA and FILA ranked the third and the fifth respectively under the sports and outdoor category, and ANTA KIDS ranked the third under the kids’ clothing and footwear category. The big data database that the Groups owns contains online shopping behaviors of 250 million consumers, which helps to generate accurate consumer insights. In fact, during the Covid-19 outbreak, it has already proven essential and powerful for the Group to conduct precision marketing.
Organizational Base: Globalization In The Process & Sufficient Reserve Of International And Creative Talent
In 2019, ANTA Group initiated the globalization strategy and finalized the acquisition of AMER SPORTS for a “double A” (ANTA and AMER) merger. In terms of AMER’s post-acquisition business objectives, the Group has proposed a five-year growth plan of “five 1billion euros“, which means upgrading Arc’teryx, Salomon and Wilson to brands of 1 billion euros in retail sales value each, and earning 1 billion euros respectively in China market and through D2C. During the first two months of 2020, AMER SPORTS was on track as originally planned; however, business started to get affected by the Covid-19 outbreak in March. Yet, given the seasonality of AMER’s core products, sales of fall and winter products normally take up over 65% of the annual sales; so, if the pandemic can be contained before fall and winter, its influence of AMER’s full year earnings will also be appropriately curbed.
In terms of talent management, ANTA Group has been extensively recruiting competitive and creative international professionals. At the end of 2019, ANTA SPORTS CAMPUS, the Global Retail Headquarter of ANTA Group, was launched in Shanghai, indicating a major move in ANTA Group’s globalization as well as a key milestone of the group’s development.
Operational Base: Strong Control and High-Quality Growth to Resist Market Risks
Since the early stage of the Covid-19 outbreak, ANTA Group has been decisively exercising precise cost management and taking extreme cost control measures so as to reduce detrimental impact of the external crisis on the business. Meanwhile, the Group has also made effective efforts to improve management efficiency, build more flexible supply chains, manage inventories more effectively and optimize distribution channels in order to fend off potential risks. In addition to controlling expenditure, the Group has been proactively broadening revenue sources by shifting the focus onto the e-commerce: at the end of January, the Group took the lead and launched the inspiring initiative of “All Hands on Retail” in which over 60,000 employees and partners participated and leveraged their own networks to generate online sales. Up to now, the Group’s own manufacturers have fully recovered their production capacity and contract manufacturers have resumed over 90%. All the stores of brands under the Group have basically resumed operation.
In 2019, ANTA Group invested 200 million RMB in digitalization and a big data platform. The Group worked with internationally leading technology partners and straightened coordination between business pillars of ordering, supplying, manufacturing and retailing. By reorganizing information on branding, marketing, supply chain and manufacturing, the Group has managed to improve teamwork between the manufacturing and retailing sides and make deliveries more timely, efficient and intelligent. In 2020, the Group’s digitalization strategy will focus on three major perspectives, which are developing smart products, building a CRM platform for multiple brands and omni-channel, and conducting seamless and inclusive digital operations, with the objective of empowering high-quality growth.
Since the country is united as a whole fighting against the pandemic, ANTA Group has been proactively taking scientific measures to protecting and caring for its employees. Up till now, not a single employee of the Group has been infected. From 25th January, the Group has donated 10 million RMB in cash and in-kind, that worth a total of 32 million RMB, to support healthcare professionals at the forefront. Over the years, ANTA Group has been dedicated to fulfilling corporate social responsibilities, investing 618 million RMB accumulatively in social public services. For instance, by the end of 2019, the Group’s “Robust Growth Charity Plan” has donated 174 million RMB to students from primary and middle schools in under-developed regions and areas in China, which covered 770,000 teenagers and children from 2,286 schools of 30 provinces in China.
“The unexpected coronavirus outbreak in early 2020 has undoubtedly brought unprecedented challenges to the global consumer market. However, the more challenging it is, the more decisive and persistent we should be. We should hold on to our core values, because this is an excellent opportunity to go for efficiency and carry forward effective reforms,” said Ding Shizhong, Chairman of the Board of Directors and CEO of the ANTA Group. “We will focus on consumers and reconstruct our mindset, believe in long-termism and go after high-quality growth.
We will also uphold the principle of organic business operation, improve our management efficiency and hunt for opportunities in various crises. In the face of more lurking ‘black swan’ incidents, enterprises should not just rely on prompt and decisive reactions, but they should also assess whether their regular operations are reliable and solid or not, as this is the key to survival and success. Back to 2012, we accumulated a lot of practical experiences in the inventory crisis of the sportswear industry, and we were the first one to recover business performance successfully. Our persistence and resilience against risks and uncertainties have been fully validated. Therefore, we believe that the current coronavirus outbreak will push the health and sportswear industry to the next level and create critical opportunities for reforms and innovation in the industry. We are fully confident about the recovery of the sports market after the outbreak and the Group’s long-term growth. Given the status quo, brands under the Group will stand together and provide better products and services in innovative ways for consumers around the world. Our goal of achieving a retail sales value of 200 billion RMB by 2025 will remain unchanged.”
