Baosheng Slows Growth Due To Expansion Of Store Expansion Costs

According to the world clothing shoes and hats net,

Foundry giant

Industry (Group) Limited (0551.HK) and its China sporting goods retailer, Baosheng International Holdings Limited (3813.HK), today disclosed May sales figures.

Yuyuan group's total revenue grew by 7.3% to 809 million 500 thousand dollars last month, and the consolidated revenue growth rate in the first 5 months of this fiscal year expanded to 5.2%, and its revenue increased from 3 billion 527 million 600 thousand US dollars to 3 billion 711 million 200 thousand US dollars in the same period last year.

International consolidated revenue increased by 10.9% from 1 billion 400 million 100 thousand yuan in the same period last year to 1 billion 553 million 400 thousand yuan, but the growth rate slowed sharply compared with 18.5% in April and 19.1% in March. The total revenue in the 5 months before the current fiscal year was 8 billion 138 million 100 thousand yuan, 14.6% higher than the 7 billion 98 million 500 thousand yuan in the same period last year.

Data show that as of the end of March, Baosheng international revenue grew by 14.4% to 4 billion 674 million 100 thousand yuan over the same period last year, but net profit dropped sharply from 27.4% to 103 million 700 thousand yuan due to the expansion of the store, resulting in an increase in staff costs and rental expenses. Sales, distribution, administrative and other expenses increased by 17.8% during the period, and the operating profit margin dropped significantly by 200 basis points to 4.5%.

Macquarie Group Ltd., Macquarie Bank estimates that the 50 base points are due to the group's establishment of larger stores and better customer experience while closing down less efficient stores to promote offline passenger flow.

The bank also expects Baosheng international to restructure its store portfolios in the next few seasons, resulting in a slowdown in growth. Therefore, its sales growth forecast for the same year will be reduced to 3.8%, and the retail business profit margin will also be reduced from 6.3% to 4.7%.

Deutsche Bank AG Deutsche Bank also lowered its profit forecast for the group in the current and next two years by 14% and 13%, and the target price was reduced from HK $2.4 to HK $2.2, maintaining a "buy" rating.

In the first trading day after its first quarter results in mid May, 3813.HK's share price plummeted nearly 20%.

Yuyuan group's total revenue increased by 3.6% to US $2 billion 100 million 800 thousand in the first quarter, of which footwear business achieved 1.6% growth.

Net profit rose 30.6% to $124 million 500 thousand.

Macquarie estimated that in the past 12-15 months, the group's efforts to improve the gross margin of the OEM Adidas business will help to improve future profits. Deutsche also pointed out that the group closed a large number of factories in Guangdong and the encouraging earnings recovery trend in the three quarter of last year showed that the mainland's manufacturing sector was in the stage of anti bomb. In addition, the group's investment in the quick replenishment production line and the Adidas Boost brand and the Primeknit series will support the growth of ODM business in the long run.

Yuyuan group (0551.HK) today closed at HK $31.65, down 0.16% a day, and has risen 12.3% this year.

Last month, Macquarie and Deutsche Bank raised their target price from HK $37.6 and HK $38 to HK $38.1 and HK $41 respectively.

3813.HK today fell 0.67% to HK $1.49, expanding the cumulative decline to 32.9% this year.

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