March 27, 2017 / 6:45 AM / 8 months ago

Fitch: Continued Positive Momentum for China Sportswear

(The following statement was released by the rating agency) HONG KONG, March 27 (Fitch) China's sportswear industry should see continued expansion over the next few years, with the segment proving to be resilient amid the country's challenging retail environment due to shifting consumer behaviour and preferences for more differentiated shopping concepts, says Fitch Ratings. Both international and domestic brands have benefited from the expansion of China's sportswear industry, which Fitch accredits to increased investment and higher sports participation, following the issues of store overexpansion and excess inventory having been resolved since 2012. The State Council aims to develop China's sports industry to CNY5 trillion by 2025 and increase the area available for practising sports. Greater interest in fitness and sports has also become more apparent, with more people taking an interest in running, for instance; the China Daily reports that a total of 328 marathons were registered through the Chinese Athletic Association in 2016, attracting approximately 2.8 million participants, and representing an increase of 85% compared with the previous year. Likewise, a Xinhua news report said that the number of participants at private gyms across China's 70 major cities has increased by 4 million-5 million each year since 2011. The China market is led by international brands Adidas and Nike. Adidas reported over 20% constant currency growth for China in 2016 and Nike also saw double digit growth in Greater China. However, Fitch believes local brands can also benefit, since they offer consumers a competitive value-for-money proposition. For instance, local brand 361 Degrees International Limited (BB/Stable) saw over 7% yoy same-store sales growth in 2016 and its trade-fair orders for 3Q17 achieved a high single-digit increase. Fitch sees sufficient room for industry growth. Expansion could moderate slightly in 2017 due to a higher basis of comparison, but greater product differentiation and diversification into new sports areas could help brand growth. 361 Degrees noted increased demand for functionally strong products that are aligned with specific activities, such as running, and another major domestic brand, Li Ning, saw higher retail sell-through in functional categories, such as basketball and running, in 2016. Brands are also developing new categories, including outdoor and winter sports. Beijing won the bid to host the 2022 Winter Olympics, which could spur interest in related sports. Local brands have been looking to take advantage of this interest, with 361 Degrees potentially using its joint venture with One Way, a Nordic outdoor sports brand, to capture demand. Anta Sports also announced a proposed joint venture with Korean outdoor brand, Kolon, in February 2016. Contact: Cathy Chao Associate Director +852 2263 9967 Fitch (Hong Kong) Limited 19F Man Yee Building 68 Des Voeux Road Central Hong Kong Yee Man Chin Director +852 2263 9696 Media Relations: Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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