Changing consumer tastes impacts Stella’s performance

Worldwide
Published:  17 March, 2017

The Hong Kong based developer, manufacturer, and distributor of footwear products has posted consolidated revenue for the year ended December 31 2016 of US$1.55 billion, representing a 12.4% decline over the previous year.

Shipment volumes decreased 9.1% to 52.9 million pairs in 2016, attributed to the continued weakness in the non-sports footwear products, which resulted in the lower utilisation of the concerned footwear factories and lower efficiency, especially in the first half of the year. The fall was partially offset by increasing demand for our athleisure products, which remains the Group’s key growth driver, according to Stella International.

Gross profit in 2016 dropped 21.8% to US$290.5 million, and full year net profit attributable to shareholders of the Company declined 32.6% to US$81.6 million. The average selling price (‘ASP’) of the footwear products fell 4.1% to US$28.1 per pair due to changes in the product mix. Gross profit margin for the year is reported to have dropped 18.7%, while net profit margin fell to 5.3%.

“Global political events and changing consumer tastes both had an impact on our financial performance during the year under review. However, our ability to cope with these changes stabilised towards the end of the year, which helped us to reduce inefficiencies and the underutilisation of some of our factories. This enabled us to restore some of our margins toward the end of the year”, said Lawrence Chen, CEO, Stella International.

The Company says it continued to make proactive adjustments to its manufacturing business to better cater for the rising popularity of ‘athleisure’ footwear products, including substituting some of the existing non-sports footwear capacity to meet rising athleisure orders, while also reducing headcount to better control capacity and costs. Fashion footwear is reported to have contributed 42% to Stella’s total revenue (2015: 46%) in 2016, while the contributions from the casual footwear and athleisure footwear products were 29% and 24% respectively (2015: 32.5% and 16.9%).

Geographically, North America and Europe continued to be the two largest markets, accounting for 52.3% and 25.1% of total revenue in the period. Followed by China (including Hong Kong), which accounted for 13.1%, other Asian countries (7.4%), and other geographical regions (2.1%).

“We further grew our market share in the premium footwear market due to the unparalleled reputation we have built in delivering ‘Italian quality’, as well as flexibility and research and development capabilities. These capabilities continue to be underpinned by our state-of-the-art design, research and development centres in Dongguan, China, and Venice, Italy”, said Stella in a statement.

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