Domestic Famous Sports Brands Issued Earnings Warning, And The Industry Entered Structural Saturation.

Sponsoring the 2008 Beijing Olympic Games has made Chinese local sports brands feel more or less the pleasure of rapid growth.

However, 4 years later, despite the gimmick of the London Olympic Games, the sporting goods industry was not very well off.

Recently,

PEAK and other sporting goods enterprises have issued a profit warning, and the problems such as profit decline and inventory backlog continue to test the sporting goods industry.

A larger decrease in orders

In mid June, once the mainland sporting goods industry leader Lining sporting goods Co., Ltd. issued a performance warning, the annual orders showed a high unit number of decline, it is expected that the first half of this year and annual profits will drop sharply.

Following Lining's earnings warning, PEAK sports also issued a profit warning earlier. As of the end of June this year and the end of December, the total net profit will decrease significantly over the same period last year, mainly due to the extensive inventory adjustment and weak economic conditions this year, which has a negative impact on the demand for sports goods in the group.

Anta's latest performance also shows that the order volume of products coming to the market in the fourth quarter of 2012 has a larger decline, which is also expected to have a significant decrease in the annual order volume.

Not only did domestic sporting goods business experience unprecedented operational pressure, but the international line brands also had a hard time.

Nike's fourth quarter earnings report also showed that China's sales revenue fell.

As of May 31, 2012, sales in Nike Greater China, including footwear, clothing and accessories, fell by 3.9% over the third quarter.

Target price was downgraded by agencies

The forecast of earnings is not optimistic, which aggravates market opposition.

Stock worries, recently, some agencies have lowered the target price and rating of Chinese sports stocks.

After the performance warning report was released, Lining's share price fell for two consecutive days.

In June 13th, a number of investment banks and analysts, including J.P. Morgan, Merrill Lynch, CICC, and Shenyin Wanguo, all lowered the ratings of Lining.

Merrill Lynch Merrill Lynch sharply lowered Lining's earnings forecast, the target price from 4.7 yuan to 4.1 yuan, to maintain the "run big city" rating.

Barclay was the most pessimistic, cutting the target price of Lining 60%, from 6.5 yuan to 2.7 yuan, and the investment rating from "big city" to "reduction".

Deutsche Bank also lowered the target price of Anta sports from HK $8.5 to HK $5.4 recently, reducing the expected earnings per share in the 2012 - 2014 fiscal year by 16% to 26%, maintaining the rating.

The agency said Anta sports fell 26% in June (Hang Seng Index rose 4% over the same period), the decline should be mainly caused by Lining and PEAK sports earnings warning and Nike's future growth in China orders slowdown.

Industry enters "structural" saturation

Goldman Sachs Gao Hua's research report pointed out that China's sports brand is facing a series of structural problems, such as slow growth of low end demand, competition from international brands Nike and Adidas, low brand equity and lack of differentiation.

And China Merchants Securities released in mid May released the sports industry report also pointed out that Lining, Anta, 361 degrees, PEAK and other sporting goods companies released 2011 Annual Report reflects sales growth decline, profitability decline.

Aggravated industry phenomenon.

The report believes that the current stock backlog is not a real market saturation, but a "structural" saturation phenomenon.

"There is not much problem in the sporting goods market. What is happening now is the supply shortage in the short run."

Lining's official said that the focus of recent adjustment of sporting goods companies should be to find suitable business models and network structures.

Anta CEO Ding Shizhong also believes that China's sports apparel market has a large capacity, but the proportion of per capita expenditure and sales in clothing is obviously low. After the digestion of inventory stage, the surviving domestic sports brands still have many opportunities for development.