Xtep International Acquires Saucony, Slows Sales Growth in Mainland China in 2023

Xtep International Holdings Limited (1368:HK) recently revealed the operational performance of its mainland China business for the fourth quarter and the entire year of 2023.

During the fourth quarter, Xtep's primary brand experienced a year-on-year sales surge of over 30% through both online and offline retail channels, with a retail discount rate of approximately 30%. In 2023, the year-on-year sales growth for Xtep's main brand across online and offline retail channels exceeded 20%, while the channel inventory turnover cycle ranged from four to four and a half months, indicating significant inventory pressure.

Media reports suggest that during the 2023 Singles' Day period, Xtep International's cumulative online transaction volume (GMV) reached CNY 1.1 billion, with a year-on-year growth of only 20%, signaling a noticeable slowdown in revenue growth. The core brand's year-on-year growth rate was only in the high single digits, lower than the 16%-19% growth in the third quarter of 2023. Additionally, the discount intensity during the promotional period increased year-on-year, but the return rate was higher than that of 2022.

On December 17, 2023, Xtep International announced the acquisition of the joint venture equity of Saucony for USD 61 million, along with the purchase of a 40% ownership stake in Saucony in China. In the first half of 2023, Saucony became the first new brand under Xtep International to achieve profitability. 

Established in 1898, Saucony holds title as the "Rolls-Royce in Running Shoes", being recognized alongside ASICS, New Balance, and BROOKS as the Four Big Running Shoe Brands in the industry.

In 2019, Xtep International announced a joint venture agreement with Wolverine to establish a joint venture company, conducting the development, marketing, and distribution of Saucony and Merrell brand footwear, clothing, and accessories in mainland China, Hong Kong, and Macau. According to the joint venture agreement, Xtep and Wolverine each injected approximately 155 million yuan as initial capital into the joint venture company.

As of press time, Xtep International's stock price is HKD 4.22 per share, with a total market value of HKD 11.147 billion.