Joshua Roberts

Creative Director

March 19, 2013

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Optimization & Expansion

Xtep consolidates its Chinese outlets while it expands into lower-tiered cities.

xtep-shoes

Mainland sportswear retailer Xtep International plans to enhance its presence in third and fourth-tier cities this year to cash in on the potential increase in consumption demand driven by the country’s urbanization policy.

The management said it expected the sportswear market in the country to remain challenging this year. Intense competition, excessive inventory and high retail discounts would persist in the industry, it said.

The sports apparel and footwear seller plans to consolidate 100 to 200 underperforming and remote retail outlets this year.

It also plans to open more shops in smaller cities, especially in the northern areas.

To counter the weak market environment, the company said it would continue to offer higher wholesale discounts and additional incentives to distributors and franchisees. It would also advise them to be conservative when placing orders, the company said.

During the reporting period, revenue from footwear rose 9 percent to 2.7 billion Yuan, accounting for nearly 49 percent of the total revenue. Apparel contributed 2.7 billion Yuan, down 7 percent year on year.

Our Thoughts

Many retailers are getting lean and optimizing their store networks in China to better cope with rapid changes. Xtep, like many others, have found a considerable amount of market potential in lower-tiered cities where they’ll face less competition and lower operating costs.

Moving to lower-tiered cities is not without its downsides, as supply chain costs are costly and make up for differences in savings elsewhere. Xtep International Holdings Ltd. is on a mission to enable its brand to approach ubiquity in the consumer market.

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