Janice R. Andrews
Anta Sports Products Ltd. in China has changed its full-year sales forecast for one of its major brands because of worries about slow customer spending in the world’s second-largest economy. This comes after the company’s better-than-expected first-half results.
Anta reduced its retail sales growth forecast for its high-end Fila brand to the high single digits on Tuesday, from the previous goal of double digits. The company said this was because more discounts are likely to be offered to attract buyers. This information was emphasized in a note that Citigroup Inc. sent out after the earnings report. In the same note, the company also warned about its main Anta brand, which is known for being affordable. It said that the brand’s goal of double-digit retail sales growth for 2024 would face “some challenges.”
This company makes sportswear, shoes, and accessories. Its first-half financial figures show that its Anta and Fila names made up about 48% and 39% of its total sales, respectively.
Even though these lower expectations meant that Anta’s shares went up by as much as 12.1% in Hong Kong on Wednesday, which was the biggest jump since August 2023. The stock price went up after the company said it made more money than expected in the first half of the year and announced a plan to buy back its own shares. Anta wants to buy back up to 10% of its shares over the next 18 months using up to HK$10 billion ($1.28 billion) in cash on hand. The company says that the present share price does not reflect its true value.
Anta’s stock has been very unstable all year. A lot of the gains made in the first five months were lost, but the stock started to go up again after the latest earnings report.
Citi’s downgrade and the market outlook
Citigroup lowered Anta’s rating from “buy” to “neutral” at the end of July. This was the first time since March 2023 that the company wasn’t recommended to be bought. Bloomberg data shows that growth in China’s sportswear market is likely to slow to low to mid-single digits between 2024 and 2026, which is reflected in this drop. It is also believed that the slower growth in the sector will be caused by the lower benefits of going straight to consumers.
Even so, Anta is still positive about how Chinese consumers are changing. The company said on Tuesday that Anta has been helped by Chinese customers’ growing need for cheaper choices as the economy slows down. Rich people are also becoming more interested in niche names, which has helped the company grow even more.
The company said in its first-half financial results that customers “pursued rational consumption,” which means they picked either high-value or high-end goods based on their needs. “As a result, faster growth was seen in both high-end luxury brands and value-for-money brands.”
Plans for global growth and the future
Looking ahead, Anta is committed to its plan to grow around the world, with a focus on Southeast Asia. Descente, the company’s high-end name, will soon be available in more Southeast Asian countries after its launch in Malaysia.
Amer Sports, which makes Arc’teryx outdoor clothing and Wilson tennis rackets and is backed by Anta, reported earnings earlier this month that were better than expected, which raised its full-year profit forecast. There are a lot of price wars going on between Chinese and foreign companies that want to attract cheap Chinese customers. However, Anta’s CEO, James Zheng, who is also an executive at Anta, called mainland China a “difficult market.”
Anta has to deal with problems like a slowing economy and changing customer tastes. To keep growing, the company needs to keep focusing on brand differentiation, value-for-money offers, and going global.
