Jan. 18 (Bloomberg) — Yue Yuen Industrial Ltd., the biggest
supplier of shoes to Nike Inc. and Adidas AG, fell the most in
almost five years in Hong Kong trading after reporting full-year
profit that missed analysts estimates.
The shoe manufacturer fell 6.8 percent to HK$24.60 at the
close of trading, the biggest decline since March 31, 2003. Hong
Kong-based Yue Yuen yesterday reported profit rose 1.6 percent to
$359.4 million in the year ended Sept. 30, trailing the average
estimate of $387.4 million of eight analysts surveyed by
Bloomberg.
Yue Yuens jointly controlled companies incurred losses as
they reorganize to meet higher material and labor costs, while
its sales and marketing expenses also rose. The company is
expanding its retail network in China to counter a possible
slowdown in exports to the U.S., where consumer demand is wilting.
“Yue Yuen is facing more cost pressure as material prices
stay high, said Jennifer So, who today cut the companys stock
to “neutral from “outperform in coverage at CIMB-GK
Securities (HK) Ltd. in Hong Kong. Orders from U.S. and Europe
may slow as the economies weaken, she said.
Lifestyle, Esprit
The shoe manufacturer led declines among other Hong Kong-
listed retail stocks, including Lifestyle International Holdings
Ltd., which fell 1 percent to HK$19.80, and Esprit Holdings Ltd.,
which dropped 2.1 percent to HK$93.10.
Sales to the U.S., Yue Yuens largest market, grew 4 percent
last fiscal year, lagging the companys overall revenue
growth of 12.5 percent.
Yue Yuen “is well aware of the potential impact on U.S.
retail sales from the sub-prime mortgage problem, its earnings
statement said. “ On the cost side, oil prices remain at a high
level and there is constant inflation pressure on wages.
Selling and distribution expenses rose 43 percent to $221.2
million last fiscal year, from $154.2 million a year earlier, Yue
Yuen said in a statement yesterday.
The company had about 3,000 self-owned or franchised retail
outlets in China at the end of September, the statement said,
compared with 2,200 six months earlier.
Yue Yuen, controlled by the family of Chairman Tsai Chi Neng,
said jointly controlled companies contributed losses of $5.9
million, compared with profit of $43 million a year earlier,
citing “challenging business environments, the statement said.
The companys jointly controlled entities include Best Focus
Holdings Ltd., a Chinese maker of paper carton boxes, and
Blessland Enterprises Ltd., a maker of shoe pads, according to
Yue Yuens annual report last January.
Yue Yuen made 232.2 million pairs of shoes from factories
in China, Vietnam and Indonesia last fiscal year, compared with
196.4 million a year earlier, it said. The company, a contract
manufacturer for brands including Nike, Adidas, Reebok, Puma,
Converse and Timberland, increased capital spending 16 percent to
$337.6 million to boost capacity, it said.
To contact the reporter on this story:
Mark Lee in Hong Kong at
