Revenue of $8.53 billion increased 1%, compared with the previous year, with the solid recovery seen in the first half of 2021 largely offset by the disruption to manufacturing operations in Vietnam and weak retail sales in the second half of the year. [Yue Yuen Returns To Profitability In 2021 SGB Media]
Total Revenue by Category
In the year ended December 31, 2021, revenue attributed to footwear manufacturing activity, including athletic/outdoor shoes, casual shoes, and sports sandals, increased by 1.8 percent to $4,450.5 million, compared with the previous year. The volume of shoes shipped during the year was 238.3 million pairs, representing a decline of 2.5 percent over last year, with most of the earlier solid recovery in demand neutralized by the negative impact of COVID-19 lockdowns in Southern Vietnam. The resurgence of the pandemic led to production halts in Vietnam, material supply disruption, as well as shipping congestion and delays in some of the group’s production countries in the latter half of 2021. The Group’s average selling price increased by 4.4 percent to $18.68 per pair in 2021, as compared with the previous year, led largely by its continued efforts to refine its product mix with a focus on more high-value orders.
The group’s athletic/outdoor shoes category accounted for 84.5 percent of footwear manufacturing revenue in 2021. Casual shoes and sports sandals accounted for 15.5 percent of footwear manufacturing revenue. When considering the group’s consolidated revenue, athletic/outdoor shoes represented the group’s principal category, accounting for 44.1 percent of total revenue, followed by casual shoes and sports sandals, which accounted for 8.1 percent of total revenue.
The group’s total revenue with respect to the manufacturing business, including footwear, soles, components, and others, was $4,914.0 million in 2021, representing an increase of 3.8 percent as compared to the previous year.
In the year ended December 31, 2021, the revenue attributed to Pou Sheng fell by 2.4 percent to $3,619.3 million, compared to $3,709.2 million in the previous year. In RMB terms, Pou Sheng’s reporting currency, revenue decreased by 8.8 percent to RMB23,350.2million, compared to RMB25,611.1 million in the previous year, which was mainly attributed to market dynamics, sporadic Pandemic outbreaks and disrupted product supply in China one after another, and weakened consumer sentiment in recent quarters. As of December 31, 2021, Pou Sheng had 4,631 directly operated retail outlets and 3,786 stores operated by sub-distributors across the Greater China region, representing a net closure of 658 stores as compared with the previous year. The net closure is in line with Pou Sheng’s channel optimization strategy that focuses on refining store networks to enhance efficiency.
Prospects
Looking ahead, Yue Yuen said, “The group is cautiously optimistic about its continued recovery momentum, with global demand remaining strong and with the group seeing a good and more visible order pipeline. The group’s capacity constraints in Southern Vietnam have eased with production having progressively resumed since October 2021, in compliance with local government regulations and safety criteria. This will allow it to ramp up production to normal levels ahead of planned capacity expansion later in 2022. The group will continue to actively manage its supply chain and dynamically allocate its manufacturing capacity to balance demand, its order pipeline, and labor supply.
“With an eye on its medium-term recovery, the group will continue to maintain the highest level of flexibility to sustain its efficiency and productivity, leverage its core strengths, adaptability, and competitive edges to overcome short-term disruptions if any, and safeguard its sustainable growth and profitability in 2022. It will also continue to exploit its strategy of prioritizing value growth, rather than pure volume growth, leveraging the ‘athleisure’ and premiumization trend and seeking more high-value orders with a better product mix. The group will continue to ramp up and diversify its manufacturing capacity in Southeast Asia, particularly in Indonesia where labor supply and infrastructure are supportive for faster growth.
“That said, potential risks on the manufacturing side of the group’s business remain, particularly those posed by the COVID-19 situation in Southeast Asia and mainland China, as well as from labor supply in certain Southeast Asia countries. The group remains highly focused on actively monitoring macroeconomic and other potential headwinds in order to facilitate rapid response plans to mitigate the impact accordingly. Over the longer term, the group is continuing to explore ways to digitalize its processes to achieve operational excellence within its manufacturing business, having recently rolled out the third wave of SAP ERP implementation as an integral part of its digital transformation strategy. It will proactively adapt its production capacity and capability to cater to the fast-moving market environment and ongoing trends, including increased demand from brand customers for greater versatility, flexibility, more efficient turnaround times, on-time delivery, and end-to-end capability. This includes enabling digital prototyping, automation, more flexible set-ups and frequent line change-overs through process re-engineering, and the further integration of other digitalization tools such as increasingly important Robotic Process Automation (RPA), to optimize its ongoing smart manufacturing strategy.
“The group remains optimistic about the long-term growth prospects of its retail business with Pou Sheng continuing to progress its digital transformation in ways that strengthen and further diversify its omni-channels and increasingly digitally-enabled physical stores. It will also continue to enhance its business intelligence system and invest in its digital tools such as smart product allocation, dashboard and E-POS systems to better support its operations. Pou Sheng is also actively expanding its cooperation with its brand partners, many of whom are also long-term and strategic customers of the group’s manufacturing business, in ways that support inventory integration, membership growth, increase in-season sales volumes and maximize value for consumers, all of which is designed to translate into a seamless shopping experience. In this way, the group will continue to benefit from cross-business synergies while providing differentiated value-added and one-stop services to its customers and strategic partners. Going forward, the group remains confident that the above strategies will enable it to continue providing its brand partners with the best possible end-to-end solutions, anchoring its quality growth while safeguarding its solid long-term profitability and ability to deliver sustainable returns to shareholders.”
