[Overseas Stocks Spotlight] "Anta Sports to Shift Business Model to Consumer-Facing Approach from Second Half"

[Asia Economy Reporter Eunmo Koo] Anta Sports' Anta brand will shift its business model to Direct to Consumer (D2C) starting in the second half of this year to promptly respond to rapid trend changes and consumer demand.

Anta Sports reported revenue of 14.67 billion yuan in the first half of this year, a 1.0% decrease compared to the same period last year, and net profit attributable to controlling shareholders was 1.66 billion yuan, down 28.6%. Excluding a loss of 719 million yuan from its associate company (Amer Sports), net profit attributable to controlling shareholders was 2.38 billion yuan, a 20.1% decrease.

On the 30th, Shin Seung-woong, a researcher at Yuanta Securities, stated in a report, "Due to the impact of COVID-19 in the first half, demand was sluggish, leading to a decrease in franchise orders and losses from associate companies." He explained, "Anta Sports' gross profit margin reached a record high of 56.8%, up 0.7 percentage points year-on-year, driven by the high gross profit margin (70.5%) of the FILA business division. However, net profit margin fell by 4.4 percentage points to 11.3%, and net profit margin excluding associate company losses decreased by 3.9 percentage points to 16.2%."

The sales proportion of FILA exceeded that of the main brand Anta. In the first half, Anta and FILA, which account for 95% of Anta Sports' sales, recorded brand revenues of 6.777 billion yuan (-10.7%) and 7.152 billion yuan (9.4%), respectively, while other brands saw an 8.3% increase to 740 million yuan, driven by strong sales of DESCENTE.

Researcher Shin noted, "The somewhat sluggish performance of the Anta brand is due to weak demand caused by COVID-19 and order cancellations by intermediate distributors." He added, "The sales proportion fell by 5 percentage points year-on-year to 46.2%, and the gross profit margin decreased by 0.85 percentage points to 41.6%." FILA grew 8.3% year-on-year despite a high base, supported by online sales that increased by more than 50%.

The number of stores by brand under Anta Sports showed differentiated trends along with changes in sales proportions. While the number of Anta stores continuously declined, FILA and DESCENTE stores steadily increased. As of the first half of this year, the number of Anta stores (10,197) decreased by 0.3% year-on-year, whereas FILA (1,930) and DESCENTE (145) stores increased by 7.9% and 26.1%, respectively.

The Anta business division will transition to a Direct to Consumer (D2C) business model. Researcher Shin explained, "The Anta business division mainly applied an indirect sales method through distributors, but to enable efficient management and promptly respond to rapid trend changes and consumer demand, it will switch to a 'D2C' business model starting in the second half of this year." He added, "Based on FILA's successful direct operation experience, the Anta brand plans to transition its business model to a mixed 'direct operation + franchise' approach in 3,500 stores across 11 regions (accounting for 35% of total stores), with about 60% of these (approximately 2,000 stores) adopting direct operation."

He further analyzed, "This business model transition is expected to take about 6 to 9 months, and although there will be short-term performance pressure due to product recalls worth around 2 billion yuan, it is expected to strengthen the main brand image and improve efficiency in the mid to long term."

This content was produced with the assistance of AI translation services.