Outdoor Market Expands with US and European Consumer Recovery... Youngone Corporation's Value Soars

[Asia Economy Reporter Ji Yeon-jin] Due to improved consumption in the United States and Europe, Youngone Corporation is expected to show a strong sales recovery this year.

According to the Korea Exchange on the 30th, Youngone Corporation recorded a 49.84% increase in the KOSPI market compared to the beginning of the year as of the previous day. Korea Investment & Securities forecasted that Youngone's sales and operating profit this year will grow by 11% and 15% respectively from the previous year, reaching 2.74 trillion KRW and 298 billion KRW. In particular, apparel OEM sales are expected to increase by 9% to 1.39 trillion KRW. Sales in dollar terms are projected to increase by 15%, while the KRW/USD exchange rate has decreased by 5%.

As orders increase and operating rates normalize, the operating profit margin is expected to improve by 0.5 percentage points from the previous year to 13.7%. The impact of the recent sharp rise in raw material prices, which could be a burden on costs, is expected to be minimal. Park Ha-kyung, a researcher at Korea Investment & Securities, said, "Buyers negotiate directly with raw material suppliers and then designate fabric suppliers to Youngone, setting fabric prices accordingly," adding, "The increase in raw material prices is borne by the buyers, so the impact on margin erosion due to price fluctuations is minimal."

Youngone Corporation is an OEM company producing functional apparel such as sportswear. Its major clients include The North Face, Engelbert Strauss, Patagonia, Columbia, and Lululemon. The sales distribution is estimated to be 40% North America, 46% Europe, and 13% Asia. The main production regions are in Southeast Asia, with Bangladesh producing 70% of the total, followed by Vietnam and China at 20% and 10%, respectively.

In addition to the OEM business, Youngone has been operating a brand business by acquiring the European bicycle brand Scott in 2013 and the traditional American outdoor brand Outdoor Research in 2014. As of last year, OEM business sales amounted to 1.27 trillion KRW (52%), and brand business sales were 1.2 trillion KRW (49%).

With the recovery of the U.S. consumer market, which accounts for 40% of Youngone's sales, orders are expected to expand. Consumption in the European region, which accounts for 50% of sales, is also gradually rebounding. Due to heightened awareness of personal health and increased outdoor activities following COVID-19, the global sportswear market has recorded growth despite sluggish consumption. In addition to the high growth of the front-end market, Youngone has secured competitiveness in producing relatively demanding functional apparel such as down and woven garments. Centered on its production base in Bangladesh, it holds cost competitiveness and is expected to expand orders through capacity expansion and continuous investment in vertical integration.

Youngone's bicycle business is also booming due to COVID-19. Last year, due to a surge in bicycle demand in Europe, Scott's sales increased by 26% from the previous year to 1.1 trillion KRW. During this period, the net profit margin reached 6.4%, a significant improvement from 2.1% in 2019. It is estimated that out of the brand operating profit of 92 billion KRW, 84 billion KRW came from Scott, which corresponds to an operating profit margin of 8%, the highest ever.

The background of profitability improvement is that sales surged due to favorable market conditions, selling and administrative expenses were reduced by cutting promotions, and the proportion of high-profit items such as E-bikes (Electronic bikes) expanded. The bicycle market is growing due to COVID-19, and this exercise trend is expected to establish itself in the long term.

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