Adidas Q1 mirrors sportswear slump

German sportswear company adidas AG witnessed sluggish growth in its Chinese operation during the three months through March 2013, which analysts said Sunday is a reflection of an industry downturn in the market.

Adidas sales revenues in China reached 409 million euros ($536 million), a 6 percent year-on-year increase and far below the growth rates of 36 percent for the same period in 2012 and 43 percent in 2011, according to the first-quarter financial report released by the company Friday.

The whole sportswear sector is slumping due to economic recession, with all the players having a hard time including adidas, US rival Nike and Chinese rival Li Ning Co, Wang Danqing, an industry analyst at the Beijing-based ACME Management Consulting, told the Global Times Sunday.

Nike's Chinese operation saw a 9 percent year-on-year fall in revenues during the three months through February 2013, according to a financial report released by the company on March 22.

Li Ning Co reported a 1.98 billion yuan ($322 million) loss in 2012 after a profit of 386 million yuan in 2011. ANTA recorded a 21.5 percent year-on-year drop in net profits in 2012.

Sportswear brands are also confronting high inventory in China as a result of rapid expansion after they overestimated the potential of the market following a decade of high growth, Zhang Qing, CEO of Beijing Key-Solution Sports Consulting Co, told the Global Times Sunday.

Adidas said in its report that the company is focusing heavily on inventory management. Its stock declined 2 percent to 2.3 billion euros at the end of March, compared to 2.4 billion in 2012.

Li Ning Co announced on December 17 that it would invest up to 1.8 billion yuan in helping its distributors clear stock.

Another Chinese sportswear maker, Xtep International Holdings, disclosed that its distributors had reduced orders for the first half of 2013 in order to control their inventories.

Wang noted that compared to foreign sportswear brands, domestic peers are likely to have a harder time clearing stock.

"In order to decrease inventory, foreign brands are likely to open up more factory outlets to sell products at huge discounts, which is likely to attract a greater number of frugal Chinese who believe that Nike and adidas are better in quality than domestic brands," he said.

Nike planned to open 50 new factory outlets in China during 2013, the National Business Daily reported on March 4. The company did not respond to e-mail inquiries from the Global Times.

Factory outlets are a good way to clear stock by offering tempting discounts, but may threaten the sales of other retail stores, said Wang.