Stella is cutting production capacity in China

Magazine for Textiles, Clothing, Leather and Technology

After announcing that its fashion athletic products drove 5.9% volume growth, Stella International also confirmed they will continue to cut production capacity in China.

For the three months ended on the 30th of September 2018, the group’s unaudited consolidated revenue totaled approximately 471.3 million US dollars (452.4 million US dollars in 2017), an increase of approximately 4.2% as comparedto similar period last year. For the nine months ended on the 30th of September 2018, the group’s unaudited consolidated revenue was approximately 209.4 million US dollars (2017: 1 214.1 million US dollars), a decrease of approximately 0.4% as compared to similar period in 2017. However, on a comparable basis (adjusting for the group’s former China retail business), the unaudited comparable consolidated revenue for the nine months ended on the 30th of September 2018 improved by 1.7%.
Revenue from the group’s manufacturing operations rose by 2.6% and 1.3% respectively to 455.2 million US dollars  and  1 176.4  million US dollars  for  the  three  and  nine  months  ended  on the 30th of  September  2018. Shipment volumes rose by 5.9% and 6.9% over the same periods to 16.1 million pairs and 45.1 million pairs respectively. The increase in shipment volumes  was  attributed  to  the  robust ordering activity for fashion athletic footwear products and increase in ordering activity for casual footwear products. Rising global trade frictions did not have an impact on the group’s operations during the periods under review.
The average selling price of Stella’s footwear products fell by 3.1% to 28.3 US dollars per pair in the  three  months  ended on the 30th of September 2018, due to changes to the group’s product mix and customer mix.
Revenue from the branding business, anchored in the retail business in Europe, for the three months ended on the 30th of September 2018 was flat when compared to similar period in 2017.


Looking forward, the group expects a steady expansion in demand for fashion athletic footwear products. Fashion athletic footwear products will continue to remain the main growth driver for Stella, while demand for casual and fashion footwear products is expected to further stabilise. Stella is also expecting to “selectively reduce production capacity in China in order to improve utilisation efficiency and deliver margin recovery over the medium term”.
Mr. Lawrence Chen, Chief Executive Officer of the Group, commented on the Group’s performance: “It is pleasing to see the continued recovery in demand for our footwear products. We will continue to seek further manufacturing efficiency gains in order to improve our margins.”
Commenting on the outlook for the group’s businesses, Mr. Jack Chiang, Chairman of the group,  said:  “We  will  closely  monitor  events  that  may  impact  our  business  environment, such as an extension of US trading tariffs to include Chinese-made footwear products. We are making significant progress in reallocating our production base to reduce the share of manufacturing  capacity  in  China  considerably  within  the  next  year.  Once  this  process  is completed,  we  expect  the  impact  to  the  group  from  any  extension  of  tariffs  on  Chinese – made footwear products to be minimal.”