Anta Sports (HKG: 2020) (OTCPK: ANPDF) shares are up 10% in Hong Kong today. 2020 shares are up on the release of their results - which show that the company is roaring back. Lockdown clearly produced problems for a sports and consumer brand but now that they think it’s all over - well, it is now. Or, to not borrow from famed sporting commentary, we seem to be back to a more sensible economy now.
Those results were pretty good at Anta: “Anta’s shares were up 11% at 86.15 Hong Kong dollars (US$10.99), their biggest intraday rise since March 2023. However, the stock was still down 16% year to date. Anta said Tuesday after the market closed that its first-half net profit with the effect of share of profit or loss of a joint venture rose to 4.75 billion yuan (US$651.3 million) from CNY3.59 billion a year earlier. The company’s gross profit margin gained 1.3% to a record high of 63%.” Sales up, margin up, therefore profits well up - what’s not to like here?
Well, don’t forget, results are always a look at the past - current trading is looking a little weaker: “Despite the stellar results, management said retail sales were weaker than expected in May and June and such sales weakness continued into July and August.” That’s perhaps those macroeconomic problems coming to the fore.
Anta Sports share price from Google Finance
We’ve tagged before about Anta Sports: “Anta Sports can be seen as a bellwether of how investors think the consumer market is going to do. If real wages are rising strongly then we can - and would - assume that spending upon branded clothing - this is a luxury product in both the colloquial and also the stricter economic senses - is going to rise strongly too. In fact as disposable incomes rises faster than GDP, we would expect branded sales to rise faster than GDP too.” We might, therefore, want to be ever so slightly wary of projecting these historic results top far into the future. If China suffers a significant economic slowdown then that could spell trouble.
Xinhua is more confident: “Chinese sports enterprises such as Anta, Xtep, and Li-Ning enjoyed considerable growth in 2022, boosted by the Winter Olympics and their increasing appeal to young Chinese consumers. Anta's full-year revenue rose 8.8 percent year-on-year to 53.65 billion yuan last year.” They think the entire sector is going to keep going. We might want to be a little more wary than that.