China HongX Research Report

by DBS Group (13 May)

XI'AN Trade Show and store visit story: We had the opportunity to visit eight different China Hongxing stores within Xi'an city, including the 300 sqm flagship store, as well as the group's logistics centre for China's northwest region. We also attended its trade show for the upcoming winter season.

Point: China Hongxing has expanded its presence in Shaanxi province from almost zero two years ago to over 50 points of sales (DBS Vickers' estimate) currently and we believe the group has plans to add another 100 stores over the next two years to capture more market share in this emerging region.

At the same time, the recently set up logistics centre, which is also responsible for staff training and monitoring distribution and inventory sales as well as market research, should provide valuable support to the group's push in this part of China.

We were also treated to China Hongxing's winter fashion show at its latest trade fair, where it was apparent that greater efforts were focused on the apparel and accessories segment than before. This is in line with the group's strategy of growing its apparel and accessories to 40 per cent of total revenue by end-2008, which is also underpinned by store upgrades and the opening of larger stores.

Relevance: This latest visit has reinforced our belief that China Hongxing continues to execute well on its distribution network expansion plans, which we believe will help consolidate its position as a top five domestic sports brand in China.

-Research Report by DBS Group (13 May)