China’s Anta Sports Tempers Guidance Despite Profit Beat

China’s ANTA Sports Products Ltd. lowered its full-year sales guidance for one of its core brands, as concerns about weak consumption in the world’s no. 2 economy eclipsed the sportswear maker’s better-than-expected first-half performance.
The company on Tuesday cut retail sales growth guidance for its pricier Fila brand to high single-digit from the previous double digits amid expectations for more discounts to be dished out to woo buyers, according to a post-earnings note by Citigroup Inc.
Anta also sounded cautious about its namesake value-for-money Anta label, with the management acknowledging “some challenges” to the brand’s double-digit retail sales growth guidance for 2024, the Citi note said. 
Anta and Fila brands accounted for about 48% and 39% of the sports clothing, shoe and accessories maker’s total sales, the first-half financial results showed.
The company’s shares climbed as much as 12.1% in Hong Kong on Wednesday, the most since August 2023, after it reported a better-than-expected profit in the first six months and announced a buyback. 
Anta will use up to HK$10 billion from its cash reserves to repurchase as much as 10% of its shares in batches over the next 18 months, the company said Tuesday, adding that the current share price doesn’t reflect its actual value.
Anta’s shares have been on a roller-coaster ride this year. The stock, which erased most of the gains made during the first five months of the year, trended higher after the latest earnings report. 
Citi cut Anta’s target price in late July and downgraded it to neutral from buy, the first non-buy recommendation for the company since March 2023, data compiled by Bloomberg show. The brokerage expects China’s sportswear sector growth to moderate to the low-to-mid single digits in 2024-2026, with diminished benefits from a direct-to-customer push.
Still, on Tuesday Anta said Chinese consumers’ growing demand for cheaper alternatives amid a slowing economy worked in favor of the company. The preference for niche brands among affluent consumers also helped, it said.
“Consumers pursued rational consumption, choosing either high value-for-money or high-end products based on their specific needs,” the company said in its first-half financial results. “Consequently, both high-end luxury brands and value-for-money brands experienced faster growth.”
Anta vowed to continue its global expansion, with a focus on Southeast Asia. Descente, one of the company’s premium brands, will look to expand into more Southeast Asian markets after making its debut in Malaysia, it said.
Earlier this month, Anta-backed Amer Sports, which makes Arc’teryx outdoor apparel and Wilson tennis rackets, reported earnings that topped Wall Street expectations and boosted its full-year profit forecast. As local and foreign companies engage in price wars to lure newly frugal Chinese customers, the brand’s Chief Executive Officer James Zheng — who’s also an executive at Anta — called the mainland a “difficult market.”
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