Economy

Peak Sport says order growth will stay strong

By Yang Ning (China Daily)
Updated: 2011-03-30 10:15

XIAMEN, Fujian - The Chinese sporting goods maker Peak Sport Products Co Ltd expects its order growth to remain strong at more than 20 percent despite its decision to raise prices by up to 10 percent in an effort to offset cost increases.

"Because of rising raw materials and labor costs, we decided to raise prices of our new products by 5 percent to 10 percent," Xu Zhihua, chief executive officer of Peak Sport, told China Daily. The company's costs increased by approximately 10 percent in 2010, he said.

Peak Sport's decision follows similar price increases by other major sporting goods manufacturers. Nike Inc said earlier this month that it will raise prices on a wide variety of products beginning in spring 2012 because of the rising cost of cotton, oil, labor and transportation.

Li Ning Co Ltd, Peak's domestic competitor, also plans to raise prices this year.

However, Xu said the price hike would have little influence on the company's operating performance.

"We expect projected orders from Peak Sport's distributors and retail outlets scheduled for delivery in the fourth quarter of this year will still increase by more than 20 percent compared with the same quarter a year ago," he said.

The company also plans to open 800 new stores across China this year, most of which will be in second- and third-tier cities. "The reason we attach great importance to the country's second- and third-tier cities is that we believe there will still be significant economic growth in these areas because of rapid urbanization and the encouragement of domestic consumption by the Chinese government," said Xu.

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The number of authorized Peak Sport retail outlets hit 7,224 by the end of 2010, an increase of 1,018 units from the previous year, according to the company.

This year, Peak Sport aims to further boost distribution in overseas markets, particularly in the United States, where the company opened a research and development center in December 2010. The company has been chosen as China's official marketing partner of the US National Basketball Association (NBA) in China, and it currently sponsors 15 NBA players.

Currently, Peak Sport's products are exported to more than 70 countries, and the sales from overseas markets account for 10 percent of its total revenue.

The company's overseas sales grew 46.2 percent last year, higher than its 36.4 percent growth in the domestic market, said Xu. In 2010, Peak Sport's revenue increased 37.3 percent year-on-year to 4.25 billion yuan ($647 million) while net profit rose 30.9 percent to 822 million yuan from a year earlier, according to the company's annual financial report released on March 15.