Daiwa Research has recently met with Xtep International's (01368) CFO Ricky Yeung for an update on the company's latest operations and its multi-brand strategy.
The research house said, for the Xtep brand, management has seen resilient retail sales in 4Q to date, while the recently launched Jeremy Lin basketball shoes quickly sold out and are well-received by the consumers, prompting management to double its production volume planned for next year.
Management's 2020 sales guidance for the Xtep brand of low-teens could see an upside
from replenishment orders. Management also highlighted Palladium and Saucony as the key focuses for its multibrand strategy in 2020, as K-Swiss' brand repositioning and Merrell's development may take some patience. Nevertheless, management maintains its view that Palladium's profits will offset investments in K-Swiss, while they expect its share of JV losses will come in below CNY20m in 2019 and CNY30-50m in 2020 as store openings begin.
Daiwa maintained its "outperform" rating on Xtep.
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