Xtep International's revenue exceeded 10 billion yuan for the first time, and CEO Ding Shuibo explained in detail why he "focused" on the running market

Source: 21st Century Business Herald

On the evening of March 20, Ding Shuibo, chairman and CEO of Xtep Group, wore a gray sports shirt and appeared in the online live broadcast room of the 7th Xtep 321 Running Festival.

Meanwhile, Xtep International (01368. HK) released a new generation of marathon professional running shoes 160X3.0, windbreak vests and other new products on the same day, as well as the digital collection "160X-Metaverse".

(Pictured: On the left in the picture is Ding Shuibo, chairman of the board of directors and CEO of Xtep Group)

Just last week (March 16), Xtep International (01368. HK) released its 2021 annual financial report, in the past year, Xtep International's overall revenue exceeded 10 billion yuan for the first time, reaching 10.013 billion yuan (RMB, the same below), an increase of 22.5% year-on-year, compared with 2017 revenue of 5.113 billion yuan to double, and hit a new high in the past five years; net profit of 908 million yuan, an increase of 77.1% year-on-year.

In particular, the main brand "Xtep" has strong revenue growth in 2021, setting a record of 8.841 billion yuan in revenue, up 24.5% year-on-year, especially in the second half of 2021.

Talking about the performance of the past year and the focus on the running market, Ding Shuibo told the 21st Century Business Herald reporter, "We believe that for a company to make consumers remember, it must be one of the best in a certain category." I believe that running is a very important category in all sports brands, so Xtep decided to focus on the running field in 2007 when the strategic transformation, when the slogan of "love running, love Xtep" was put forward, and for more than a decade, Xtep has been "focused" and "focused" in the field of running, which makes us competitive. ”

Revenue in 2021 will reach the milestone of 10 billion

It should be pointed out that Xtep International operated as a single-brand Xtep before 2019 and launched a multi-brand strategy in 2019, and currently has the main brands Xtep that positions the mass movement, Saucony and Merrell, which positions the professional sports, and K-Swiss and Palladium, which position the fashion movement.

According to the 2021 financial report, in terms of different categories, the revenue from "mass sports" was 8.841 billion yuan, accounting for 88.3%, an increase of 24.5% year-on-year; revenue from "fashion sports" was 971 million yuan, accounting for 9.7%; revenue from "professional sports" was 201 million yuan, accounting for 2.0%, with a strong year-on-year increase of 180.2%.

For the eye-catching financial performance in 2021, Ding Shuibo believes that there are several major reasons behind it, "First of all, the support of national policies, the promotion of national fitness, the promotion of mass sports, and the promotion of the construction of 'Healthy China', in this context, the participants in the sports industry are also one of the beneficiaries." Secondly, more and more young consumers have confidence in domestic brands and are willing to choose domestic brands, so that the growth rate of many domestic brands is greater than that of international brands."

In terms of channels, as of December 31, 2021, Xtep International had 6,151 Xtep brand stores in Chinese mainland and overseas that were mainly operated by authorized distributors.

In addition to offline stores, Xtep's online business has also developed rapidly.

In the 2021 financial report, Xtep International said, "Just as the offline marathon was postponed or cancelled when the epidemic intensified Chinese mainland, we quickly transferred marketing and sales resources to social media platforms, such as Douyin and Xiaohongshu, and made full use of live e-commerce."

According to the data, Xtep International's e-commerce business recorded a strong year-on-year increase and accounted for more than 30% of the revenue of Xtep's main brand in 2021.

How does the company grasp the opportunity of private domain traffic and live broadcasting? Ding Shuibo told the 21st Century Business Herald reporter, "The original e-commerce mainly focused on one or two platforms in the head, and now the trend of e-commerce diversification makes Xtep seize new opportunities in time, so the company's growth rate in the field of e-commerce exceeds the growth rate of offline." Live broadcasting and mini programs are all new models for us to grasp private domain traffic, develop marketing, and interact with consumers. In short, the market is changing, and what remains unchanged is how Xtep better meets the needs of consumers. ”

In the face of the rising trend of the national tide, how does Xtep impress young people?

Ding Shuibo told the 21st Century Business Herald reporter, "A brand with young consumers will have a future, Xtep attaches great importance to resonance and communication with young people." In addition to focusing on the running business, Xtep and Shaolin Temple began to cooperate in 2020 to launch the 'Xtep X Shaolin' joint series. In addition, Xtep International has launched a new high-end label 'XDNA', with a total of about 200 'XDNA' points of sale in Chinese mainland as of December 31, 2021. ”

It is worth mentioning that 2021 is also the 20th anniversary of the establishment of Xtep, Xtep Group released a new "Five-Year Plan", Ding Shuibo said that it is expected that by 2025, Xtep's main brand will maintain its impressive growth trend, with a revenue target of 20 billion yuan, while the revenue target of the four new brands is 4 billion yuan.

Consolidating the running "moat"

"Focusing" on the running market, Xtep deeply cultivates the marathon market and becomes one of the sports brands with the most sponsored marathon events in China. In almost all major marathons, you can see the figure of Xtep.

According to the financial reports of the past years, in 2020, Xtep sponsored a total of 12 offline marathons and 9 online events in Chinese mainland. In 2021, Xtep International sponsored a total of 7 marathons and running events.

In particular, Xtep's "160X" series of running shoes debuted at the Xiamen Marathon, the world's platinum standard event in April 2021, surpassing international brands for the first time, with a wearing rate of more than 50%.

In the face of the impact of the "new crown" epidemic on offline marathon events, Ding Shuibo said frankly, "The epidemic has led to the suspension of many large events, but we did market research last year and found that runners increased by 20% compared with the original." Why? Because running is a mass event, there are many forms of organization for running, you can run alone, you can also run together with three or five people, more than ten people, or 40,000 or 50,000 people running at the same time, so running is relatively small affected by the epidemic. ”

Ding Shuibo also mentioned that Xtep has more than 1.3 million "special running families", distributed in running groups across the country, they have regular training and competitions, with the increase of running crowds, it will also have a positive impact on the company's running shoe business.

At the 7th Xtep 321 Running Festival, Xtep International released a new generation of marathon professional running shoes 160X3.0.

Behind the product upgrade is the increased investment in research and development.

According to the 2021 financial report, Xtep International's R&D expenses are about 252 million yuan, accounting for 2.5% of the company's total revenue, and the R&D expenses are mainly invested in the salary costs of the research and design team, the material costs of developing new products and the equipment costs of new production technologies.

In addition, the financial report data shows that from 2017 to 2021, the proportion of R&D expenses of Xtep International in total revenue has been more than 2.5%. In the past five years, Xtep has successively launched A number of patents such as X-Dynamic Foam Power Nest, Reactive Coil Shock Absorber, Air Mega Pneumatic Ring, ComfyCubes Soft Cube, FeatherFoam Feather Technology and so on.

Ding Shuibo believes, "We know Chinese runners better, our products are specially developed and designed for Chinese runners, whether it is foot type, running strength, Chinese runners and international runners are different." In the process of research and development, the most important thing is to improve according to the needs of consumers, at the same time, we also cooperate with various scientific research institutions to develop and create together with athletes. ”

In addition to continuing to develop professional running shoes, the 21st Century Business Herald reporter learned that at present, Xtep International is promoting the expansion of its running shoes products "from professional to the public" and "from racing to life".

For the considerations behind this strategic change, Ding Shuibo explained, "According to our statistics, there are about 3 million people in China who can complete marathon events, about 30 million amateur runners, and as many as 300 million potential runners." A pair of running shoes can be applied to a variety of scenes such as walking, brisk walking, jogging, walking, etc., and the mass market is more extensive. We also hope that these potential runners will join the running team and expand the 'professional' to the 'public'. In addition, the core of sports has also begun to shift from 'competitive sports' to 'life sports', that is, sports do not come for achievements, sports come for health, for life. ”