Swire Pacific’s (0019.HK) sportswear retail unit Swire Resources said revenue from its China operations is expected to increase at least 30% this year as the company penetrates further into second- and third-tier cities. According to the company’s managing director Tam Lai-man, revenue generated from the mainland last year totaled about US$244 million.
Swire Resources operates 200 retail outlets in China, Hong Kong and Macau including the chains Marathon Sports, GigaSports and Catalog. The company also directly distributes sports and apparel brands including Columbia, Arena, Rockport and Surf-Siders and has a distribution joint venture with Puma covering Hong Kong and China.
Brands like Columbia, which focus on outdoor pursuits, enjoy a relatively competition-free environment as wealthier consumers continue to demand high-quality foreign brands. This market demand is now trickling down from first-tier cities to the second- and third-tier hubs.
Swire Resources’ strategy will continue to work so long as the mainland economy maintains its robust growth and more consumers take an interest in outdoor leisure activities. Local brands which cater to the mass market at more competitive prices such as Anta (2020.HK), Xtep (1368.HK) and to a lesser extent Li Ning (2331.HK) – which sees itself competing with the likes of Adidas (ADSG.DE) and Nike (NKE.NYSE) – have shown stronger resilience to economic down cycles, which may not be so true for makers of ski and hiking gear.