Consumer China

China Dongxiang – losing traction

  • Published 01 Dec 2011

Dongxiang has had to buy back inventory from stores and sell items off online at a steep discount, driving profits down sharply.

China Dongxiang (3818:HKG) has exclusive rights to the Italian fashion sportswear brand Kappa, famed for a logo featuring a man and a woman sitting back to back in the nude. It is ironic then, that the company is now suffering not from too few clothes, but from too many. It has had to buy back inventory that went unsold in shops, dragging down revenues and net profit by 45% and 71% respectively in 1H11. With order book growth down a further 14% YoY in 2H11, we expect at least a 30% YoY revenue decline over the period. Further, the resignation of the company's CEO in October adds cause for concern.

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