Chinese shoe maker Yue Yuen Industrial (Holdings) Ltd. said its gross profit and gross profit margins for its manufacturing operations fell due to uneven production across its various plants.
For the nine months ended Sept. 30, the gross profit of the manufacturing business fell by 4.8 percent to $773.5 million, while the gross profit margin of the manufacturing business decreased by 1.3 percentage pints to 18.3 percent versus year-ago levels. In addition to uneven production across its different plants, the company also said production efficiency of some production lines “fell short of set targets.” Compounding the decline was higher labor costs due to labor force expansion and rising wages across some regions.
Total revenue for the nine months slipped 1.0 percent to $6.02 billion from $6.08 billion in the same year-ago period. In footwear manufacturing, its soles, components and other materials business posted a 21.9 percent drop in revenue to $275.6 million from $352.8 million last year. But the company did manage to see a 4.6 percent revenue gain in footwear manufacturing activity for athletic and outdoor shoes and casual shoes and sports sandals to $3.96 billion. While the volume of shoes shipped rose 1.3 percent to 189.4 million pairs, so too did the average selling price, which was up 3.2 percent to $20.88 per pair. The Group’s retail subsidiary Pou Sheng in the Greater China region saw its sales fall 7.9 percent to $1.79 billion, attributable to volatile foot traffic.
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Overall, the company’s profit for the quarter fell 16.0 percent to $278.7 million from $331.7 million a year ago.
The company said the operating environment “remained challenging” with new tariff policies and geopolitical tensions continuing to create uncertainties. Amid this complex and dynamic global economic landscape, brand customers are adopting more conservative procurement strategies.” Despite the adverse impact form reciprocal tariffs, Yue Yuen said its premium order mix helped to raise its average selling price that partially offset the “adverse effect from reduced shipment volumes on footwear manufacturing revenue.
And while the near-term business environment remains unsettled, with “volatile sentiment potentially arising from reciprocal tariff-related challenges,” the company also said that the “athleisure” trend continues to accelerate, driving up performance at a number of its “industry-leading brand customers.” Yue Yuen expects that major international sporting events — the FIFA World Cup 2026, the Asian Games and the Winter Olympics, to name a few — will continue to drive interest in sports and wellness.
“The group remains optimistic about the long-term prospects of the sports industry and is confident that its role as a strategic supplier, combined with its high-end footwear development capabilities, will continue to reinforce its enduring partnerships with leading international brands,” the company said.
Many companies who were able to do so had moved some of their shoe production out of China once U.S. President Donald Trump won the 2024 presidential election, knowing that tariffs would be part of his agenda. With the new trade deal setting the tariff rate for footwear at a range of 20 percent to 27 percent, depending on shoe classification and not including existing duties, there could be some production moving back to China. But how much is unclear, especially since the White House guarantee to not impose “heightened reciprocal tariffs” on China imports is only for one year through Nov. 10, 2026.
