China Hongxing is a leading domestic sports brand in China, selling a wide range of sports footwear, apparel and accessories under its brand Erke. Management expects a lacklustre 2009, due to weak demand and inventory issues. The company plans to improve the situation by focusing on same-store sales. One of the strategies is to increase the store space (for fitting rooms) to cater for higher sales of sports apparel, which carry higher margins. Furthermore, Hongxing aims to expand its network and have 4,100 outlets by 2009 (+8%), 4,600 by 2010 (+12%) and 5,400 by 2011 (+17%). In the long term, management targets to have advertising and promotion-to-sales ratio reduced to within 20% while sports apparel to account for 60% of sales. Management remains optimistic that Hongxing will continue to gain market share.
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