China Hongxing (CHXS.SI), a Singapore-listed Chinese maker of sports shoes and apparel, aims to open 2,000 new stores in China by end-2011 to extend its retail network to more small Chinese cities.

The firm also hopes to report positive revenue growth for 2010 despite a drop of about 5% in the first half, helped by the expansion of its product lines to include more casual wear, CEO Wu Rongzhao told Reuters in an interview.

 

Hongxing, whose “Erke”-branded products compete with bigger Chinese names such as Li Ning (2331.HK) and Anta Sports (2020.HK), saw revenues and earnings plunge last year as it slashed prices amid slower sales in the aftermath of the 2008 Beijing Olympics.

 

However, analysts view the problem as short-term and said China’s rising affluence and consumers’ growing interest in sports and healthy living will support demand for sportswear.

 

“About 600-700 million Chinese consumers are still unable to afford China Hongxing’s price levels, but with the development of their income level, we believe more of them will be able to buy our products,” Wu said.

 

“That’s why we think the future will be optimistic for us,” he added.

 

Hongxing plans to invest up to 550 million yuan ($109.2 million) to ramp up production of its clothes and shoes, Wu said.

 

He said the firm will increase the annual production capacity of its shoes by 41% to 24 million pairs by the first half of next year. It currently makes 17 million pairs of shoes a year.

 

Hongxing, which outsources the manufacturing of apparel, is also planning to bring some of this in-house to enable it to introduce new clothing lines at a faster pace.

 

By the third quarter of 2011, it hopes to be able to manufacture 6 million pieces of apparel a year, Wu said.

 

The firm has around 4,200 stores mainly in eastern and southern China currently. The planned store expansion will see Hongxing extend its reach to smaller tier 3 and 4 cities across the country.

 

Hongxing reported a net profit of 38.8 million yuan for first six months on sales of 1 billion yuan.

 

In 2009, the firm saw revenues fall 31% to 2 billion yuan ($397 million), while net profit dropped 71% to 131.1 million yuan.