The world’s largest contract manufacturer of sports shoes has started 2026 with significant declines. Falling order volumes, lower factory capacity utilisation and rising production costs have weighed on turnover and profits. Nevertheless, the group is sticking to its dividend policy and continuing to invest in digitalisation and the expansion of its global production network.
The Taiwanese footwear manufacturer Yue Yuen Industrial, one of the world’s leading production partners for international sports and lifestyle brands, achieved revenue of US$3.97 billion in the first half of 2026. This represents a decline of 2.2 per cent compared with the same period last year. The core footwear manufacturing business was particularly affected: turnover in the production division fell by 4.7 per cent, whilst the number of shoes shipped dropped by 6.4 per cent to 118.6 million pairs. A 1.6 per cent increase in the average selling price per pair could only partially offset the decline in volumes.
The trend in earnings was even more pronounced. Profit attributable to shareholders slumped by 57.9 per cent to US$72 million. The gross margin in the manufacturing business fell from 17.7 to 14.3 per cent. Yue Yuen attributes this primarily to lower capacity utilisation at its production facilities. Fluctuating and short-term order intake is said to have led to inefficiencies in production, whilst at the same time labour and overhead costs continued to rise. Overall, the Group’s gross margin fell from 22.6 to 20.7 per cent.
“Whilst increasing macroeconomic uncertainties have weighed on our operational performance, we are using these short-term challenges as a catalyst for long-term growth. With our enhanced core competencies and long-standing partnerships with international brands, we will further strengthen our resilience and consistently drive forward the transformation of the company,” explained Chairman Lu Chin Chu. The aim is to further optimise the production structure, build on operational excellence and create sustainable value for customers and shareholders.
Regionally, Indonesia remained the Group’s most important production site, accounting for 52 per cent of total output. It was followed by Vietnam with 33 per cent and China with nine per cent of total footwear production. Yue Yuen intends to continue the strategic shift of capacity to Indonesia and India in the coming years in order to diversify its supply chains and remain competitive in the long term.
The retail business of the subsidiary Pou Sheng in Greater China performed more steadily. Turnover rose by 3.5 per cent in US dollars to US$1.31 billion. At the same time, the company consistently continued its restructuring and reduced the number of its own retail outlets by a net total of 200 to 3,110 by the end of June. The aim remains to achieve higher productivity per unit area and greater integration between physical and digital sales channels.
Yue Yuen expects the market environment to remain challenging in the second half of the year. Persistent inflation, geopolitical uncertainties and a lack of planning certainty regarding order intake are likely to continue to weigh on demand. At the same time, the Group aims to enhance its competitiveness through investment in digital manufacturing processes, SAP and manufacturing execution systems, as well as the increased use of AI-supported production control. Cooperation with international brand partners is also to be further strengthened in order to increase the proportion of high-value orders.
Despite the significant decline in profits, Yue Yuen is sticking to its long-term stable dividend policy. The Board of Directors is once again proposing an interim dividend of 0.40 Hong Kong dollars per share for the first half of the year.
