[Exclusive] Fila Establishes Chinese Corporation... Challenges to Boost Performance Riding on K-Fashion

Established 'Misto Brand Management' in Shanghai
Distributing Famous Domestic Brands and Discovering New Brands
Fila Brand Sales Decline, Growing as a New Growth Engine

Fila Holdings established a new corporation in the Hong Kong Special Administrative Region last year, and it has been confirmed that they also set up a corporation in Shanghai this February. As Korean designer brands gain popularity in the Chinese market recently, it is expected that Fila Holdings will use this as a forward base for new businesses by distributing domestic brands in the Chinese market beyond the Fila brand and discovering new brands.

According to the Financial Supervisory Service's electronic disclosure system on the 3rd, Fila Holdings established 'Misto Brand Management' in Shanghai on February 27. This corporation is 100% owned by 'Misto Brand Holdings.' Misto Brand Holdings was established at the end of August last year by Fila Holdings with 100% ownership in the Hong Kong Special Administrative Region, with the purpose of discovering new brands and securing licensing rights.

A representative from Fila Holdings explained, "It is not solely aimed at the Chinese market, but considering that Shanghai is an economic hub and that existing sourcing-related corporations are located in Shanghai, we decided to establish the corporation here," adding, "We are currently reviewing whether we can operate businesses with brands other than Fila."

Fila Holdings operates 'Mantova Brand Management' in the same area. The newly established 'Misto Brand Management' is located in the same building and on the same floor. Mantova Brand Management is engaged in distributing domestic designer brands in the Chinese market. The company changed its name once last year; its previous name was 'Mardi (Shanghai) Brand Management.' Since the first brand the company launched in the Chinese market was Mardi Mercredi, it appears the company name was aligned with the brand name. Currently, Mantova Brand Management also handles the distribution business of 'Holy Number Seven,' a brand known to be favored by dancers.

Fila's active involvement in nurturing new brands is due to the sluggish performance of the Fila brand. Fila Holdings' blueprint is to cultivate new brands as future growth engines.

Fila Holdings' business segments are broadly divided into 'Fila Korea,' 'Fila USA,' the 'Fila' segment reflecting royalty income, and the golf subsidiary 'Acushnet.' While Acushnet's sales and operating profit have increased annually due to the strong golf business, Fila has been on a downward trend across the board. This is due to weakened brand awareness and increased discount competition and inventory burdens in both domestic and U.S. markets. Last year, it recorded a loss of 61 billion KRW. Consequently, Fila Holdings' operating profit has also declined; operating profit, which was close to 500 billion KRW in 2021, fell nearly 40% to 303 billion KRW last year.

Fila Holdings' Mantova corporation focuses on nurturing new brands (incubating), including K-fashion, while Misto Brand is preparing for the distribution business of global brands. However, both brands are still in the early stages, and it is expected to take more time before meaningful results emerge. In fact, the performance of Misto Brand Holdings, which holds shares in both corporations, is minimal. As of the first quarter, the net loss was 245.7 million KRW, and no sales were recorded. A Fila Holdings representative stated, "Internally, we have not clearly distinguished the business directions of the two corporations," adding, "We do not currently have our own distribution network but plan to develop one in the future."

In the fashion industry, Fila Holdings' strength in the Chinese market is attributed to its network. It is evaluated that they have firmly established their network as they have been operating the Fila brand business in the Chinese market for a long time. Previously, Fila Holdings operated the Fila brand business by establishing a joint venture with Anta Sports in China through Fila Luxembourg. A fashion industry insider familiar with the Chinese market said, "Although Fila does not directly have a distribution network, it maintains a good network in the Chinese market through partnerships, so there should be no difficulty in launching new businesses," adding, "Interest in K-fashion, which has not been introduced before in the Chinese market, is growing, and not only Fila but also some companies see opportunities in distributing K-fashion."