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Kappa-Retailer Dongxiang Rises Most in 5 Years on Analysts’ View

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Jan. 17 (Bloomberg) -- China Dongxiang Group Co. rose the most in five years after Bank of America Merrill Lynch analysts said the sportswear retailer would be the only company in the industry that they expect to report earnings growth this year.

China Dongxiang surged as much as 22 percent to HK$1.40, headed for the highest close since Oct. 2007. It traded 11 percent higher at HK$1.28 as of the midday break in Hong Kong. The city’s benchmark Hang Seng Index fell 0.4 percent.

Same-store sales growth in the fourth quarter last year at Dongxiang, distributor of the Kappa and Phenix brands in mainland China and Japan, probably improved from the previous three-month period, analysts Raymond Ching and Chen Luo wrote in a report yesterday. The Beijing-based company’s spring-summer orders this year will be better than the 50 percent decline the analysts estimated for the fall-winter 2012 orders, according to the report.

Dongxiang has declined 7.3 percent in the past year, compared with a 19 percent gain in the Hang Seng Index.

The company reduced inventory to 359 million yuan ($57.7 million) by the end of the first half last year from 404 million yuan six months earlier, according to the report. The analysts expect the company’s gross profit margin to increase this year, Ching and Chen wrote.

To contact the reporters on this story: Liza Lin in Shanghai at llin15@bloomberg.net; Billy Chan in Hong Kong at bchan101@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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