Chinese menswear brand KBS Fashion Group says it is benefitting from expanding into tier 4 and 5 cities.

The company – which designs, manufactures, distributes and retails its mens apparel throughout China, has reported net revenues in the first half of 2014 rose 7.4 per cent to $49.8 million. Gross profit was $20 million, or 40.3 per cent of revenue, down from 46 per cent in the same period last year.

Chairman and CEO Keyan Yan said the company had been able to grow and leverage its distributor relationships during the half, giving it access to the faster growing fourth and fifth tier city retail markets in China.

“Revenue growth from our distribution network helped offset our corporate store restructuring process in the first half of the year. While operating profitability slowed down in the period as we worked to optimise our store network, we have seen it return to satisfactory levels in the second half of the year.

“Going forward, we remain focused on maximising the productivity of our corporate stores and expanding our distribution network as opportunities emerge,” he said.

Headquartered in Shishi, China, KBS runs its own network of 114 KBS stores and distributes through a number of multi-brand stores. Yan said the company expects to open its new manufacturing facility in Taihu, Anhui province, in the first quarter of 2015. The new plan has a capacity of 5 million garments a year, compared with the existing plant’s 2 million. “We expect the new facility will lower our production costs as it becomes fully operational.

“Meanwhile, we have been working with several well-known brands to become one of their original design manufacturing suppliers. We have passed relevant screening tests and received some sample orders. We anticipate that we will be able to negotiate larger orders in the near future, once our additional production capacity is online.”

Yan said the company projects a profit of $25 million in the full year as revenue growth accelerates in the second half.