TOPSPORTS (06110) has shown signs of passing an operational inflection point, evidenced by stabilized net store closures, continuous improvement in sales per square foot, and increased substantive support from core brands. Nike (NKE.US), TOPSPORTS' key brand, has been gradually launching new products, making the stock worth monitoring.

Key insights from Guoyuan International include: On December 22, the company announced its Q3 operational performance and held an earnings call. For FY2025/26 Q3 (September–November), retail and wholesale sales declined by a high single-digit percentage year-over-year (YoY), while gross selling area decreased by 1.3% quarter-over-quarter (QoQ) and 13.4% YoY.

Despite operational pressures, results were in line with expectations, though achieving full-year profit parity remains challenging. Q3 sales fell by a high single-digit percentage, with retail outperforming wholesale. Offline sales improved slightly due to a low base, while online growth slowed amid a high base. Discounts widened YoY due to a higher online sales mix but narrowed compared to the first half of the fiscal year.

Management acknowledged persistent macroeconomic headwinds and weak offline foot traffic, posing challenges to meeting the full-year profit target. However, any deviations are expected to remain within a controllable range.

Nike has stepped up support for Greater China, addressing high inventory levels of older products by increasing buybacks from core retailers and writing off obsolete stock. This move alleviates retailers' working capital pressure while improving the brand's product mix in the region.

TOPSPORTS has passed an operational inflection point, reflected in stabilized net store closures, improved sales efficiency, and stronger backing from core brands. These factors indicate stabilized business adjustments, effective new business models, and potential financial benefits from partner support.

Future considerations include the pace of consumer recovery and the market performance of Nike’s new products, which will determine the company’s operational rebound. Guoyuan International will closely monitor margin improvements in the second half of the fiscal year and market reception of Nike’s upcoming products.