According to reports, Guosheng Securities has released a research report stating that TOPSPORTS (06110), as a leading domestic retailer of sports shoes and apparel, boasts advanced digital capabilities and increasingly improved operational efficiency. However, due to fluctuations in the consumer environment and foot traffic affecting terminal sales, the company’s net profit attributable to shareholders for FY2026-FY2028 is projected to be 1.301 billion, 1.483 billion, and 1.648 billion yuan respectively. At the current price, this corresponds to a FY2026 price-to-earnings ratio of 15 times, thus maintaining a "Buy" rating. The key points from Guosheng Securities are as follows:

The company reported a 5.8% year-on-year decline in revenue for the first half of FY2026, while net profit attributable to shareholders fell by 9.7%. During the first half of FY2026 (March 2025 to August 2025), the revenue declined 5.8% year-on-year to 12.3 billion yuan, with a slight drop in gross margin of 0.1 percentage points to 41%. Increasing retail discounts negatively impacted gross margins, although the growing share of retail business and support from brand partners provided some positive contributions. During this period, net profit attributable to shareholders decreased 9.7% year-on-year to 790 million yuan, with a net profit margin dropping 0.3 percentage points to 6.4%, maintaining relative stability. In terms of dividends, the company’s board has resolved to distribute an interim dividend of 0.13 yuan per share, leading to a payout ratio of 102.2%, indicating a commitment to shareholder returns.

By brand: It is expected that the performance of Nike, one of the company's main brands, still requires improvement, while the company continues to expand its brand partnerships for long-term stable growth. In the first half of FY2026, revenue from the main and other brands fell 4.8% and 12.2% year-on-year to 10.8 billion and 1.4 billion yuan respectively. The assessment indicates that adidas is likely to have relatively strong sales performance in the Greater China region, while Nike is still in a destocking process. TOPSPORTS, as an important retailer for Nike in that region, closely ties its operations to Nike’s operational rhythms. According to disclosures from relevant companies, adidas saw a 7.8% increase in revenue from the Greater China region in H1 2025 (currency neutral), whereas Nike reported a 10% decline in revenue for Q1 FY2026 (June to August) in the same region (currency neutral). Beyond the main brands, the company is focused on deepening its brand positioning in the running and outdoor segments, having initiated collaborations with running brands such as Norda, Soar, Ciele, and outdoor brand Norrøna, to cater to differentiated consumer demands.

By business model: The retail business outperformed the wholesale business, with e-commerce performing better than offline retail. In the first half of FY2026, retail revenue fell 3% year-on-year to 10.6 billion yuan, during which offline stores were undergoing optimization, and same-store traffic dropped double digits. In contrast, online retail performed well with double-digit year-on-year growth. On the other hand, wholesale revenue fell 20.3% year-on-year to 1.6 billion yuan, largely due to a decrease in foot traffic resulting in fewer orders. 1) In the first half of FY2026, the company closed 332 offline stores, still in the process of optimizing its channel structure. As of the end of August 2025, the number of stores had decreased by 332 to 4,688, with total sales area down 14.1% year-on-year, while sales area per store grew 6.5% year-on-year. The company adheres to a "select and optimize" principle, conducting eliminations focusing on market dynamics to alleviate operational pressure; it has also implemented stricter standards for new openings and renovations, concentrating new stores on flagship stores of the main brands and niche brands. 2) The company’s e-commerce platform sales have been growing rapidly, with outstanding omni-channel e-commerce operational capabilities. In the first half of FY2026, combined sales from public and private domain online retail business achieved double-digit growth year-on-year. The company continuously strengthens its e-commerce system construction, relying on offline stores to extend the online boundaries of physical stores, integrating various channels such as Douyin live streaming, Xiaohongshu, WeChat mini programs, and instant retail. 3) Consumer-centric focus on user operations has seen the company attract a growing user base, achieving a total membership of 89.1 million by the end of August 2025. The membership scale continues to expand, and during this period, retail sales from offline stores and WeChat mini programs attributed to members accounted for 92.9% of total retail, with repeat member sales contributing 60% to overall membership sales, maintaining high and stable sales contributions.

Inventory situation remains robust, and cash flow is excellent. 1) Inventory: As of the end of August 2025, the company reported an inventory value of 5.83 billion yuan, down 4.7% year-on-year, with inventory turnover days at 150, which is an increase of 1.7 days year-on-year. The firm believes the total inventory has been effectively controlled. 2) Cash flow: The company generated a net cash flow from operating activities of 1.35 billion yuan during the period, which is 1.7 times the net profit attributable to shareholders, maintaining a healthy cash return ability in an uncertain market environment. Looking ahead to FY2026, the firm expects a slight decline in the company’s revenue while net profit attributable to shareholders will remain stable year-on-year. The firm anticipates fluctuations in offline customer traffic will persist, while online growth will accelerate. Considering the recovery trends amidst the volatile consumer environment, it projects a slight decline in revenue for FY2026, with net profit attributable to shareholders remaining stable year-on-year.

Risk Warning: Slowdown in terminal sales; operational risks arising from changes in brand partnerships and suboptimal store optimization.