Shenwan Hongyuan Group Co., Ltd. has released a research report stating that retail sales of clothing, footwear, and hats from January to May 2026 increased by 7.2% year-on-year, outperforming the overall consumer sector. With ongoing macro policies stimulating consumption, domestic demand is steadily recovering.

The firm believes the external trade environment in 2026 is generally stabilizing. The impact of U.S. tariffs is diminishing, and accommodative expectations are driving further release of global demand. Textile exports are outperforming apparel and footwear, driven by rising prices for upstream raw materials like cotton and Australian wool, leading to simultaneous increases in volume and price.

Looking ahead to Q2 2026, high-end brands and upstream beneficiaries of price increases may deliver standout financial performance. Meanwhile, high-performance outdoor gear and the sleep economy also present opportunities for increased market penetration.

Key insights from Shenwan Hongyuan are outlined below.

Domestic Demand: Apparel Retail Outperforms, Moderate Recovery Trend Confirmed

From January to May 2026, China's total retail sales of consumer goods reached 20.6 trillion yuan, up 1.4% year-over-year. Within this, retail sales of clothing, footwear, hats, and textiles by enterprises above a designated size increased by a cumulative 7.2% year-on-year. Online retail sales of physical clothing goods also grew by a cumulative 7.2%. The textile and apparel industry's growth outpaced the overall consumer sector. With continued macro policy support for consumption, domestic demand is expected to maintain a steady recovery trend.

External Demand: Textiles Outperform Apparel and Footwear, Upstream Price Hikes Drive Volume and Price Gains

1) Vietnam: From January to May 2026, Vietnam's textile exports totaled $15.1 billion, up 1.8% year-on-year, while footwear exports reached $9.8 billion, up 0.2%.

2) China: From January to May 2026, China's textile industry exports amounted to $116.73 billion, up 0.1% year-on-year. This includes $59.48 billion in exports of textile yarns, fabrics, and products, up 1.7%, and $57.24 billion in exports of apparel and clothing accessories, down 1.6%.

The firm believes the external trade environment in 2026 is generally stabilizing. The impact of U.S. tariffs is diminishing, and accommodative expectations are driving further release of global demand. Textile exports are outperforming apparel and footwear, primarily benefiting from rising prices for upstream raw materials like cotton, Australian wool, and chemical fibers, as well as strengthened expectations for demand recovery. The supply chain dynamic shows upstream procurement leading midstream shipments.

Hong Kong-Listed Sportswear: Major Event Year, Outdoor Brands Maintain High Growth

2026 is a major year for sporting events, with brands actively preparing products and marketing sponsorships, making subsequent developments worth watching. It is estimated that in Q2 2026, Anta/FILA/outdoor brand group sales will grow by low-single digits/mid-single digits/30%–35% year-on-year, with the outdoor brand group continuing its high growth. Value-for-money brand 361 Degrees' offline sales are expected to grow by high-single digits year-on-year, while Xtep's main brand sales are projected to grow by low-single digits.

Branded Apparel: Gradual Retail Recovery, High-End Categories Show Stronger-Than-Expected Profit Recovery

1) Mass Market Apparel: It is estimated that in Q2 2026, Heilan Home and Semir will see revenue growth in the low single digits year-on-year. Heilan Home's net profit attributable to shareholders is expected to be flat, while Semir, with measures like store optimization, is at the bottom of its operating cycle and recovering. Its net profit attributable to shareholders is expected to achieve high growth on a low base from the previous year.

2) Mid-to-High-End Apparel:

① Menswear: The main Bisin brand is showing strong growth, with new brand clusters building a rich second growth curve. It is estimated that in Q2 2026, both revenue and net profit attributable to shareholders are expected to continue high growth, delivering standout performance.

② Womenswear: Following deep adjustments and efficiency improvements by brands like Jinhong, Xinya, and Ellassay, it is estimated that in Q2 2026, net profit attributable to shareholders will achieve high growth on a low base, with a potential turnaround from difficulties being anticipated.

③ Childrenswear: With Jiaman optimizing channels and improving store efficiency, it is estimated that in Q2 2026, revenue will grow by double digits year-on-year, and net profit attributable to shareholders will gradually recover.

Home Textiles: Big Product Strategy Drives Profit Growth Exceeding Revenue

It is estimated that in Q2 2026, Luolai, Mercury, and Fuanna will see revenue growth in the single digits year-on-year. For Luolai, a significant management expense item from last year's rental and occupancy fees is eliminated in Q2 2026, so its net profit attributable to shareholders is expected to exceed expectations. Mercury and Fuanna benefit from product structure upgrades driven by their big product strategy, with profit growth potentially outpacing revenue growth.

Textile Manufacturing: Upstream Price Cycle Releases Profit Elasticity, Midstream Under Pressure

1) Upstream: The price increase cycle drives simultaneous gains in volume and price. A clear contraction in Australian wool production and growing demand for sport wool apparel are pushing up Australian wool prices, with high-quality wool textile companies expected to benefit continuously. Additionally, there is an expectation of reduced global cotton production in 2026, with U.S. cotton prices rising year-on-year. It is estimated that in Q2 2026, Bloomage East will benefit from rising cotton prices, with quarterly profit expected to expand further compared to Q1, showing promising elasticity.

2) Midstream: Rising costs and weak orders squeeze profits. Affected by performance fluctuations of brands like Nike, orders in related manufacturing supply chains are weak. It is estimated that midstream manufacturing companies are temporarily under pressure, with most companies' performance falling short of expectations.

Risk Factors

Consumer recovery may fall short of expectations; industry competition may intensify; risks of inventory impairment; rising raw material costs.