On Thursday afternoon, XTEP INT'L (01368.HK) saw its shares plunge by more than 9% during trading, hitting a low of HK$4.66 per share, the lowest level since April of last year.

The sharp decline appears linked to the group's latest 2025 financial report, which revealed performance below expectations, a decline in gross profit margin, and over-reliance on the professional sports segment for growth.

By the market close, XTEP INT'L was trading at HK$4.78 per share, down 7%, with a total market capitalization of approximately HK$13.4 billion.

Despite announcing positive 2025 results on the same day, selling pressure persisted, likely due to the figures falling short of market forecasts.

It is worth noting that several well-known Hong Kong-listed companies have recently experienced significant stock price drops after releasing strong annual reports. Previously, Alibaba-W and Pop Mart saw declines following their earnings reports, and on Thursday, Kuaishou's shares plummeted nearly 15% after its results were published.

**The Decisive Role of the Professional Sports Segment**

XTEP INT'L's 2025 performance showed full-year revenue of RMB 14.15 billion, a year-on-year increase of 4.2%, below the estimated RMB 14.38 billion. Full-year net profit was RMB 1.37 billion, up 10.8% year-on-year, slightly missing the projected RMB 1.38 billion. Both key indicators fell short of expectations.

In its annual report, XTEP INT'L particularly emphasized the decisive role played by its "professional sports segment."

The company noted that revenue growth in 2025 was mainly driven by the steady performance of the core XTEP brand and the "strong growth of the professional sports segment."

Revenue from the main XTEP brand increased by only 1.5% year-on-year, while revenue from the professional sports segment surged by 30.8%.

**Fruits of a Cross-Border Acquisition Two Years Ago**

The "professional sports" segment referred to by XTEP INT'L primarily includes marathon running, along with outdoor activities (under the Merrell brand) and basketball.

In marathon running, XTEP INT'L highlighted that both the XTEP and its subsidiary brand Saucony continued to dominate wear rates in major domestic marathon events from 2025 to 2026, securing the top spot in six key marathons—Shanghai, Beijing, Xiamen, Guangzhou, Wuxi, and Chengdu—"fully demonstrating the effectiveness of the 'professional influences mass' strategy."

Historical information shows that Saucony was originally a brand under the U.S.-based Wolverine World Wide group. Founded in 1898 and headquartered in Pennsylvania, USA, it specializes in the design, development, and manufacturing of running shoes.

On December 17, 2023, XTEP INT'L announced the acquisition of the remaining interests in the joint venture holding Saucony for US$61 million, along with a 40% ownership stake in Saucony's operations in China. Since then, the joint venture has become a wholly-owned subsidiary of XTEP. XTEP's fully-owned subsidiary, XMS Sports, acquired a 40% ownership interest in Saucony Asia IP Holdco, which holds the intellectual property rights for the Saucony brand in Mainland China, Hong Kong, and Macau.

It is the strong performance of Saucony that has laid the foundation for the sharp revenue increase in XTEP INT'L's professional sports segment.

XTEP INT'L stated that benefiting from Saucony's robust revenue growth, the professional sports segment delivered "outstanding financial performance" in 2025. As of December 31, 2025, Saucony had 175 stores in Mainland China.

Additionally, Saucony has established a premium brand image among runners and social elites. In 2025, it further expanded its lifestyle and casual product lineup, broadening its market reach.

**Concerns Over Declining Gross Profit Margin**

Nevertheless, a more noticeable decline in the gross profit margin of the professional sports segment remains a significant concern.

XTEP INT'L pointed out that the gross profit of the professional sports segment rose significantly by 27.0% to RMB 900 million (compared to RMB 715 million in 2024), but the gross profit margin was 55.5%, down nearly 2 percentage points from 57.2% in 2024.

In contrast, the gross profit of the mass sports segment grew by only 0.1%, but the decline in gross profit margin was slight, dropping from 41.8% in 2024 to 41.2% in 2025.

XTEP INT'L explained that the lower gross profit margin in the professional sports segment was due to a higher contribution from apparel sales, which have a lower gross margin compared to footwear.

**Overseas Expansion Limited to Southeast Asia**

Regarding XTEP INT'L's emphasized "accelerated globalization strategy," the group has primarily focused its promotional efforts in Southeast Asia while deepening its cross-border e-commerce business.

In September of last year, XTEP opened its first overseas running club at the Kallang Wave mall in Singapore, adopting a community-centered approach to promotion.

Furthermore, XTEP strengthened its retail presence by entering into a significant partnership with Malaysia's Bonia, opening a 300-square-meter running flagship store in Kuala Lumpur's prominent Mid Valley Megamall.

At the same time, XTEP's cross-border e-commerce business achieved rapid growth exceeding 220%, with particularly strong performance on major Southeast Asian platforms such as Shopee, TikTok, and Lazada.

Overall, while XTEP reported significant increases in revenue and profit, the figures were slightly below expectations. Most of the growth came from sub-brands in the professional sports segment, with the main brand showing limited growth. The decline in gross profit margin also raises concerns, which may explain the sharp drop in the stock price.

**Ding Shuibo: Responding to External Market Volatility**

Ding Shuibo, the 56-year-old founder of XTEP, entered the footwear industry in 1987 and established the XTEP brand in 2001. Headquartered in Quanzhou, Fujian Province, the company invited Nicholas Tse as its brand ambassador, pioneering the era of entertainment marketing for Chinese sports goods enterprises. XTEP was listed on the Hong Kong Stock Exchange on June 3, 2008.

In 2019, XTEP signed a joint venture agreement with Wolverine to develop, market, and distribute the Merrell and Saucony brands in Mainland China, Hong Kong, and Macau. It also fully acquired brands such as K-Swiss and Palladium from the E-Land Group, marking its entry into a multi-brand, international development phase.

Currently, Ding Shuibo serves as the Board Chairman and Chief Executive Officer of XTEP INT'L.

In the 2025 financial report, Ding Shuibo noted that "market leadership enables better response to external market fluctuations." However, the report did not specify what these external market fluctuations refer to.