The total sales amount of FY24Q3 retail and wholesale business increased by 10%-20%. The lower tier company announced FY24Q3 operating performance, and the total retail and wholesale sales amount of FY24Q3 (23/9-23/11) increased by 10%-20% in the lower segment (FY24Q2 reduced orders, FY24Q1 increased by 20%-30% lower). By the end of November, the gross sales area of direct-run stores had also decreased by 1.7%, up 0.5% from the end of August.
Inventory management matches the store layout and the pace of brand recovery. The company's FY24H1 average inventory turnover period was 141 days and 27 days; as of 2023/8/31, the inventory amount was reduced by 10%, down 7.9% from the end of February, in line with the store layout and the pace of brand recovery; the year-on-year improvement in new product sales led to a year-on-year improvement in retail discounts and an increase in same-store sales.
Broaden the brand cooperation matrix and lay out segmented sports tracks
The company began brand cooperation with running shoe brand HOKA ONE ONE and outdoor sports brand Kaileshi (currently 14 cooperative brands); at the same time, it completed investments in professional ski equipment retailer Lengshan and professional outdoor content agency Mounster to provide consumers with more diverse and rich product categories and seize global high-quality growth opportunities.
Store structure upgrade, focusing on improving the quality of individual stores
Steadily promote scale development and structural upgrading, and focus on improving store efficiency. As customer flow returns and channel adjustments come to an end, store holdings and total sales area remain in line with market demand. According to the consumer characteristics, categories and product attributes corresponding to the 14 cooperative brands, the optimal store size is accurately located to match them. Using the most suitable efficiency as the starting point, we will drive the upgrading of the overall store structure to fully unleash the potential of different brand types of stores.
Focus on users and build new connections and new experiences
The company continues to broaden consumer reach in multiple scenarios and achieve continuous accumulation of users. By the end of FY24Q2, the company's cumulative number of users reached 73.1 million, an increase of 16%; members contributed 93% of total in-store retail sales (including VAT), which continued to maintain a high proportion and steady sales contribution. The contribution of repurchase members to the overall consumption of members also remained stable between 60-70%, and was stable year over year; high-value members accounted for a median unit of total consumer membership, contributing nearly 40% to total consumer members' sales.
Raise profit forecasts and maintain a “buy” rating.
The company continues to collaborate with brand partners to seize market opportunities, broaden the brand cooperation matrix, and explore diverse sports segments; at the same time, it also focuses on upgrading its long-term efficiency and continues to optimize the channel structure to enhance consumer reach and accumulation. Considering the company's better retail and wholesale sales and improved discounts, we raised our profit forecast. The company's FY24-26 revenue is 309/347/38.5 billion yuan respectively (previous values were 304/345/39.4 billion yuan, respectively), net profit to mother is 23.8/28.1/3.24 billion yuan (previous values were 21.2/24.5/2.87 billion, respectively), and EPS was 0.38/0.45/0.51 yuan/share, respectively (previous values were 0.34/0.40/0.46 billion yuan/share, respectively) , the corresponding PE is 14/12/10x, respectively.
Risk warning: Increased personnel expenses and rental costs, average store management, pressure on sales rates, changes in brand cooperation terms, etc.