According to the IPO application documents submitted by Topsports International Holdings Limited International Holdings Limited to the Hong Kong Stock Exchange, the funds raised will be used to invest in scientific and technological innovation, business operations and general corporate operations, with BofA Merrill Lynch and Morgan Stanley as co-sponsors.

It is reported that Topsports International Holdings Limited International is a sports retail and service platform, in essenceThe sports business section of Belle International, the largest footwear retailer in China.Acting for Nike Inc, Adidas, PUMA, Converse and other sports brands distribution business, with 17 international sports or outdoor brand distribution rights.

The largest distributor of sports shoes and clothing in China

According to public data, the Chinese clothing retailer Belle International was founded in 1991. Topsports International Holdings Limited International, a subsidiary of Belle, has been involved in sports products since the 1990s and has the largest and highly sinking network of sneaker and clothing stores in China, covering nearly 270cities in 30 provinces.

Among them, Topsports International Holdings Limited's own stores are named after TopSports and Foss, and the distribution agents include Adidas, Nike Inc, Puma, Converse, Vance and other internationally renowned sports brands. Most of these direct stores are operated directly by Topsports International Holdings Limited International, while the rest are operated by independent third parties, while Topsports International Holdings Limited International will pay joint venture fees to third parties (as a percentage of sales).

According to data from consulting firm Frost&SullivanTopsports International Holdings Limited International is currently the largest sports footwear dealer in the Chinese market in terms of 2018 retail sales, with a market share of 15.9 per cent.Gao Bo also mentioned in the prospectus and website that the network of direct stores is its core asset.

According to the prospectus, in the 2016-2019 fiscal year, the company's operating income was 21.69 billion yuan, 26.55 billion yuan and 32.56 billion yuan respectively, and the adjusted annual profits were 1.538 billion yuan, 1.81 billion yuan and 2.236 billion yuan respectively.

However, even if Topsports International Holdings Limited International includes almost all the first-tier sports brandsHowever, it is highly dependent on the sales revenue of the two main brands, Nike Inc and Adidas.. In 2017 and 2018, sales of these two brands accounted for 90.0%, 89.4% and 87.4% of total sales, respectively.

It can be seen from the data that Topsports International Holdings Limited International is gradually reducing its dependence on the two brands Nike Inc and Adidas, but the current results are not satisfactory. In the future, with the intensification of industry competition and changes in consumer preferences and consumption patterns, it may bring a potential decline in profitability.

The growth rate of stores is doubtful

In fact, Belle International was listed on the Hong Kong Stock Exchange as early as 2007, with a market capitalization of more than HK $140 billion at one point. But over the next decade, the clothing retail giant went through a process from rapid expansion to declining performance, and finally had to commit to selling cheaply, and Belle made a comeback this year, spinning off its sports division to list in Hong Kong.

From the above data, we can see that Topsports International Holdings Limited's international income growth rate is about 20%, and profit growth is still rising, but not only because of the dependence on the head brand, but because of the "restrictions" of the role of middleman. As a result, Topsports International Holdings Limited International's gross profit margin fell, from 43.2 per cent in 2017 to 41.6 per cent in 2018. Topsports International Holdings Limited International explained that it is mainly because many manufacturers recommend that retail prices use discounts that are lower than the usual level.

As at April 30, 2019, Topsports International Holdings Limited's net international current liabilities was RMB 1 billion, which was mainly due to the increase in inventory due to Topsports International Holdings Limited International's seasonal sales model, which was partly offset by an increase in trade payables and short-term loans.

According to statistics, Taub International has more than 8000 direct stores across the country. As of February 28, 2019, Taub International had opened 8343 direct stores and 1880 stores operated by downstream retailers in 268 cities in 30 provinces, according to the prospectus.

Of course, the increase in rental costs comes with the opening of new stores. At the end of the 2017-2019 fiscal year, Topsports International Holdings Limited international store rental expenses were 2.418 billion yuan, 2.562 billion yuan and 2.972 billion Hong Kong dollars respectively, accounting for 12.6%, 10.9% and 10.4% of the total revenue, respectively.The lease liability rose from 445 million yuan to 882 million yuan.

One thing that can't be ignored is thatTopsports International Holdings Limited International closed more than half of its new stores in 2017.In 2018, the number of shop closures increased by 125, while the net increase of new stores was only 76. The unicorn already knew and noticed that as of February 28, 2019, Topsports International Holdings Limited International had opened 1415 new stores and closed 1374 stores, almost the same as the number of new stores.

To sum up, including industry competition, consumer preferences, store growth and other reasons may affect Topsports International Holdings Limited International's future performance growth. Not to mention Topsports International Holdings Limited International's current dependence on head brands such as Nike Inc and Adidas, if the company is successfully listed in Hong Kong, how to solve these problems is also a concern for investors.