Matters:
On April 10, the company announced retail performance for the first quarter of 2024. At 361 degrees, offline retail sales of major brands recorded high double-digit positive growth, children's clothing brands recorded positive growth of 20%-25% in offline retail sales, and e-commerce platforms recorded positive growth of 20%-25%.
Guoxin Textile's opinion: 1) Adult clothing offline sales increased by double digits in the first quarter of 2024, with children's clothing offline and e-commerce growing by 20%-25%, maintaining expectations for 2024; 2) Risk warning: the pandemic has repeatedly impacted consumer demand; channel expansion falls short of expectations; brand image damage; and systemic market risks.
3) Investment advice: Strong performance in the beginning of 2024. Optimistic about professional sports series, children's clothing, and e-commerce drive growth in the medium to long term. The company's turnover maintained strong growth in the first quarter on a high basis, and continued to maintain a relatively optimistic outlook for 2024. Since the company launched the rebranding plan, product and channel adjustments have begun to improve, brand product potential has improved, and financial management conditions have improved. In the medium to long term, the company's rich IP matrix for professional products will drive a sharp rise in volume and price, and there is plenty of room for brand growth. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 11.4/13.2/1.53 billion, an increase of 18.0%/16.4%/15.6% year-on-year, and maintain the target price to HK$5.7-6.0, corresponding to 2024 PE 9.5-10x, maintaining a “buy” rating.
Commentary:
Offline adult clothing sales increased by double digits in the first quarter of 2024. Offline sales of children's clothing and e-commerce increased by 20%-25%, maintaining the 2024 forecast 1. Distribution growth rate split:
1) Offline: 361 degree, high double digit growth, children's clothing growth of 20%-25%; 2) Online: 361 degree online growth of 20%-25%.
2. New products: The company continues to launch new professional sports products. In the first quarter, in the field of running, 361 introduced the new color scheme of the professional marathon running shoe Feifan 3, equipped with an original dynamic carbon plate, which is both highly attractive. At the same time, professional running shoe products such as Shippeng Family and Biking Speed 3pro were launched, covering various needs such as professional racing, daily training, and physical examinations. In the field of comprehensive training, the company launched Women's Professional Sports New Skin 4.0, which uses a new Chinese elegant and deep low-saturation aesthetic color scheme to provide soft and resilient external protection.
3. Inventory sales ratio and retail discount: Inventory sales ratio remained at 4-4.5; retail discount in the first quarter was 30% off, mainly due to the intense competitive environment.
4. Forecast for 2024: Revenue maintains a 15%-20% growth forecast, and is expected to reach 10 billion dollars of revenue for the whole year. Maintain the projected net opening of 100-200 stores for bulky goods and children's clothing, respectively.
Investment advice: Strong performance in the beginning of 2024. Optimistic about professional sports series, children's clothing, and e-commerce driven growth in the first quarter, the company's turnover maintained a beautiful growth base in the first quarter, and continued to maintain a relatively optimistic outlook in 2024. Since the company launched the rebranding plan, product and channel adjustments have begun to improve, brand product potential has improved, and financial management conditions have improved. In the medium to long term, the company's rich IP matrix for professional products will drive a sharp rise in volume and price, and there is plenty of room for brand growth. Maintaining the profit forecast, the company's net profit for 2024-2026 is expected to be 11.4/13.2/1.53 billion, an increase of 18.0%/16.4%/15.6% year-on-year, and maintain the target price to HK$5.7-6.0, corresponding to 2024 PE 9.5-10x, maintaining a “buy” rating.
Risk warning
The pandemic has repeatedly impacted consumer demand; channel expansion falls short of expectations; brand image has been damaged; and the market's systemic risks.