The company's recent situation
The company announced 1QFY25 (March to May 2024) operating performance: the total sales amount of retail and wholesale business declined year-on-year in the number of units, and the gross sales area of direct-run stores decreased by 0.5% year on year, down 1.4% from the end of February.
reviews
Under 1QFY25's high base, sales declined year over year, and the online growth rate was better than offline. Demand for terminal consumption has fluctuated quite a bit since this year, and offline passenger flow is under pressure. At the same time, due to adjustments in the pace of delivery of some products from major brands and the high base for the same period last year, the total sales amount of 1QFY25 Taobo's retail and wholesale business declined in units over the same period last year. By channel, the company continued to strengthen global operations to effectively make up for the loss of offline traffic. The year-on-year growth rate of online sales was faster than offline during the quarter, and the proportion of online sales in direct management channels increased to more than 30% (vs. 1QFY24 and FY24 only account for 20-30% in the middle). Among them, content e-commerce performed the most. In terms of brands, the main brands Nike and Adidas have recently begun Olympics-related marketing and new product launches; in terms of new brands, the company is actively expanding new customers, recently cooperating with Columbia to expand its outdoor brand map, and is expected to open its first brand store in July.
Gross sales area declined slightly year-on-year, focusing on improving the quality of individual stores. The gross sales area of 1QFY25 Maitaobo's direct-run stores decreased by 0.5% year-on-year, and decreased by 1.4% compared to the end of February, and the area of a single store increased. FY25 plans to focus on improving the quality and efficiency of individual stores to improve the efficiency of single stores through the global expansion of offline stores (using online channels such as content e-commerce and private domains as an increase in offline stores).
Inventory remains at a consistent healthy level, and retail discounts have deepened slightly. Taobo has maintained strict inventory management. As of the end of May, the inventory sales ratio was 4-5 months, which was basically the same as at the end of the previous quarter; total inventory increased slightly year-on-year, mainly due to the arrival of new products; the storage age structure remained healthy, accounting for about 80% of new products. The 1QFY25 retail discount deepened slightly year-on-year, mainly due to the structural impact of the increase in the share of online channels.
Profit forecasting and valuation
Maintain the company's FY25/26 EPS forecast of 0.39/0.42 yuan. The current stock price corresponds to 10/9 times the FY25/26 price-earnings ratio, maintaining an outperforming industry rating. Taking into account recent fluctuations in the consumer environment and the downward trend in the valuation center of Hong Kong stocks, the target price was lowered by 19% to HK$5.58, corresponding to 13/11 times the FY25/26 price-earnings ratio, with 27% upside.
risks
The retail environment fell short of expectations, competition in the industry intensified, and sales of major brands slowed down.