FY2025Q1 offline passenger flow was under pressure, and sales volume recorded a decline in orders, maintaining the FY2025Q1 business situation published by the “buy” rating company. The FY2025Q1 sales volume recorded a decline in orders. The pace of retail and wholesale was about the same. The main factors were weak offline passenger flow, high base, and major partner brands adjusted in line with the delivery pace of some products sold in Olympic sales. Considering the weak offline customer flow, we lowered our profit forecast. We expect FY2025-2027 net profit of 23.7/25.8/2.78 billion yuan (originally 24.8/27.8/3.11 billion yuan), corresponding EPS of 0.4/0.4/0.4 yuan, and the current stock price corresponding to PE is 9.9/9.1/8.4 times. The company has significant advantages in global integration, continuously adding brand cooperation and pioneering new models, and maintaining the “buy” rating.
Channel division: Focus on global integration, offline customer flow is under pressure. The online share increased to 30% +FY2025Q1. The growth rate was better than offline. In terms of growth performance, online content e-commerce > private domain > platform e-commerce > offline retail sales: (1) the share of online retail sales increased from the 20-30% middle of FY2024Q1 to more than 30%; (2) the number and area of offline stores declined. As of 5.31, the gross area of directly-managed stores was -0.5% compared to the previous month, -1.4%, and the year-on-year decline narrowed further (FY2024Q4) -0.8%); (3) offline Passenger flow is weak. According to Nike's announcement, the number of FY2024Q4 physical stores in Greater China declined by double digits year on year.
By brand: The main brand Olympic sales have accelerated, with the addition of cooperation, Colombia is increasing the performance of FY2025Q1 and other brands in the outdoor field. It is expected that the new product performance of the main brand will increase with Olympic operation and sales: (1) On May 31, the Nike On Air Extraordinary Innovation Experience Event was held in Shanghai and released the 2024 Paris Olympics national team equipment; (2) On April 18, adidas officially released an athlete equipment series containing 49 types of shoes, covering 41 different projects. In addition, the company added a cooperative brand Columbia to strengthen its outdoor layout. As of FY2024, the number of direct stores managed by professional sports brands, including Beimian, Asics, Hoka, and Glorstone, is increasing the number of units over the same period last year.
The sales structure led to a year-on-year deepening of discounts, and the inventory ratio maintained a healthy level (1) Discounts: FY2025Q1 direct sales discounts deepened year-on-year, mainly due to changes in the sales channel structure. The share of online sales with relatively deep discounts increased, but the online channel fee rate was significantly lower than offline, so it positively catalyzed profitability. (2) Inventory: As of 5.31, the inventory value increased slightly year-on-year due to the arrival of new products, and the inventory sales ratio remained at a reasonable level of 4-5.
Risk warning: New brand cooperation, discount improvements, and new product sell-out rates fall short of expectations.