Jingwu Finance | Guozheng International Research indicates that TOPSPORTS (06110) FY25Q3 (September-November) group retail and wholesale business total sales amount decreased year-on-year in the mid-single digits, an improvement from the low range of 10-20% drop compared to FY25Q2. Looking at different channels, online performance was better than offline, as September to November is a peak period for online promotions. The company actively seized sales opportunities, with online revenue recording double-digit growth, and the proportion of direct online sales in overall direct sales increased to 40%; offline customer traffic saw a sequential improvement, but still faced certain pressures.

The bank noted that in terms of stores, direct-operated store gross sales area decreased by 4.4% year-on-year and 2.1% quarter-on-quarter; the number of stores approximately declined in high single digits year-on-year. The decrease in the number of stores is greater than the decrease in area, indicating that the company's store structure is continuously optimizing. It is expected that the company will continue to enhance the operational capacity of individual stores by matching store types based on brand attributes; in terms of inventory, the current inventory-to-sales ratio is about 4-5 months, maintaining healthy and controllable inventory under peak season stocking pressure, with new products accounting for about 70-80%, aiming for inventory improvement by the end of FY25.

The bank continued to point out that the main brand Adidas performed excellently, with revenue growth in the Greater China region achieving high single digits in the first three quarters. Management has continuously raised the fiscal year guidance, expecting annual revenue growth to reach 10%. In contrast to Adidas's strong recovery, another main brand, Nike, is currently in an adjustment period, but an improvement is expected with the appointment of the new CEO.

The bank stated that TOPSPORTS has had in-depth cooperation with Nike and Adidas for many years. In addition to main brands, it is also continuously expanding cooperation with domestic sports brands and other international brands. As the retail consumer environment improves, it is believed that sports consumption enthusiasm will gradually recover, driving a rebound in company performance. In recent years, the company has also adhered to a high dividend policy, providing higher returns to shareholders. Taking everything into account, the bank predicts EPS for FY25/26/27 to be 0.22/0.29/0.33 yuan, assigning a 15 times PE to the 2025/02 fiscal year, with a target price of 3.7 HKD, maintaining a "Buy" rating.