Industrial Securities released a research report stating that TOPSPORTS (06110) maintains a "Buy" rating, expecting net income attributable to the parent for FY25/26/27 to be 1.4/1.53/1.671 billion yuan, with year-on-year changes of -36.7%/+9.3%/+9.2%. The terminal sales environment faces challenges, with the company prioritizing inventory management, making progress as expected, and maintaining its full-year guidance unchanged. Nike's new CEO places greater emphasis on collaborating with Dealers and plans to refocus on professional sports categories, expecting more changes by FY2026.

The main points of Industry Securities are as follows:

The company released its FY25Q3 operational performance report ending November 30, 2024:

Total sales amount for retail and wholesale business declined in the mid-single digits year-on-year; the gross sales area of direct-operated stores at the end of the period decreased by 2.1% month-on-month and 4.4% year-on-year.

E-commerce promotions were anticipated early, leading to a reduced decline in sales in FY25Q3 compared to FY25Q2.

The trend of offline foot traffic showed slight improvement month-on-month but remains challenging; this year's promotions came early, and the company fully leveraged its comprehensive layout advantages while shifting more goods to online channels to seize business opportunities. It is estimated that FY25Q3 online pre-tax sales grew double digits year-on-year, narrowing the overall channel decline to mid-single digits. The sales trends in retail and wholesale channels in FY25Q3 were basically consistent, with retail channels performing slightly better.

Managing inventory is the top priority, and it is estimated that FY25Q3 direct-operated discounts deepened year-on-year, with inventory management progress meeting expectations.

The promotional atmosphere in the Industry is intense; it is estimated that FY25Q3 primarily saw deeper offline direct-operated discounts year-on-year, as well as an increase in online sales proportion, with the online pre-tax sales proportion in FY25Q3 further increasing compared to FY25Q2, impacting direct-operated discount depth year-on-year, similar to FY25H1.

Continue to optimize stores and diversify store types.

The company continues to adjust and optimize inefficient stores, and it is estimated that the number of stores at the end of FY25Q3 will decrease by a high single digit year-on-year, with a decline similar to the first half of the fiscal year, and the average store area will increase year-on-year. In August, TOPSPORTS launched a new store type, FOS (Future of Style), for Adidas, focusing on the avant-garde sports leisure series; in October, the HALO Concept store was launched as Adidas's highest-end retail store, continuously diversifying store types and enhancing overall retail capability.

Risk warning: Inventory backlog risk, brand business adjustment risk not meeting expectations, supply chain tightening risk.