Known as the "simplest" and "most overwhelming" 618 in history, it ended in a somewhat quiet atmosphere.

Although the overall growth rate of e-commerce promotion has decreased, the prosperity of the sports apparel category may be due to factors such as the catalysis of sports events, the proliferation of outdoor diversified sports projects after the epidemic, etc. For example, the public data shows that as of 24:00 on June 20th, 361 Degrees's overall sales on all channels increased by 94% YoY during the promotional period. Looking at the entire sports brand track, according to Tianxia Wangshang data, Nike ranks first in the 618 sports brand list ranked by transaction volume, and Feile, Adidas and others follow closely.

It is well known that 2024 can be regarded as a big year for sports, with many international heavyweight events taking place one after another. Whether it is the European Cup, the Copa America, which are currently in full swing, or the upcoming Paris Olympics, undoubtedly bring huge business opportunities to sports brands.

However, pessimism in the world often does not intersect. In the face of great prosperity, investors in the capital market obviously do not think that companies on the industrial chain have equal opportunities. The Zhitong Finance APP noticed that 361 Degrees' stock price has increased by more than 20% since the beginning of the year; and Xtep International (01368), who wants to create a "non-ordinary feeling", has a slightly lower increase, but its increase this year has also reached two digits; while Topsports, which services many well-known brands at home and abroad, looks much worse, with a cumulative decline in the stock price approaching 30% this year.

Does the sports event economy fuel sports brands?

At the end of June, China's traditional "Summer Solstice" solar term came as scheduled, and the "sports event economy" also rose with the temperature. At present, with the passionate kick-off of the European Cup and Copa America, and the opening dates of the Paris Olympic Games approaching, the "sports event economy" has gradually "ignited".

Take the just-concluded 618 promotion as an observation sample, and the performance of the sports and outdoor categories in the textile and clothing field is particularly eye-catching. Public data shows that during the promotion period, the turnover of the sunscreen clothing category on the JD.com platform increased by 120% YoY, and more than 70 sports and outdoor categories such as hiking shoes, mountaineering clothing, road bikes, electric skateboards, yoga, and billiards increased by more than 100% YoY. Similarly, in the Douyin e-commerce sports and outdoor rankings, Nike, Feile, Adidas and other brands occupy the TOP3 of GMV, and the sales of sports and outdoor apparel and footwear, such as hiking shoes and mountaineering clothes, continue to grow, with a sales growth rate of nearly 350%.

And reflected in the specific listed sports footwear and apparel companies, the 618 performance of the head brands also shows that consumers' enthusiasm for purchasing related products is rising. According to information released by 361 Degrees, in the first two days before 618 opening, the official flagship store of 361 Degrees' sales volume increased by 51% YoY, the unit price increased by 50% YoY, and the sales volume of premium products increased by 100% YoY. If we look at the entire promotion period, the company's e-commerce channel sales increased by 94% YoY and the e-commerce channel sales volume increased by 99%. The sales volume of all channels' premium products exceeded 240,000, a YoY increase of 167%, of which the sales volume of official flagships' premium products increased by 79% YoY.

361 Degrees' performance is not an isolated case. From an industry perspective, the sports brand is currently in a stage of continuous improvement of inventory and gradually rising industrial chain prosperity. It is observed that the destocking processes of mainstream sports brands are relatively smooth. For example, in the case of the four major sports brands listed in Hong Kong Stock Exchange, the inventory-to-sales ratios in the first quarter of this year have all been reduced to below 5. Benefiting from a series of international events, the market performance of sports brands in the second half of the year may be further optimized.

As for international brands, Adidas has also achieved growth for four consecutive quarters. Among them, the company's Q1 2024 revenue increased by 4% YoY to 5.458 billion euros, and gross margin increased to 51.2%. Based on the better-than-expected first quarter performance, Adidas has even raised its annual guidance, with operating profit raised to 700 million euros, an increase of 40% from before.

How much "prosperity" can sports brands grasp in this big year of sports?

Compared with the traditional clothing industry with short fashion cycles and strong seasonality, the sports footwear and apparel industry has fewer styles, stronger professional attributes, and a lower frequency of updates. The industrial chain pattern is relatively stable and the competitive barriers are higher. Therefore, the sports footwear and apparel industry naturally has a higher market concentration.

Looking back at the development of China's sports shoe and clothing market, the industry was already highly concentrated before the epidemic. However, in the post-epidemic era, due to the backlog of inventory, the intensity of industry competition has increased, and the concentration has decreased. At the same time, after experiencing continuous high growth, the growth rate of the sports shoe and clothing market has also shown a trend of slowing down. According to Euromonitor data, excluding the low industry growth rate caused by the epidemic in 2020, the average industry growth rate of sports shoes and clothing from 2015 to 2021 is between 17-18%. It is predicted that the average annual growth rate of China's sporting goods market from 2022 to 2026 will be 9.9%. If the industry growth rate of -5.2% due to the epidemic in 2022 is excluded, the average industry growth rate from 2023 to 2026 will be 13.5%, which is also lower than the high double-digit growth rate before 2021.

During the industry adjustment period, leading players urgently need to adhere to and innovate to ensure that their position will not be overtaken by latecomers. At the current time, taking advantage of the "favorable weather" of sports events and seizing the opportunity of sports economy is a crucial focus for sports brands.

Recently, Nike and Adidas have successively released competition equipment for sponsoring athletes in the Paris Olympics. In order to welcome this year's Olympics, Chinese domestic brands are also eager to try and hope to make breakthroughs in marketing and other aspects. For example, not long ago, the Xtep brand launched the victory-colored running shoes to preheat the "Olympic moment." It is understood that as a leader in Chinese running sports, the main Xtep brand has always focused on running shoe categories. Since 2007, the company has sponsored marathons in multiple cities every year and has become one of the sportswear brands that sponsor the most marathons in Greater China.

It is worth noting that based on the company's recent business trends, Xtep, which aimed to "walk on multiple legs," seems to be preparing to narrow its focus. Just last month, Xtep International announced the sale of its wholly-owned subsidiary that holds the Geoswift and Parading brands. It is reported that the company's action is intended to optimize its financial structure. According to public information, this year's first-quarter Geoswift and Parading lost about 9 million US dollars, and Xtep expects its annual loss to be similar to that of last year. After completing the above sales, Xtep's business structure is expected to refocus on the running field. Among them, the Xtep main brand is aimed at the mass market, Saucony serves the high-end and mature customer group, and Mizuno focuses on off-road running and outdoor activities. However, whether Xtep International after "losing weight" can win the favor of investors, I'm afraid that only time will tell.

Back to the industry perspective, with one after another sports events coming, investors in the capital markets are also starting to catch relevant investment opportunities. But as the saying goes, "to forge iron, one needs a strong hand," for listed companies, performance is the best "touchstone" to test investment value. After the enthusiasm of the market, probably only brands that truly seize the opportunity to realize value advancement can attract more long funds.

Apart from the Olympics, Chinese domestic brands are also frequently showing their muscles in other important events. For example, 361 degrees announced that it has become an official partner of the Harbin Asian Winter Games. In addition, in order to enhance brand influence, 361 degrees is also vigorously developing endorsement resources. A recent example is that the company announced at the end of last year that Jokić became the global spokesperson for the brand, which once sparked a topic for discussion. However, it should be noted that due to its long-term focus on the mid-to-low-end market, the brand value and image of 361 degrees are somewhat different from those of traditional big brands. Although the discussion about "downgrading consumption" has been heated in recent years, low prices do not necessarily mean capturing consumers, and it may not be easy for 361 degrees to achieve sustained breakthroughs in the future.

In addition to the Olympics, Chinese domestic brands are also frequently showing their muscles in other important events. For example, 361 degrees announced that it has become an official partner of the Harbin Asian Winter Games. In addition, in order to enhance brand influence, 361 degrees is also vigorously developing endorsement resources. A recent example is that the company announced at the end of last year that Jokić became the global spokesperson for the brand, which once sparked a topic for discussion.

However, it should be noted that due to its long-term focus on the mid-to-low-end market, the brand value and image of 361 degrees are somewhat different from that of traditional big brands. Although the discussion about "downgrading consumption" has been heated in recent years, low prices do not necessarily mean capturing consumers, and it may not be easy for 361 degrees to achieve sustained breakthroughs in the future.

Finally, looking back at the industry perspective, with one after another sports events coming, investors in the capital markets are also starting to catch relevant investment opportunities. But as the saying goes, "to forge iron, one needs a strong hand," for listed companies, performance is the best "touchstone" to test investment value. After the enthusiasm of the market, probably only the brands that truly seize the opportunity to realize value advancement can attract more long funds.