Introduction to this report:
FY2025Q1 sales are in line with expectations, and online is clearly superior to offline. Sales have been in line with the company's expectations since June, and cooperation with Columbia has been added.
Key points of investment:
Investment advice: Considering the weak recovery in domestic offline terminal consumption, we lowered FY2025-2027's net profit to mother of 23.9/26.2/2.89 billion yuan (24.8/27.8/3.10 billion yuan before adjustment, respectively). The latest closing price for PE was 10.4/9.5/8.6 times, respectively, maintaining the “increase” rating.
FY2025Q1 throughput is in line with expectations, and online is clearly superior to offline. The number of units in the total retail and wholesale business volume of FY2025Q1's year-on-year decline was mainly due to fluctuations in consumer demand, weak offline passenger flow, high base for the same period in 2023, and the pace of arrival of major partner brand products adjusted to match the Olympic Games. By channel, the proportion of FY2025Q1 direct online sales increased from 20-30% in FY2024 and FY2024Q1 to 30% in FY2025Q1. The online growth rate is faster than offline, and the growth rate of content e-commerce is faster than that of private sector operations and platform e-commerce. The pace of retail and wholesale is about the same. In terms of inventory, the inventory sales ratio remained at a healthy level of 4-5 months. The inventory amount increased slightly due to the arrival of new products, and the proportion of new products remained around 80%.
As of the end of May, the gross sales area of the company's directly-managed stores decreased by 1.4% month-on-month and 0.5% year-on-year compared to the end of FY2024Q4.
Sales since June have been in line with company expectations, and discounts have deepened slightly year over year. Since FY2025Q2, the overall consumption trend has basically continued in FY2025Q1. Offline passenger flow is under certain pressure, and the company actively uses online channels to make up for the impact of offline customer flow. During the 618 period, the company's overall performance was in line with expectations. Among them, the self-operated live streaming business grew the fastest year-on-year among all online channels, achieving double growth; the Douyin direct-run store industry ranked first in the cumulative transaction list; in terms of discounts, the increase in the share of content e-commerce and private domain operations led to a slight increase in direct retail discounts over the same period last year.
Actively develop the outdoor field and add cooperation with Columbia. 1) Fanatics: The framework agreement and cooperation have now been signed, and it is expected to be implemented one after another in FY2025Q2-3. 2) Norda:
Currently, cooperation begins with marketing and brand building. In the future, the company will gradually involve Norda's online and offline operations, and the original wholesalers will also pick up goods from the company. 3) Columbia:
Recently, the company added a new partnership with Columbia and is expected to open its first store in mid-July.
Risk warning: changes in brand cooperation, weak terminal consumption, etc.