Zhitong Finance and Economics APP learned that haitong int'l released a research report stating that on the brand terminal side, although the retail performance of clothing, shoes, hats, textiles and other categories in Q3 24 declined compared to Q2, the retail year-on-year growth rate has shown a monthly improvement trend since July. It is recommended to focus on companies with steady and promising performances, potentially high-quality brand companies that may have fully established a bottom. On the manufacturing end, Q3 24 overseas exports accelerated compared to Q2 as a whole, with export growth rates of textile and apparel products declining in China and Vietnam in September compared to the previous month, but with China showing more resilience. With the gradual increase in the base in the second half of the year, we remain bullish on high-quality manufacturing companies that continue to increase their supplier share among core customers and have stable business conditions with core clients.

Haitong International's main viewpoints are as follows:

In recent days, several overseas sports companies have raised their full-year guidance, further slowing down the growth rate of luxury goods revenue.

Last week, sports companies Deckers and Skechers released their latest quarterly results, both raising their full-year revenue and profit guidance. In terms of luxury goods, the continued weak consumption of Chinese customers has dragged down the revenue growth of various companies in Asia. In Q3 24, LVMH and Kering saw a year-on-year decline in revenue, significantly below market expectations; Hermès maintained double-digit growth, but revenue growth also slowed down quarterly.

Deckers' FY25Q2 performance significantly exceeded expectations, with a 2.1% increase in net margin. FY25Q2 revenue increased by 20.1% to 1.31 billion USD, gross margin increased by 2.5% to 55.9%, net income increased by 35.7% to 0.24 billion USD, and net margin increased by 2.1% to 18.5%. Revenue/net income were 9%/28.7% higher than market expectations. Both DTC and distribution channel revenues achieved over 20% year-on-year growth, with overseas region revenues leading the growth, and main brands HOKA/UGG revenues increasing by 34.7%/12% respectively.

Skechers saw double-digit revenue growth in most regions in Q3 24, with an increase in inventory levels.

In 24Q3, Skechers' revenue increased by 15.9% to $2.35 billion. The gross margin decreased by 0.8 percentage points to 52.1%, while net income increased by 32.9% to $0.19 billion, with a net margin improvement of 1 percentage point to 8.2%. All regions outside China achieved double-digit growth, with revenues in the Americas/EMEA/APAC (excluding China) increasing by +13.6%/+30.2%/+21% year-on-year, while revenue in China declined by 5.7% due to weak consumer demand. End-of-period inventory increased by 23.5% year-on-year and 12.7% quarter-on-quarter, mainly due to higher inventory levels in China and high in-transit inventory in EMEA.

Adidas, Deckers, and Skechers have raised their full-year revenue and profit guidance.

Adidas expects a 10% increase in full-year revenue in 2024 on a currency-neutral basis (previously high single-digit growth) and an operating profit of 1.2 billion euros (an increase of 347.8% year-on-year, previously 1 billion euros). Deckers forecasts a 12% increase in total revenue to $4.8 billion for FY2025 (previously 10%), with HOKA brand revenue growth of 24% (previously 20%), maintaining the UGG brand revenue growth in the mid-single digits. Due to shallower discounts in the same period last year, the company expects deeper discounts in FY25H2 year-on-year, combined with higher-profit brands and product proportions leading to an expected gross margin of 55-55.5% in FY2025 (previously 54%, 2023: 55.6%). Skechers anticipates an 11.9% revenue/EPS growth in 2024 (previously 11.6%/18.3%).

Weak consumer spending by Chinese customers dragged down the growth rate of luxury brands in Asia, with slowing revenue growth in 24 due to seasonal factors.

In 24Q3, Hermès/LVMH/Kering saw revenue changes of +10.1%/-4.4%/-15.2% year-on-year, compared to market expectations of +0.7%/-4.9%/-4.3%. LVMH and Kering have seen continuous year-on-year revenue declines since Q1, with the decline gradually expanding each quarter. The high-growth Japan and Asia (excluding Japan) regions have significantly slowed down year-on-year, with the main reasons being the appreciation of the Japanese yen and weakened spending by Chinese customers at home and abroad. Hermès maintained double-digit growth, steady growth in Japan, leading the industry due to a lower proportion of tourist customers in Japan, capacity enhancements, average selling price increases, and sustained double-digit high growth in Europe and America. However, overall revenue growth has slowed due to decreasing flows of Chinese customers in other Asian regions each quarter. Kering and Hermès both noted an increase in the percentage of spending by Middle Eastern and American customers.

Regarding Symbol.

On the brand side: Recommend focusing on Bosideng (03998) and Topsports (06110).

On the manufacturing side: Recommend focusing on Shenzhou International Group Holdings Limited Unsponsored ADR (02313), Yue Yuen Ind (00551), Stella Holdings (01836), and Huali Group (300979.SZ).

Risk warning

Consumer preferences are changing, industry competition is intensifying, and the retail environment is weak due to economic downturn.