Key Takeaways:
Xtep International cut its 2026 revenue guidance to a low single-digit decline, from prior mid-single-digit growth, as China sportswear demand weakens.
"Uncertainties linger in the macro environment in the second half, and based on performance since the third quarter, the company expects to continue facing certain operating pressure for the full year," CFO Dona Ding said.
First-half net profit fell 10.5% year over year to RMB818 million, with the interim dividend maintained at HKD0.18 per share. Professional sports brand Saucony is forecast to record about 10% revenue growth. The group reiterated its outlook for an overall net profit margin at a high single-digit level, while the second-half operating margin will face relatively greater pressure.
The revision reflects weakening demand in China's sportswear market and could weigh on the broader Hong Kong-listed consumer sector. Shares rose 6.2% on the announcement. Investors will watch the interim results call in August for updated segment margins.
Analysts trimmed targets after the company's second-quarter retail data came in below expectations. BOCI lowered its price target to HK$4.30, citing weaker-than-expected first-half sales. JPMorgan cut its target to HK$6.00 from HK$6.30 while keeping an Overweight rating, reducing 2026-2028 earnings forecasts by 3% to 5%. Goldman Sachs lowered its target to HK$5.6, noting retail sales came under pressure in the second quarter but discounting remained disciplined. Nomura downgraded the stock to Hold.
In the second quarter, Xtep's core brand retail sales posted a mid-single-digit year-over-year decline, with discounts of 70% to 75% off and an inventory-to-sales ratio of 4.5 to 5 months. Saucony recorded low-single-digit growth. Management reaffirmed its outlook for mid-single-digit group revenue growth and a high-single-digit net profit margin by 2026, though the full-year revenue target now appears harder to reach given the macro environment, BOCI said.
The guidance cut shows management expects demand to stay soft through year-end. Investors will watch the interim results call in August for updated segment margins and any further revision to the Saucony growth outlook.
This article is for informational purposes only and does not constitute investment advice.
