Looking ahead to the second half of 2026, domestic apparel end-market sales are expected to continue a mild recovery, while the performance of major overseas brands is becoming increasingly divergent. Prices for raw materials such as wool and cotton are entering an upward cycle, which benefits upstream industry leaders with ample inventory. It is recommended to focus on high-quality leading sportswear companies with comprehensive advantages in brand power, product strength, and channel capabilities. In a context where raw material prices provide a floor, leading enterprises with integrated production capacity and cost-plus pricing mechanisms can effectively pass on cost pressures, allowing profit elasticity to be gradually released.
Review of the First Half of 2026
From January to May 2026, national apparel retail sales reached 642.5 billion yuan, a year-on-year increase of 7.2%, which was 5.8 percentage points higher than the growth rate of total retail sales of consumer goods over the same period, indicating signs of stabilization and recovery in domestic demand. On the export front, affected by weak overseas demand and fluctuations in international trade, the cumulative year-on-year growth rates for textile yarn and apparel exports from January to May 2026 were -1.5% and -4.7%, respectively, showing clear pressure on exports. As of June 15, the textile and apparel sector index had fallen by 8.81% since the beginning of the year, with the upstream textile manufacturing and downstream apparel & home textiles sub-sectors declining by 14.9% and 3.28%, respectively, reflecting a divergence in sector performance.
Outlook for the Second Half of 2026
From a domestic demand perspective, apparel end-market sales are anticipated to maintain their mild recovery. The outdoor and sports segment remains highly prosperous, with product specialization upgrades and innovations in new retail channels serving as growth drivers for the latter half of the year. Regarding exports, U.S.-China tariff pressures are expected to remain elevated in the short term, but expansion into non-U.S. markets such as Southeast Asia will effectively support long-term resilience. The divergence in the development of major overseas brands is intensifying, with brands in outdoor gear and professional running shoes performing strongly. Upstream manufacturing firms that are closely tied to high-quality clients are likely to see structural improvements in order demand.
Prices for raw materials like wool and cotton are entering an upward cycle, which benefits upstream industry leaders with sufficient inventory. Sportswear and outdoor apparel, as the highest-growth core segments within the textile and apparel industry, are seeing domestic brands steadily increase their market share through strategies such as scaling up core IP products, expanding into new large-store formats, and accelerating global expansion, indicating strong and certain growth prospects.
Looking toward the second half of 2026, the industry's growth momentum is expected to continue. The trend towards urban light outdoor activities for the general population persists, and seasonal demand for scenarios like winter skiing and hiking will drive growth in both professional and casual sportswear. Leading companies will continue to deepen their global layouts by expanding overseas channels, sponsoring international sporting events, and integrating multi-brand portfolios to accelerate their capture of global market share. Simultaneously, they will continue to invest in product R&D and omnichannel digital operations to further solidify brand and channel barriers. It is recommended to focus on high-quality leading sportswear companies with comprehensive advantages in brand power, product strength, and channel capabilities.
In the phase of rising raw material prices, upstream manufacturing leaders with cost-plus pricing capabilities, who can pass cost pressures downstream, will release profit elasticity. Furthermore, against the backdrop of U.S.-China tariff disruptions, manufacturing leaders with well-established overseas production capacity, mature global supply chain systems, and deep ties to core, high-quality clients possess greater risk resilience and potential for increasing global market share.
Looking ahead to the second half of 2026, the industry is expected to bottom out and recover. Inventory destocking for apparel retail in core European and American markets is nearing completion, and manufacturing orders are likely to stabilize and pick up. On the cost side, global raw materials like cotton and chemical fibers are entering a production reduction cycle, while wool supply has not yet recovered, providing a floor for prices. Leading enterprises with integrated production capacity and cost-plus pricing mechanisms can smoothly pass on cost pressures, allowing profit elasticity to be gradually released.
The downstream branded apparel and home textiles industry has generally entered a period of stable development, with sector allocation sentiment entering a concentrated release phase. Currently, sector valuations are at historically low levels, institutional holdings are low, and there is ample margin of safety. Leading companies maintain stable operating cash flows and consistent dividend policies, and their characteristics of high dividends and low valuations offer defensive allocation value in times of market volatility. It is recommended to focus on low-valuation targets with high dividend yields and stable profit growth.
Investment Recommendations
1. Outdoor & Sports: Focus on Anta Sports, Xtep International, Li Ning, 361 Degrees, and Sanfo Outdoor.
2. Textile Manufacturing: Focus on Kairun Co., Ltd., Weixing Share, Taihua New Material, and Xinao Textile.
3. Downstream Brands: Focus on HLA Group, BiYinLeFen, Bosideng, LUOLAI Lifestyle, Mercury Home Textile, and Fuanna.
Risk Warnings
Risks include a slower-than-expected recovery in domestic consumption, a slowdown in overseas consumer demand, and fluctuations in raw material prices.
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