TOPSPORTS' performance recovery remains a work in progress. For the fiscal year 2026 ending February 28, TOPSPORTS' revenue declined by 4.7% year-over-year to RMB 25.74 billion. The company continues to face challenges such as declining offline foot traffic, weak consumption, and fluctuations from major clients. However, through store closures, cost control, comprehensive online operations, and inventory turnover, the impact of the revenue drop on profits has been somewhat mitigated. In fiscal 2026, TOPSPORTS' gross profit margin decreased from 38.4% to 38.0%, but its operating profit margin remained stable at 5.9%. The profit margin attributable to shareholders even saw a slight increase from 4.8% to 4.9%. Nevertheless, stabilizing the profit and loss statement does not equate to solving the growth issue. TOPSPORTS' core foundation remains heavily reliant on Nike and Adidas. Revenue from the "key brands," comprising Nike and Adidas, amounted to RMB 22.33 billion, a decrease of 4.2% year-over-year. However, as other brands experienced a steeper decline, the share of revenue from key brands actually increased by 0.4 percentage points to 86.7%. This structure presents a dual nature. On the positive side, Nike and Adidas continue to provide the most stable revenue base. For a sports retailer like TOPSPORTS, the product appeal, brand recognition, and channel resources of these leading brands are difficult for smaller brands to replace in the short term. On the other hand, TOPSPORTS' performance elasticity is tied to the cycles of its major clients. As long as Nike and Adidas do not achieve a sufficient growth recovery in the Chinese market, it will be challenging for TOPSPORTS to truly lighten its load on the revenue side. This is also why TOPSPORTS has been continuously adjusting its channel structure over the past few years. In fiscal 2026, the company's retail business revenue decreased by 2.7% year-over-year, while wholesale business revenue fell by 16.6%. The significantly larger decline in wholesale indicates that TOPSPORTS is continuing to shift resources towards direct retail and comprehensive operations. As of the end of February 2026, the number of TOPSPORTS' directly operated stores was 4,360, a decrease of 660 stores, or approximately 13.1%, from the previous fiscal year's 5,020. While the previous fiscal year saw a net reduction of 1,124 stores, the pace of closures has slowed this fiscal year. Total sales area decreased by 9.7% year-over-year, but the sales area per store increased by 3.9%. TOPSPORTS stated in its financial report that the performance of newly opened and renovated stores this year was better than the same period last year. The overall loss reduction effect from store closures was also better than last year, with capital expenditures decreasing by 24% year-over-year. Although offline foot traffic has declined, the value of a store is no longer solely determined by natural walk-in customers. For TOPSPORTS today, stores serve not only as sales terminals but also as local fulfillment hubs, community activity bases, content conversion entry points, and brand experience spaces. Currently, TOPSPORTS employs a model of "1 offline store + N online multi-scenario layouts," enabling stores to simultaneously handle functions such as public domain traffic acquisition, private domain user retention, instant fulfillment, and content marketing. This capability also lays the groundwork for operating more niche sports brands. In 2025, TOPSPORTS launched its first running lifestyle multi-brand store, ektos, in Shanghai. The store is based on multi-brand retail and integrates running culture activity spaces and community connection functions. Within the year, ektos participated in marathon expos, set up pop-ups for trail running, and regularly organized running clubs and community activities, continuously penetrating the professional runner community. Currently, TOPSPORTS has become the exclusive operating partner in the Chinese market for brands such as Norrøna, norda®, Soar, and Ciele, undertaking tasks including brand strategy positioning, localized content creation, comprehensive retail implementation, and sports community cultivation. Whether these attempts can truly break through their respective circles will determine if TOPSPORTS can evolve from being a major client distributor to becoming the operational gateway for more sports brands entering the Chinese market.
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