Guosheng Securities has reaffirmed its "Buy" rating on TOPSPORTS (06110), recognizing it as China’s leading sports retail platform. While the company experienced a slight decline due to short-term fluctuations in its core brand Nike, adidas maintained robust growth momentum. TOPSPORTS aims to enhance retail efficiency by expanding partnerships with new brands like Li-Ning and Kailas, while deepening digital operations, private traffic acquisition, and membership management. Key insights from Guosheng Securities include:
**Business Overview** TOPSPORTS is China’s largest sports retail and service platform. Since entering the sports retail market in the 1990s, it has partnered with major brands such as Nike, adidas, Puma, Converse, and Vans. Amid shifting consumer trends and adjustments in core brand operations, FY2025/FY2026H1 revenue fell 7%/6% YoY to RMB27.0/12.3 billion, while net profit attributable to shareholders dropped 42%/10% YoY to RMB1.29/0.79 billion.
**Brand Performance and Expansion** In FY2026H1, core brand revenue declined 4.8% YoY to RMB10.8 billion, accounting for 88% of total revenue. While adidas outperformed expectations with 8% YoY revenue growth in Q3 2025 (currency-neutral basis), Nike faced short-term volatility. TOPSPORTS has diversified its brand portfolio, partnering with Li-Ning in 2022—its first domestic brand collaboration—and later adding outdoor and running brands like Kailas, Norda, norrona, soar, and ciela. The company also serves as an exclusive partner/operator for some brands, overseeing brand strategy, marketing, omnichannel operations, and community engagement in China.
**Retail Excellence Drives Long-Term Growth** 1) **Store Optimization**: After prioritizing large-format stores (1,056 locations over 300 sqm by FY2023, 16.1% of self-operated stores), TOPSPORTS shifted to a "brand-specific strategy" in FY2024 to boost efficiency through tailored store designs. 2) **E-Commerce and Livestreaming**: By FY2026H1, the company had over 3,600 mini-program stores, complemented by partnerships with platforms like Dianping and Douyin to drive offline traffic. E-commerce sales now contribute ~40% of revenue. 3) **Membership Growth**: Total registered members reached 89.1 million by FY2025H1, with initiatives to enhance engagement and conversion rates. 4) **Digital Transformation**: Since its 2019 IPO, TOPSPORTS has focused on empowering frontline staff, digitizing store operations, and optimizing inventory management. Innovations like off-store mini-program sales and livestreaming have helped navigate market volatility.
**Mid-Term Outlook** Nike’s product pipeline is expected to recover by FY2027, potentially boosting TOPSPORTS’ revenue and margins. With adidas performing strongly and Nike’s China operations stabilizing, FY2026 profits are projected to remain flat. FY2027 could see improved sales and profitability as Nike ramps up new releases.
**Valuation and Dividend** TOPSPORTS has a cumulative dividend payout ratio of 107.3% since its IPO, with RMB2.54 billion in cash reserves as of FY2026H1. As a dominant downstream channel for sportswear, its expanding brand portfolio and operational efficiency reinforce its competitive moat. Guosheng forecasts FY2026–FY2028 net profits of RMB1.297/1.481/1.666 billion, with the current price at 14.6x FY2026 PE and a 7% dividend yield.
**Risks**: Weak consumer demand, slower store expansion, and e-commerce execution risks.
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