Company Coverage
Xtep International Holdings (1368 HK): 1H26: Revenue Misses But Gross Margin Expansion Drives Better-Than-Expected Net Profit; Lowers Full-Year Revenue Target
BUY (Maintained)
Current price:
Target price:
Upside:
HK$3.79
HK$5.60
+47.8%
Analyst
Analyst
Highlights
Xtep’s 1H26 revenue missed but net profit beat consensus primarily driven by gross margin expansion.
Looking ahead, management has lowered the full-year group revenue guidance to a low single-digit decline (vs previously mid-single-digit growth). Of this, Saucony is expected to deliver 10% growth, with 20-30 new stores planned for the full year.
Gross margin expansion is likely to continue in 2H26. However, the core Xtep brand’s operating margin may be under pressure. Net margin is expected to be at a high single-digit range.
Maintain BUY, keep target price unchanged at HK$5.60.
Analysis
1H26 revenue missed but net profit beat consensus, primarily driven by gross margin expansion. Xtep International Holdings (Xtep) reported 1H26 revenue of Rmb6,795m (-1% yoy), 2% below Visible Alpha Insights (VA) consensus. By segment, revenue of the core Xtep brand decreased 2% to Rmb5,920m, broadly consistent with management's softened tone on the 2Q26 update call (revenue tracking a similar trend to retail sell-through), while the professional sports segment (Saucony and Merrell) delivered an 11% revenue growth to Rmb875m. Gross profit was Rmb3,155m (+3% yoy), and gross margin was 46.4% (+1.4ppt yoy), driven by: a) a 1.5ppt expansion in the mass market segment, supported by the e-commerce business and kids business with an increasing mix of functional products; and b) a 0.3ppt expansion in the professional sports segment, underpinned by the premiumisation strategy to improve flagship product discounting and achieve economies of scale in apparel and lifestyle offerings.
Highlights
Xtep’s 1H26 revenue missed but net profit beat consensus primarily driven by gross margin expansion.
Looking ahead, management has lowered the full-year group revenue guidance to a low single-digit decline (vs previously mid-single-digit growth). Of this, Saucony is expected to deliver 10% growth, with 20-30 new stores planned for the full year.
Gross margin expansion is likely to continue in 2H26. However, the core Xtep brand’s operating margin may be under pressure. Net margin is expected to be at a high single-digit range.
Maintain BUY, keep target price unchanged at HK$5.60.
Analysis
1H26 revenue missed but net profit beat consensus, primarily driven by gross margin expansion. Xtep International Holdings (Xtep) reported 1H26 revenue of Rmb6,795m (-1% yoy), 2% below Visible Alpha Insights (VA) consensus. By segment, revenue of the core Xtep brand decreased 2% to Rmb5,920m, broadly consistent with management's softened tone on the 2Q26 update call (revenue tracking a similar trend to retail sell-through), while the professional sports segment (Saucony and Merrell) delivered an 11% revenue growth to Rmb875m. Gross profit was Rmb3,155m (+3% yoy), and gross margin was 46.4% (+1.4ppt yoy), driven by: a) a 1.5ppt expansion in the mass market segment, supported by the e-commerce business and kids business with an increasing mix of functional products; and b) a 0.3ppt expansion in the professional sports segment, underpinned by the premiumisation strategy to improve flagship product discounting and achieve economies of scale in apparel and lifestyle offerings.
BUY (Maintained)
Current price:
Target price:
Upside:
HK$3.79
HK$5.60
+47.8%
Analyst
Analyst
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