Highlights

• In 3Q26, the core Xtep brand’s offline sell-through remained under pressure while the e-commerce and kids businesses stayed relatively steady. Saucony’s sell-through picked up in 3Q26, driven by premiumisation strategy and category expansion.
   
• Management reiterated its full-year guidance for a low single-digit decline in group revenue, with Saucony and Merrell expected to deliver around 10% revenue growth, alongside a high single-digit net margin. Management also expects full-year gross margin to improve yoy.
   
• Maintain BUY but cut target price by 4% to HK$5.40.
   

Analysis

• Core Xtep brand’s offline sell-through remained under pressure while e-commerce and kids businesses stayed restively steady. In 3Q26, the core Xtep brand recorded a mid-single-digit yoy decline in retail sell-through (vs a mid-single-digit yoy decline in 2Q26). By channel, e-commerce and the kids businesses maintained relatively steady growth, while offline channels remained under pressure. Street stores faced greater challenges due to weaker traffic, whereas shopping mall stores and outlets were relatively stable. As of 3Q26, the company had reclaimed around 200 stores (vs around 100 in 1H26), and management plans to reclaim another 400 stores in 4Q26, bringing the total number to around 600 stores for the year.
   
• Saucony’s sell-through picked up in 3Q26 driven by premiumisation strategy and category expansion. In 3Q26, Saucony achieved mid-single-digit yoy growth in retail sell-through (vs low single-digit yoy growth in 2Q26), mainly supported by its premiumisation strategy and category expansion. The opening of new image stores continued to gain traction, supporting double-digit growth in offline sales. Meanwhile, apparel recorded double-digit growth, particularly the wool series, whose retail sell-through increased by more than 40%.