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2024Q3 retail sales in-line with expectations

In 2024Q3, the retail sales of 361o Core Brand/361°Kids Brand/ E-commerce grew at10%110%20% yoy respectively.

Maintain BUY and TP of HK$5.00. representing FY24 PER of 8.5x.

Retail sales of 361°Core Brand in 2024Q3 up 10% yoy. 361 Degrees mentioned that the retail sales picked up recently. 361° brand logged a double-digit yoy growth in offline retail sales in Sep 2024. This is in contrast to the single-digit yoy growth in Jul and Aug. The management shared that it reported strong sales during the National Day Holiday (Oct 1-7). Retail sales in offline and online sales channels experienced yoy growth of +20% and +30%, respectively. 361 Degrees said that the retail discount level and the channel inventory level remained stable in 2024Q3. This is impressive, especially when the China witnessed a weak growth in consumption recently. In 2024Q3, retail sales from e-commerce remained robust, with a 20%+ yoy growth. This is mainly thanks to the company's proactive marketing across the ecommerce platforms.

New Products, continuous brand enhancement. The professional running shoe series continued to impress customers. The company said the newly launched “Furious Future 2”(飞飚2) energized its sponsored runners to have extraordinary performances in the marathon race. Meanwhile, the outdoor series well-served the market. lt launched “FUTURAS Trail Running Shoes”, waterproof running shoes “Rain Block 8.0”(雨屏8代) during 2024Q3. In terms of brand development, the company has become an official partner of the Aichi Nagoya Asian Games 2026. Meanwhile, 361’ has served as a top strategic partner of the 2024 Fuzhou Marathon. 361 Degrees continuously increases the average store size to improve shoppers’ experiences. The management disclosed that the average store size of 361 Core Brand and 361 Kid increased further as compared to the end of Jun 2024.

Strong earnings prospect. We maintain our EPS forecast for FY24E/25E. 361 Degrees sales is expected to reach the RMB10bn milestone this year on the back of the robust growth in orders for all the quarterly trade-fairs in 2024. We believe the company can outperform its peers under weak consumer sentiment. This is mainly thanks to its value-for-money brand position and the growing brand recognition of the 361°, which is a result of its effort to enhance the functionality and technology of the product.

Maintain BUY and TP of HK$5.00. The target price represents an 8.5xFY24E PER

Risks: (1) Weakening retail market, (2) intensifying price competitions