Company Overview - CICC maintains the EPS forecast for Tmall (06110) at 0.21/0.26 HKD for FY26/27, with the current stock price corresponding to 12/10 times FY26/27 P/E, maintaining an outperform rating [1] - The target price is raised by 10% to 3.40 HKD, corresponding to 15/12 times FY26/27 P/E, indicating a 19% upside potential from the current stock price [1] Recent Performance - In Q1 FY26 (March to May), Tmall's total sales in retail and wholesale declined in the mid-single digits year-on-year, consistent with the company's expectations [2][3] - The retail channel's sales decline was less severe than that of the wholesale channel, primarily due to a double-digit drop in same-store traffic [3] - The total sales area of direct-operated stores decreased by 1.3% compared to the end of February, and by 12.3% year-on-year, although the average sales area per store continued to grow year-on-year [3] - Online sales grew year-on-year, with online direct sales accounting for approximately 40% of total direct sales [3] Inventory and Discounts - By the end of May, the total inventory decreased year-on-year, with the inventory-to-sales ratio remaining stable, aligning with management's expectations for inventory optimization [3] - The retail business experienced deeper discounts year-on-year due to inventory optimization and an increase in online business share, although the extent of discounting eased compared to the previous quarter [3] Category Performance - The professional sports category outperformed the overall market, while the mass sports category performed at an average level, and the sports leisure category faced relatively greater growth pressure [3] Future Outlook - In Q2 FY26, offline sales continue to be pressured by weak customer traffic, and online channel competition remains intense, particularly during the 618 shopping festival [4] - Management expects improvements in some brand orders in FY26 as product optimization and new elements are gradually introduced [4] - The company maintains its guidance for FY26, expecting net profit to remain flat year-on-year, with an improvement in net profit margin [4]

Investment Rating - The report maintains a full-year performance guidance with expectations for flat profit and cautious gross margin, while net profit margin is expected to improve year-on-year due to optimized expense ratios [3][10]. Core Viewpoints - The overall sales revenue for retail and wholesale operations in 1Q FY25 declined by a mid-single-digit percentage year-over-year, aligning with the company's progress plan amid a stable consumer environment [2][8]. - Direct-to-consumer online sales accounted for 40% of total direct sales in 1Q FY25, up from 30-40% for the full year last year, indicating a strategic shift towards online channels [2][10]. - The company is focusing on improving online efficiency and optimizing inventory management, with a cautious approach to discounting and inventory control [2][10][12]. Summary by Sections Sales Performance - Total sales revenue (pre-tax) for retail and wholesale operations in 1Q FY25 saw a mid-single-digit percentage decline year-over-year, attributed to a high base from the previous year [2][8]. - Offline foot traffic remained weak, with same-store foot traffic declining by double digits, while direct-to-consumer online sales grew significantly [2][8]. Promotional Activities - The promotional atmosphere during the 618 shopping festival was strong, with the company effectively managing multiple small peaks, resulting in profits meeting expectations [3][9]. - Consumer behavior showed rational decision-making, with increased acceptance of new products and a willingness to pay for quality [3][9]. Operational Strategy - The company continues to optimize its channel area, with a 1.3% quarter-on-quarter decrease in gross sales area of directly operated stores, a slower pace than the previous quarter [4][11]. - Collaborative brands are expected to see improved order volumes, with proactive adjustments in product offerings and a focus on high-quality items [12][13]. Brand Partnerships - The company adheres to an exclusive partnership model in China, recently announcing exclusive agency rights for several brands, including high-end outdoor and running brands [5][13]. - The introduction of new brands is aimed at enhancing consumer engagement and expanding market reach, particularly in the outdoor and running segments [5][13].

Core Viewpoint - The company, Tabo, has achieved an MSCI ESG rating upgrade from BBB to AA, becoming the first and only AA-rated enterprise in China's sports goods industry, reflecting significant progress in its environmental, social, and governance (ESG) practices [2][4]. Financial Performance - For the fiscal year 2024/25, Tabo reported a revenue of 27.01 billion yuan and a net profit of 1.29 billion yuan, marking a 41.9% decline in net profit, which is the lowest since its listing [2][12]. - The total number of Tabo's direct-operated stores decreased from 6,144 in 2024 to 5,020 in 2025, a reduction of 1,124 stores or 18.3% [7][9]. ESG Initiatives - Tabo implemented various measures for green operations, including a 3.4% reduction in direct energy consumption to 822.0 MWh and a 14.0% decrease in water usage to 13,270.7 cubic meters [4][5]. - The company has set a carbon reduction target to decrease absolute greenhouse gas emissions by 40.2% by the fiscal year 2034/35 and has begun detailed assessments of Scope 3 emissions [4][14]. Store Closures and Operational Efficiency - The company closed an average of nearly four stores daily, leading to a total reduction of 3,375 stores over seven years, representing a closure rate of approximately 40.2% [7][9]. - The closure of low-efficiency stores has contributed to a decrease in overall energy consumption and waste generation, aligning with Tabo's ESG goals [9][10]. Employee Metrics - Tabo's workforce decreased to 27,279 employees, down by 2,179 from the previous year, with an employee turnover rate of 34.35%, an increase of 2.26% [10]. - Despite the reduction in employee numbers, Tabo reported a slight increase in revenue per employee from 982,000 yuan to 990,000 yuan, a rise of 0.82% [10]. Brand Diversification - To reduce reliance on core brands like Nike and Adidas, which account for 86.3% of revenue, Tabo is expanding its partnerships with high-end niche brands, although challenges remain in market recognition and pricing strategies [12][14]. - Over 70% of Tabo's brand partners have set carbon reduction targets, with 50% committing to carbon neutrality by 2050 [13].

Financial Performance - Revenue for the fiscal year ending February 28, 2025, was RMB 27,012.9 million, a decrease of 6.6% from RMB 28,933.2 million in the previous year[6] - Gross profit decreased to RMB 10,383.4 million, down 14.1% from RMB 12,080.8 million, resulting in a gross margin of 38.4% compared to 41.8% last year[6] - Profit attributable to equity holders decreased by 41.9% to RMB 1,286.0 million, down from RMB 2,213.0 million, leading to a profit margin of 4.8% compared to 7.6% previously[6] - Operating profit fell to RMB 1,592.7 million, a decline of 42.8% from RMB 2,786.5 million, with an operating margin of 5.9% versus 9.6% last year[6] - The company's total revenue for the fiscal year decreased by 6.6% year-on-year to RMB 27,012.9 million, impacted by weak consumer demand and declining offline foot traffic[17] - Gross profit margin fell by 3.4 percentage points to 38.4%, while profit attributable to equity holders decreased by 41.9% to RMB 1,286.0 million, resulting in a profit margin of 4.8%[17] Cash Flow and Dividends - The company generated a net cash inflow from operating activities of RMB 3,755.3 million, an increase of 20.0% year-on-year, which is 2.9 times the profit attributable to equity holders[8] - The board proposed a final dividend of RMB 2.00 per share and a special dividend of RMB 12.00 per share, resulting in a total dividend payout ratio of 135.0%, an increase of 34.1 percentage points year-on-year[8] - Cash and cash equivalents increased by 32.3% year-on-year to RMB 2,587.4 million, despite a 43.5% decline in pre-tax profit[18] - The company maintained a high dividend payout ratio of 135.0%, with total dividends distributed since its listing amounting to RMB 12.96 billion[18] Inventory and Management - Inventory decreased by 4.5% year-on-year, aligning with revenue trends, and the average inventory turnover period improved[9] - The company implemented a dynamic forecasting model to enhance inventory management and improve cash flow amidst challenging market conditions[9] - Inventory management improved, with total inventory amount effectively controlled and turnover efficiency recorded as improved by the end of the fiscal year[25] - As of February 28, 2025, the group's inventory net amount is RMB 6,004.0 million, with a cumulative impairment provision of RMB 218.6 million recognized in the consolidated income statement[187] Store and Sales Performance - The total number of stores decreased by 18.3% year-on-year to 5,020, with a total sales area reduction of 12.4%[20] - Online sales, including both public and private domains, experienced double-digit growth year-on-year, with direct online sales accounting for 30%-40% of total direct sales[24] - The company launched new retail experience spaces, including concept stores, to cater to the dual needs of functionality and social interaction for younger consumers[22] - The sales contribution from members accounted for 93.2% of total in-store retail sales (including VAT) as of August 31, 2023[30] Strategic Partnerships and Brand Development - The company has formed deep partnerships with over 20 brands, expanding its brand matrix to include diverse running and outdoor brands for the Chinese market[12] - The company launched the SOAR Running brand in China, focusing on high-performance and personalized running gear, with plans for online flagship stores and offline presence[31] - The partnership with the high-end outdoor brand Norrøna aims to enhance brand promotion and market penetration in China, leveraging both online and offline strategies[32] Sustainability and ESG Initiatives - The company achieved a significant milestone in sustainable development, receiving LEED Gold certification for its green stores, showcasing its commitment to ecological responsibility[13] - The company's ESG rating improved by two levels to AA, reflecting its leadership in the Chinese consumer goods industry[13] - The company has set a ten-year carbon reduction target in response to the UN Sustainable Development Goals and national carbon neutrality objectives[34] - The group is committed to reducing the environmental impact of its business activities and has complied with relevant laws and regulations[112] Corporate Governance and Board Structure - The board consists of two executive directors, three non-executive directors, and three independent non-executive directors as of February 28, 2025[133] - The board held a total of five meetings during the fiscal year ending February 28, 2025, in accordance with operational and business development needs[138] - All independent non-executive directors confirmed their independence in writing, ensuring compliance with listing rules[140] - The company has adopted a corporate governance code and believes it has complied with all applicable provisions for the fiscal year ending February 28, 2025, except for one[132] Risk Management and Internal Controls - The audit committee is responsible for overseeing the financial reporting process of the group[196] - The company has established an internal audit department that operates independently and conducts audits based on an annual plan approved by the audit committee[165] - The company has implemented a comprehensive review of the risk management and internal control systems for the fiscal year ending February 28, 2025[166] - The company has identified significant risks affecting its strategic objectives, prioritizing them based on likelihood and impact[164] Employee and Stakeholder Engagement - The total number of employees as of February 28, 2025, is approximately 27,279, with 17.0% male and 83.0% female[158] - The group emphasizes corporate social responsibility, ensuring fair treatment of employees and contributing to the community while providing quality products and services[174] - The company has established a whistleblowing policy allowing employees and business partners to report misconduct confidentially[173] - The board is committed to maintaining effective communication with investors and shareholders through regular financial reports, investor briefings, and shareholder meetings[176]

Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - The company achieved a revenue of 27.01 billion yuan for FY2025, a year-on-year decrease of 6.6%, and a net profit attributable to shareholders of 1.29 billion yuan, down 41.9%, which met expectations. The second half of FY2025 recorded a revenue of 13.96 billion yuan, a decline of 5.4%, and a net profit of 410 million yuan, down 52.9%. The total dividend for the year was approximately 1.7 billion yuan, with a dividend yield of 135%, exceeding expectations, primarily due to cash flow performance significantly outpacing net profit [2][4]. Summary by Sections Financial Performance - For FY2025, the company reported total revenue of 27.01 billion yuan, a decrease of 6.6% year-on-year, and a net profit of 1.29 billion yuan, down 41.9%. The second half of FY2025 saw revenue of 13.96 billion yuan, a decline of 5.4%, and a net profit of 410 million yuan, down 52.9%. The annual dividend was around 1.7 billion yuan, with a dividend yield of 135%, attributed to strong cash flow performance [2][4]. Profitability and Cost Management - The company's gross margin for FY2025 decreased by 3.4 percentage points to 38.4%, mainly due to increased discounting and a higher proportion of online sales. The selling and administrative expense ratios were 29.4% and 3.7%, respectively, benefiting from a 1.3% reduction in rental costs. The company closed approximately 1,100 stores, resulting in a total of 5,020 stores, which improved operational efficiency [8]. Inventory and Cash Flow - The company significantly optimized its inventory, with inventory turnover days decreasing by 1 day to 135 days and inventory down 4.5% year-on-year to 6 billion yuan. Operating cash flow increased by 20% year-on-year to 3.76 billion yuan, while accounts receivable decreased by 600 million yuan to 750 million yuan [8]. Future Outlook - The company is expected to face revenue pressure in FY2026 due to store closures and cautious procurement. The overall revenue is projected to decline, with net profit estimates for FY2026 and FY2027 at 1.32 billion yuan and 1.42 billion yuan, respectively, corresponding to P/E ratios of 12.57X and 11.74X [10].

Core Viewpoint - The financial report of the sports retail giant, Tmall, for the fiscal year 2024/25 shows a significant decline in revenue and net profit, indicating challenges faced due to brand dependency and strategic adjustments by key partners [2][6]. Financial Performance - Total revenue for the fiscal year reached 27.0129 billion RMB, a year-on-year decrease of 6.8% [3][5]. - Net profit was 1.286 billion RMB, down 41.89% year-on-year, marking a five-year low [2][3]. - The gross profit margin was 38.4%, while the operating profit margin was 4.8% [3]. Brand Contribution - Nike and Adidas together contributed over 80% of total revenue, with Nike's sales in Greater China dropping by 17% [2][5]. - Revenue from other brands was 3.5048 billion RMB, accounting for 13% of total revenue, indicating a weak contribution from non-Nike and non-Adidas brands [5]. Strategic Adjustments - Tmall is restructuring its channel strategy, transforming physical stores into "experience centers" and enhancing online presence through WeChat mini-programs, resulting in a significant increase in direct online sales [3][4]. - The company is also diversifying its brand portfolio by partnering with high-end outdoor brands like Norrøna and Soar, aiming to reduce reliance on Nike [4]. Market Challenges - Despite efforts to diversify, Tmall faces challenges in improving short-term performance, particularly with new brands that may struggle against local competition and consumer awareness [5][6]. - The financial report reflects the anxiety of traditional sports retail agents in adapting to brand dependency and channel transformation [6].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 3.6 for the fiscal year ending February 2026, based on a 16x PE ratio [1][6]. Core Insights - The company reported a revenue decline of 6.6% year-on-year to RMB 27.01 billion for FY25, primarily due to weak offline consumption and reduced foot traffic. The net profit attributable to shareholders fell by 41.9% to RMB 1.286 billion, indicating that profit decline outpaced revenue decline due to high fixed costs associated with offline operations [2][3]. - Despite the challenges, the company achieved a 20% year-on-year increase in operating cash flow, reaching RMB 3.755 billion, demonstrating strong cash flow management [2][3]. - The company declared a final dividend of HKD 0.02 per share and a special dividend of HKD 0.12 per share, resulting in a total payout ratio of 135%, reflecting its commitment to shareholder returns [2][3]. Financial Summary - For FY25, the company’s revenue was RMB 27,013 million, with a projected revenue of RMB 26,438 million for FY26, indicating a further decline of 2.1% [4][11]. - The gross margin decreased by 3.4 percentage points to 38.4% due to increased discounting and inventory clearance [2][4]. - The earnings per share (EPS) for FY26 is projected to be RMB 0.21, with a slight increase to RMB 0.22 in FY27 and RMB 0.23 in FY28 [1][4]. Operational Efficiency - The company continues to optimize its store structure, reducing the number of direct-operated stores by 18.3% to 5,020, while the sales area decreased by 12.4%, indicating a focus on operational efficiency [3][4]. - The company is enhancing its single-store operational capabilities and plans to open new stores focusing on key brands and specialized categories [3][4]. Market Position - The main brands, Nike and Adidas, saw a revenue decline of 6.1% to RMB 23.31 billion, while other brands experienced a 9.9% drop to RMB 3.50 billion [2][3]. - The company is expanding its partnerships with both international and domestic sports brands, aiming to capture a larger market share as retail consumption improves [3][4].

Group 1: Company Performance - Tmall's revenue for the fiscal year ending February 2025 was 27.01 billion yuan, a year-on-year decline of 6.6%, with net profit down 41.9% to 1.29 billion yuan [1] - The main brands (Nike and Adidas) accounted for 86.3% of total revenue, with a year-on-year decline of 6.1%, while other brands saw a 9.9% decline [1] - Nike's revenue in the Greater China region fell 17% to $1.73 billion (approximately 12.446 billion yuan), primarily due to a double-digit drop in customer traffic and an aggressive promotional environment [2] Group 2: Market Dynamics - Nike's sales decline in China significantly impacted Tmall's performance, indicating a strong correlation between the two [4] - Tmall is seeking new growth opportunities by introducing high-end running brand SOAR and becoming the exclusive operator for outdoor brand Norrøna in China [5] - The high-end market is becoming increasingly competitive, as evidenced by Arc'teryx's parent company, Amer Sports, reporting a 43.1% increase in sales in the Greater China region [6][7]

Core Insights - The company reported a decline in revenue and net profit for the fiscal year 2025, with revenue at 27.01 billion RMB, down 6.6% year-on-year, and net profit at 1.29 billion RMB, down 41.9% [1][2] - The company maintained a high dividend payout ratio of 135.0%, exceeding the previous year's 100.9% [1][2] - The decline in profit was attributed to a significant drop in gross margin and a slight increase in expense ratio [1][2] Revenue Breakdown - Main brand revenue (Nike + Adidas) decreased by 6.1%, while other brand revenue fell by 9.9% [1][2] - Revenue from retail, wholesale, and esports accounted for 85.3%, 14.0%, and 0.2% of total revenue, respectively, with retail and wholesale revenues down 6.8% and 5.8% year-on-year [2][3] - The total number of stores decreased by 18.3%, with a total of 5,020 stores as of February 2025 [2][3] Financial Metrics - Gross margin decreased by 3.4 percentage points to 38.4%, primarily due to increased discounting [2][3] - The expense ratio increased by 0.4 percentage points to 33.2%, with sales, management, and financial expense ratios at 29.4%, 3.7%, and 0.1%, respectively [2][3] - Inventory decreased by 4.5% to 6 billion RMB, and accounts receivable decreased by 43.4% to 750 million RMB [3] Future Outlook - The company aims to enhance operational efficiency and reduce costs amid weak consumer demand and declining foot traffic [3][4] - The company plans to expand its brand matrix and has become the exclusive operating partner for high-end running brand SOARRunning and top outdoor brand Norrona in China [3][4] - Profit forecasts for fiscal years 2026 and 2027 have been revised down by 21% and 26%, respectively, with expected EPS of 0.21, 0.23, and 0.26 for fiscal years 2026 to 2028 [4]

Investment Rating - The report maintains an "Accumulate" rating for the company [1] Core Views - The company experienced a revenue decline of 6.6% year-on-year to 27.01 billion RMB and a net profit decline of 41.9% to 1.29 billion RMB for the fiscal year 2025, with a high dividend payout ratio of 135% [5][10] - The company is focusing on improving operational efficiency and has accelerated the closure of underperforming stores while expanding its brand portfolio [10] Financial Performance Summary - For fiscal year 2025, the company reported a revenue of 27.01 billion RMB, down 6.6% year-on-year, and a net profit of 1.29 billion RMB, down 41.9% year-on-year [5][10] - The earnings per share (EPS) for fiscal year 2025 is 0.21 RMB, with a proposed final dividend of 0.02 RMB and a special dividend of 0.12 RMB, totaling a dividend payout ratio of 135% [5][10] - The gross margin decreased by 3.4 percentage points to 38.4%, while the operating margin fell by 3.7 percentage points to 5.9% [6][9] Revenue Breakdown - The main brand revenue (Nike + Adidas) declined by 6.1%, while other brand revenues fell by 9.9% [7] - Retail and wholesale revenues accounted for 85.3% and 14.0% of total revenue, respectively, with retail revenue down 6.8% and wholesale revenue down 5.8% [7] Store Performance - As of February 2025, the company operated 5,020 stores, a net decrease of 18.3% from the previous year, with total sales area down 12.4% but average store area up 7.2% [8] Cash Flow and Inventory Management - The company reported a 20% increase in operating cash flow to 3.76 billion RMB, with inventory decreasing by 4.5% to 6 billion RMB [9][10]