Core Viewpoint - Uniqlo has achieved its best performance in history, with strong growth in regions like Southeast Asia, India, Australia, North America, and Europe, while the Chinese market is experiencing a slowdown [3][4]. Financial Performance - Fast Retailing, Uniqlo's parent company, reported a total revenue of 1,790.1 billion yen (approximately 91.3 billion RMB) for the first half of the 2024-2025 fiscal year, a year-on-year increase of 12%. Net profit reached 233.5 billion yen (approximately 11.9 billion RMB), up 19.2% [3][4]. - Revenue in the Greater China region declined by approximately 3% to 361.7 billion yen, with profits down about 9%. Specifically, revenue in mainland China fell by 4%, and profits decreased by 11% [4][10]. Market Strategy and Consumer Behavior - Uniqlo has ended its decade-long "honeymoon" period in China, shifting focus from market expansion to market penetration as consumer preferences evolve towards affordable alternatives [4][8]. - The younger generation in China is increasingly opting for cheaper substitutes, leading to a shift in brand loyalty. Uniqlo faces competition from lower-priced brands that directly market themselves as alternatives to Uniqlo [4][7]. Competitive Positioning - Despite the challenges, Uniqlo's brand fundamentals remain intact, as it continues to offer high-quality, basic apparel that meets market demands. The brand's relative competitiveness is reportedly increasing as consumer sentiment shifts [7][8]. - Uniqlo has maintained its position as one of the top five brands in the women's clothing market in mainland China from 2018 to 2022 [7]. Store Strategy - Uniqlo is adjusting its store strategy by closing smaller, underperforming stores and focusing on larger flagship locations to enhance profitability [9][16]. - The company has increased its store count in Greater China to 1,031, surpassing Japan's 787 stores, but revenue per store in China remains lower than in Japan [10][12]. E-commerce Integration - Uniqlo's e-commerce strategy is performing well, with online sales accounting for 20% of its revenue in China, higher than Japan's 15%. The "store-warehouse integration" strategy is enhancing overall performance [21][22]. - The company has seen significant success during major sales events, ranking first in clothing sales on platforms like Tmall during events like 618 and Double 11 [26]. Supply Chain and Production - Uniqlo relies heavily on Chinese factories, with 269 suppliers in China compared to only 75 in Vietnam and 32 in Bangladesh. The efficiency of Chinese manufacturing remains crucial for Uniqlo's operations [29][30]. Future Outlook - Uniqlo aims to achieve a sales target of 1 trillion yen by 2028, with the Chinese market being a core battleground despite current challenges [30].

Core Viewpoint - Adidas has successfully turned around its performance in the Chinese market, achieving double-digit growth in revenue for 2024, driven by a localized strategy and increased consumer engagement [1][2]. Group 1: Financial Performance - In 2024, Adidas reported global revenue of €23.68 billion, with the Greater China region contributing €3.46 billion, reflecting a 10.3% year-over-year increase [1]. - The fourth quarter of 2024 saw Greater China revenue reach €794 million, marking a 16.1% increase compared to the previous year [1]. - Adidas expects operating profit to rise to between €1.7 billion and €1.8 billion by 2025, excluding any revenue from the YEEZY line [1]. Group 2: Market Challenges and Recovery - From 2022, Adidas faced significant challenges, including a decline in revenue due to competition from local brands like Anta and a failure to adapt to changing consumer demands [1][2]. - The company experienced a severe inventory backlog and disruptions in sales channels, particularly after ending its collaboration with the YEEZY brand [2][6]. Group 3: Product Strategy and Innovation - In 2024, footwear accounted for over half of Adidas's revenue, with a 17% year-over-year increase when excluding currency effects [5]. - The Samba shoe line saw a remarkable 300% increase in sales, becoming a new revenue driver, while the YEEZY line's sales were significantly reduced [5][6]. - Adidas launched the "Adidas Essentials" line, which became one of the fastest-growing product lines, and increased the proportion of locally designed products in China to over 80% [6]. Group 4: Strategic Changes and Future Outlook - The new CEO, Bjørn Gulden, has emphasized the importance of direct-to-consumer (DTC) strategies while also strengthening relationships with wholesale partners, resulting in a 14% growth in wholesale channels and an 11% growth in DTC channels in 2024 [8][9]. - Adidas is focusing on expanding its presence in traditional sports like football and athletics while also investing in emerging sports and niche markets [10]. - The company aims to enhance brand visibility and health through innovative product lines and localized strategies, despite potential challenges in 2025 due to a lack of major sports events [10].

Investment Rating - The industry investment rating is "Outperform" (maintained) [1] Core Insights - The report analyzes the Direct-to-Consumer (DTC) model, which allows brands to bypass third-party wholesalers and retailers to sell directly to consumers, highlighting its advantages in cost, channel efficiency, and data management, while also noting the challenges of high initial investment and increased marketing costs [3][7][18] - The DTC model has been adopted by various brands, with Nike leading the charge since 2015, but recent financial performance indicates challenges, including a 0.3% revenue growth in FY24, marking one of its worst performances since the late 1990s [8][19][21] - The report emphasizes the importance of DTC in enhancing brand power and consumer insights, suggesting that brands focusing on DTC will have better long-term growth potential [5][18] Summary by Sections DTC Model Analysis - DTC allows brands to connect directly with consumers, improving data collection and product development, but requires significant upfront investment and can complicate logistics [3][18] - Nike's DTC strategy has evolved through two main phases: the CDO strategy initiated in 2017 and the CDA strategy launched in 2020, both aimed at enhancing consumer connection and operational efficiency [20][21] Brand Comparisons - The report compares Nike's DTC progress with other brands, noting that while some brands like Lululemon have successfully integrated DTC, others like Puma still rely heavily on traditional distribution channels [4][9] - In the Chinese market, brands like Anta and Bosideng have high DTC revenue shares, indicating a shift towards direct sales models [4] Investment Recommendations - The report suggests focusing on traditional brands that are successfully transitioning to DTC, such as Anta Sports and Bosideng, which are enhancing their product development and supply chain management [5] - It also highlights the evolving role of distributors, who are increasingly becoming partners in brand promotion rather than just sales agents, suggesting a shift in the retail landscape [5] Financial Performance - Nike's DTC revenue contribution grew from $7.86 billion to $11.75 billion between 2017 and 2020, but recent trends show a decline in DTC revenue growth, raising concerns about the sustainability of this model [20][21] - The report notes that Nike's market share has decreased from 16.8% in 2015 to 12.5% in 2024, indicating increased competition from brands like Adidas and Lululemon [29][30]