Core Viewpoint - Topsports' total sales declined by high single digits (HSD) year-over-year (YoY) during 3QFY26, indicating ongoing challenges in the Chinese sportswear retail market, with expectations for further weakness in December [1][2] Sales Performance - Total sales for Topsports' retail and wholesale operations fell by HSD YoY in 3QFY26, continuing the trend from 2QFY26, which also saw a decline [2] - The decline in sales was anticipated following Nike's earnings report, which revealed a 17% YoY drop in revenue from Greater China [2] - Increased e-commerce contributions led to steeper retail discounts YoY, putting pressure on gross profit margin (GPM) and net profit margin (NPM) [2] Full-Year Guidance - Management expressed reduced confidence in meeting full-year guidance, with December operations showing notable deterioration, raising concerns about the potential for missing the guidance of net profit (NP) remaining flat YoY [3] - The forecast for FY26 NP is now expected to decline by 5% YoY, influenced by operating deleverage and effective cost control measures [3] Dependency on Nike - Topsports' performance turnaround is heavily reliant on Nike, which accounted for 88% of sales in 1HFY26, making Nike's recovery critical for Topsports [4] - Management indicated that Nike is working on improving its performance through more effective marketing campaigns, but challenges in channel management will take time to resolve [4] Valuation and Rating - The target price for Topsports has been lowered to HK$3.3, based on a 14x FY2027E price-to-earnings (P/E) ratio, with a HOLD rating reiterated [6] - Despite anticipated performance disappointments, the estimated FY26 dividend yield of over 9% is seen as attractive and may provide support for the share price [6]