Core Viewpoint - The company experienced a decline in revenue and net profit in FY2025, attributed to weak consumer demand and reduced foot traffic, but maintained strong cash flow supporting high dividend payouts [1][2][3] Group 1: Financial Performance - FY2025 revenue decreased by 6.6% year-on-year to 27.01 billion yuan, with retail channel revenue down 6.8% to 23.03 billion yuan and wholesale channel revenue down 5.8% to 3.79 billion yuan [1] - Net profit fell by 41.9% year-on-year to 1.29 billion yuan, with a gross margin decline of 3.4 percentage points to 38.4% due to increased promotional discounts and a higher proportion of low-margin online sales [1] - Operating cash flow increased by 20% year-on-year to 3.76 billion yuan, with a free cash flow to net profit ratio of 2.6 times, indicating efficient cash generation [1] Group 2: Operational Strategy - The company reduced its direct store count by 1,124 to 5,020, a decrease of 18.3% year-on-year, while total sales area declined by 12.4%, but single-store sales area increased by 7.2% [2] - Membership sales accounted for 93.2% of total sales, with high-value members contributing nearly 40% of sales, reflecting strong customer loyalty [2] - The company strategically entered the outdoor and professional sports market, becoming the exclusive operator for high-end brands like norda and Norrona in China [2] Group 3: Future Outlook - In Q4 FY2024, total sales for retail and wholesale businesses saw a mid-single-digit decline, with a more significant reduction in direct store area [3] - Management expressed cautious optimism for the new fiscal year, aiming for net profit to remain flat year-on-year while improving net profit margin through cost reduction and increased online channel sales [3] - The company adjusted its profit forecasts for FY2026-2028, expecting net profits of 1.30 billion, 1.46 billion, and 1.63 billion yuan respectively, reflecting a modest growth trajectory [3]

Investment Rating - The report maintains a "Buy" rating for the company [2][5] Core Views - The company reported a revenue of 27.013 billion RMB for FY2025, a decrease of 6.69% year-on-year, and a net profit of 1.286 billion RMB, down 41.89% year-on-year. The company declared a dividend of 0.28 RMB, with a payout ratio of approximately 135% [2] - The decline in revenue is attributed to weak consumer demand and a reduction in foot traffic in offline stores. The company is focusing on efficient large-format stores while eliminating underperforming ones, resulting in a total of 5,020 stores at the end of FY25, a decrease of 1,124 stores year-on-year [3] - The company has seen a 14% year-on-year increase in average store revenue, with a membership base growing to 86 million, contributing 93.2% of in-store sales, of which repeat members account for 70% [3] - The gross margin for FY25 was 38.44%, down 3.31 percentage points, primarily due to declining sales and increased promotional activities. The net margin was 4.76%, a decrease of 2.88 percentage points [4] - The company expects to maintain stable performance in FY2026-2028, with projected EPS of 0.21, 0.24, and 0.28 RMB, and PE ratios of 14, 12, and 10 times respectively [5] Summary by Sections Performance Overview - FY2025 revenue was 27.013 billion RMB, down 6.69% year-on-year, with a net profit of 1.286 billion RMB, down 41.89% year-on-year. The company declared a dividend of 0.28 RMB, with a payout ratio of approximately 135% [2] Operational Analysis - Main brand revenue decreased by 6.1% to 23.311 billion RMB, while other brands fell by 9.9% to 3.505 billion RMB due to weak consumer demand. The company is optimizing its store network by focusing on high-efficiency large stores and reducing the number of low-efficiency stores [3] - The company has enhanced member engagement through diverse marketing activities, resulting in a membership increase of 5 million year-on-year [3] Financial Metrics - The gross margin for FY25 was 38.44%, down 3.31 percentage points, while the net margin was 4.76%, down 2.88 percentage points. The company’s cash flow from operating activities increased by 20% to 3.755 billion RMB, indicating a strong cash position [4] - The company anticipates a recovery in net profit margins in the coming years, with projected EPS growth [5]

Investment Rating - The investment rating for the company is "Outperform the Market" [5][8][59] Core Views - The company's revenue and net profit decline is in line with expectations, with a 6.6% year-on-year decrease in revenue to 27.01 billion yuan for the fiscal year 2025, impacted by weak consumer demand and reduced foot traffic [1][2] - The company maintains a high dividend payout ratio of 135%, reflecting strong cash flow generation capabilities, with a free cash flow to net profit ratio of 2.6 times [2][59] - The company is strategically enhancing its outdoor segment and optimizing its store structure, with a net reduction of 1,124 direct stores to 5,020, while improving single-store sales efficiency [3][59] Summary by Sections Financial Performance - For the fiscal year 2025, retail channel revenue decreased by 6.8% to 23.03 billion yuan, while wholesale channel revenue fell by 5.8% to 3.79 billion yuan [1] - The company's gross profit margin declined by 3.4 percentage points to 38.4%, primarily due to increased promotional discounts and a higher proportion of low-margin online sales [1][2] - The net profit for the fiscal year 2025 dropped by 41.9% to 1.29 billion yuan, with a net profit margin of 4.8% [1][2] Cash Flow and Dividend - Operating cash flow increased by 20% year-on-year to 3.76 billion yuan, indicating efficient cash generation [2] - The company has maintained a cumulative dividend payout ratio of 104.2% since its listing in 2019, showcasing its commitment to returning cash to shareholders [2][59] Strategic Initiatives - The company is focusing on enhancing its membership operations and omnichannel retail capabilities, with membership contributing 93.2% of sales [3] - The company has entered into exclusive partnerships with high-end outdoor brands, aiming to strengthen its product matrix in the professional and trendy segments [3][59] Future Outlook - The management expresses cautious optimism for the new fiscal year, targeting stable net profit levels and improved net profit margins through cost reduction and efficiency enhancements [4][59] - The company has adjusted its profit forecasts for fiscal years 2026 to 2028, expecting net profits of 1.30 billion, 1.46 billion, and 1.63 billion yuan respectively [59][60]