Investment Rating - The investment rating for the company is "Buy" and is maintained [6]. Core Views - The company reported a revenue of 12.3 billion yuan for FY2026H1, a year-on-year decrease of 5.8%, and a net profit attributable to shareholders of 790 million yuan, down 9.7% year-on-year. The company plans to distribute an interim dividend of 810 million yuan, with a payout ratio of 102% [2][4]. - Retail sales showed a decline in Q2, contributing to the overall revenue drop, with retail income down 3% and wholesale income down 20% year-on-year [6]. - The company is optimizing channel efficiency, with a net store closure of 332, bringing the total to 4,688 stores. Despite a decrease in store count, the sales area per store increased by 6.5% year-on-year, indicating improved channel structure [6]. - Gross margin remained strong at 41%, stable year-on-year, despite a challenging retail environment and increased discounts. The company maintained excellent cost control, with sales and management expense ratios showing minor changes [6]. - The company is believed to be at the bottom of its operating cycle, gradually moving upwards. If the recovery of Nike in China exceeds expectations, significant improvements in revenue and gross margin are anticipated [6]. Summary by Sections Financial Performance - FY2026H1 revenue was 12.3 billion yuan, down 5.8% year-on-year; net profit was 790 million yuan, down 9.7% year-on-year [2][4]. - The company expects to achieve net profits of 1.28 billion, 1.43 billion, and 1.57 billion yuan for FY2026, FY2027, and FY2028 respectively, with corresponding P/E ratios of 15, 14, and 13 [6][8]. Operational Insights - Retail sales in Q2 showed a decline, with retail income down 3% and wholesale income down 20% year-on-year [6]. - The company closed 332 stores, resulting in a total of 4,688 stores, while the sales area per store increased by 6.5% year-on-year [6]. Margin and Cost Control - Gross margin for FY2026H1 was 41%, stable year-on-year, despite a challenging retail environment [6]. - The company maintained strong cost control, with minor changes in expense ratios [6].