Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [4]. Core Insights - The company reported a revenue of 12.299 billion yuan for H1 FY2026, a decrease of 5.8% year-on-year, with a net profit of 789 million yuan, down 9.7% year-on-year. The interim dividend declared is 0.13 yuan per share, with a payout ratio of approximately 102% [2]. - The consumer environment has impacted sales, but channel optimization and overall growth have mitigated some pressure. The main brands (Nike and Adidas) saw revenue declines of 4.8% and 12.2%, respectively [2]. - The company continues to optimize its store strategy, reducing the number of direct stores to 4,688, a net decrease of 332 stores, while increasing same-store sales area by 6.5% year-on-year [2]. - The user base has grown to 89.1 million, with member sales contributing 92.9% of total sales, and repeat members accounting for about 60% of member consumption [2]. - Online sales have seen double-digit growth, effectively offsetting the decline in offline traffic [2]. Financial Performance - The gross margin for H1 was 41.0%, a slight decrease of 0.1 percentage points, supported by retail business contributions and brand support from Nike and Adidas [3]. - The company has maintained stable sales and management expense ratios, reflecting prudent cost control and flexibility from its omnichannel retail strategy [3]. - Inventory turnover days increased to 150 days, up by 2 days year-on-year, indicating a healthy inventory level [3]. Future Outlook - The company expects stable performance for the full year, with guidance for an increase in net profit margin. Focus will remain on omnichannel retail and operational efficiency improvements [3]. - The recovery of Nike's sales in FY26 Q1 exceeded expectations, suggesting potential for a rebound in the main brand's business [3]. - New brand expansions into running and outdoor segments, including brands like nordaTM and Norrøna, are anticipated to inject new growth momentum [3]. - Earnings per share (EPS) forecasts for FY2026 to FY2028 are projected at 0.21, 0.24, and 0.28 yuan, with price-to-earnings (PE) ratios of 14, 12, and 10 times, respectively [4].