Topsports International Holdings, Ltd., a China-based retail operation with Nike and Adidas as principal brand partners, is warning the market of a decline in profit for the fiscal first half ended August 31.

The company, which also manages retail operations in China for other (non-principal) brands, including Puma, Converse, Vans, The North Face, Timberland, Asics, Hoka, Skechers, and the NBA and other brand partners, said that based on a preliminary review of the Topsports’ unaudited consolidated management accounts for the six-month period, profit attributable to the company’s equity holders for the first half would decrease by approximately 35 percent from the RMB 1.34 billion level achieved for the year-ago first half ended August 31, 2023.

Topsports trades and reports in the Chinese Renminbi (RMB), or Yuan currency.

Topsports International Holdings’ Board of Directors said that the profit decline is primarily due to the following:

  • The dampened macro consumer sentiment hampering the industry’s retail environment in its markets, leading to a year-over-year (y/y) decrease in revenue for the fiscal first half. The slowdown in demand has had a more prominent impact on brick-and-mortar store traffic, resulting in an adverse effect on operating leverage, which led to year-over-year higher selling and distribution and general and administrative expenses ratio; and
  • The year-over-year widening in retail promotional efforts led to a year-over-year decrease in gross profit margin. The decline in revenue for the fiscal first half resulted in a short-term increase in inventory. Accordingly, the company enhanced its promotional efforts. At the same time, online sales had a steeper discount offering than brick-and-mortar sales during the same period, while the proportion of online sales during the fiscal first half increased year-over-year.

These two factors combined contributed towards a year-over-year widening of discount offerings for the retail business, thereby impacting the company’s gross profit margin.

For the year-ago fiscal first half period ended August 31, 2023, Topsports International Holdings reported revenue contributed by the Retail Business increased by 8.8 percent y/y to RMB 11.99 billion. Fueled by demand recovery, reopening consumption occasions, and gradual resumption of marketing activities initiated by its brand partners, the business remained retail-centric.

The company said at the time that both principal and non-principal brands recorded y/y revenue growth by leveraging Topsports’ diversified brand portfolio offerings, trend momentum resumption of brands, and development of the emerging niche sports market.

Revenue from principal brands Nike and Adidas increased by 7.0 percent y/y in H1 2023, and revenue from non-principal brands increased by 10.5 percent y/y for the six-month period ended August 31, 2023.

Topsports International Holdings said it is preparing and finalizing the interim results of the Group for the fiscal first half. Information is based on what is currently available to the Board. A preliminary review by the Board of the company’s unaudited consolidated management accounts for the fiscal first half has yet to be audited or reviewed by the company’s independent auditors or the company’s Audit Committee, and the relevant content is subject to further adjustments and finalization.

The company advises shareholders and potential investors to refer to the detailed information in its interim results announcement for the fiscal first half, which the company expects to publish before the end of October 2024.

Topsports International Holdings’ principal brands include Nike and Adidas. Other non-principal brands include Puma, Converse, Vans, The North Face, Timberland, Asics, Hoka, Skechers, the NBA. Other brands also includes Li Ning and Kailas.

The company reportedly classifies principal and other brands according to the Group’s relative revenue.

For the fiscal full year 2023, which ended February 28, 2024, Nike and Adidas accounted for 85.8 percent of Topsports’ total sales, while the other (non-principal) brands accounted for 13.5 percent of total revenue for the year.

Image courtesy Nike/Jordan World of Flight store, Beijing Sanlitun