Stella International Holdings Limited (Stella, Group), the Hong Kong-based manufacturer of footwear for Nike, Saucony, Under Armour, Merrell, Timberland, Ugg, and others, reported that the company continued to see solid demand for its products during the 2026 first half (H1), pointing to its “diversified manufacturing base remaining as a core differentiator.” The company stated in its first half earnings report that this differentiator supports both customer retention and new customer acquisition, and protects the Group’s top-line momentum.

First half revenue increased 1.5 percent year-over-year (y/y) to $786.7 million, an increase from the initial level indicated when the Group reported preliminary H1 numbers in mid-July. Shipment volume was said to be flat at 27.5 million pairs, but 1.8 percent growth in average selling prices assisted in the growth for the period.

“This performance was largely underpinned by strong demand from several Sports customers, alongside front-loaded seasonal volume within the Casual segment,” the company said in its earnings release.

The company reported in July that unaudited consolidated revenue inched up 1.2 percent in the second quarter to $449.3 million, driven by a 1.3 percent increase in pairs shipped.

Stella International reports in the U.S. dollar ($) currency.

Still, Stella said profitability was affected by increased raw material costs, operating deleverage at its dedicated factories for its largest Sports customer in the PRC. This customer reportedly shifted its product mix from export-oriented footwear styles to styles targeted at the domestic PRC market, as well as by the costs associated with Stella’s current capacity expansion investments.

As a result, the Group said it recorded a first half net profit of $63.6 million, compared to $78.1 million in the 2025 H1 period.

As of 30 June 2026, the Group’s net cash position was $191.7 million and net gearing ratio was negative 17.6 percent.

Continued Investment
Under its current Three-Year Plan (2026-2028), this year is reportedly an important investment year for the Group, with the commissioning and ramp-up of three new factories in Bangladesh, Indonesia and Vietnam progressing on schedule. These factories are expected to come progressively online in the second half of 2026, subject to customer certification and regulatory approvals.

“We are confident in our ability to minimise ramp-up risks, having brought forward the onboarding of management teams for each of these facilities into the period under review, despite incurring pre-production operational expenses,” the company said. “We also continue to invest in our research and development capabilities in Vietnam, including building a new R&D product development hub for all our footwear customers, as well as a dedicated product development centre for a new Sports customer.”

In July 2026, after assessing limited expansion prospects in the Philippines, Stella commenced a phased shutdown of its smaller capacity manufacturing operations in the country, which they say will allow them to focus the management teams on regions offering stronger long‑term returns.

Stella also pointed out that 2026 is a pivotal investment year for the company’s handbag and accessories manufacturing business as expands its customer base, sharpens its capabilities and develops new styles to move up the value curve.

Shareholder Return
The Board has resolved to declare an interim dividend of HK42 cents per ordinary share for the six months ended June 30, 2026, maintaining the company’s normal payout ratio of approximately 70 percent set against its adjusted net profit of $64.2 million.

“We also remain committed to returning additional cash up to $60 million per year to shareholders in 2026 under our Excess Cash Return Program, through a combination of share repurchases and special dividends, on top of paying regular dividends with a payout ratio of approximately 70 percent,” Stella noted.

Outlook
Stella said it expects shipment volumes in the 2026 full year to remain broadly flat against the backdrop of heightened geopolitical and economic uncertainties.

“Forward order visibility remains solid, with our non-customer-exclusive facilities expected to continue operating at close to full utilisation in the second half of 2026,” the company said. “Meanwhile, operating deleverage is expected to persist at our dedicated factories serving our largest Sports customer in the PRC.”

Chi Lo-Jen, CEO of the Group, said, “Our enduring strengths in design and commercialisation have proven to be a vital anchor, as we continue to navigate persistent economic, geopolitical and trade policy headwinds. This allowed us to achieve sustainable revenue performance and empowered us to expand our customer base.”

Image courtesy Stella International Holdings Limited