Key takeaway
In 3Q2 6, the company's revenue increased YoY by + 6.7 %. Of this, revenue from the main brand, HLA GROUP, increased YoY by +13.4% and maintained double-digit growth; revenue from other brands rose 1.5%. The slowdown was mainly due to a large wholesale revenue recorded by FCC in the same period last year, while JD Outlets and FCC retail maintained solid growth momentum. Revenue from the corporate bulk sales business declined 8.5% in 3Q26, with the decline narrowing significantly. In terms of stores, the HLA GROUP network had 1,822 directly operated stores, a net increase of 193 from the beginning of the year, and 3,988 franchised and other stores, a net decrease of eight from the beginning of the year. The share of directly operated stores continued to rise. As of the end of June 2026, Adidas FCC had 723 stores, unchanged from the beginning of the year, while JD Outlets had 61 stores, a net increase of one. In 3Q26, the company's net profit attributable to shareholders of the parent company decreased YoY by 1 5.0 %, while net profit attributable to shareholders of the parent company excluding non-recurring items increased YoY by 5.03%. The difference was mainly due to a fair value loss of RMB35mn on financial assets, compared with a gain of RMB25mn in the same period last year.
Looking ahead, domestic store optimization and overseas store expansion for the main brand are expected to support steady growth. The corporate bulk sales business is gradually recovering. Among the new businesses, FCC is accelerating store expansion, while JD Outlets is expected to contribute incremental growth after adjustments.
Event
The company released its 3Q26 report: revenue for 1Q–3Q26 reached RMB16.723bn (+7.20% YoY); net profit attributable to shareholders of the parent company was RMB1.728bn (-7.24% YoY); net profit attributable to shareholders of the parent company excluding non-recurring items was RMB1.700bn (-6.41% YoY); basic EPS stood at RMB0.36 (-7.69% YoY); and weighted ROE was 9.63% (-0.98pct).
Quick Take
The main brand maintained double-digit growth in 3Q26, while the decline in corporate bulk sales narrowed. In 3Q26, the company generated revenue of RMB4.304bn (+6.7% YoY), maintaining steady growth. Of this: 1) revenue from the main brand, HLA GROUP, reached RMB2.79bn in 3Q26 (+13.4% YoY, versus +11.2% and +13.1% in 1Q26 and 2Q26, respectively), maintaining double-digit growth. In terms of stores, the HLA GROUP network had 1,822 directly operated stores, a net increase of 193 from the beginning of the year, and 3,988 franchised and other stores, a net decrease of eight from the beginning of the year. The share of directly operated stores continued to rise; 2) other brands generated revenue of RMB930mn in 3Q26 (+1.5% YoY, versus +32.6% and +26.2% in 1Q26 and 2Q26, respectively). The slowdown was mainly due to a large wholesale revenue recorded by FCC in the same period last year, while JD Outlets and FCC retail maintained solid growth momentum; 3) customized corporate bulk sales generated revenue of RMB495mn in 3Q26 (-8.5% YoY, versus -37.3% and -49.6% in 1Q26 and 2Q26, respectively), with the decline narrowing significantly.
By channel: E-commerce maintained solid growth momentum, while directly operated stores outperformed franchised stores. Online revenue reached RMB3.72bn in 1Q-3Q26, up 20.1% YoY, with growth of 17.9%, 18.6%, and 25.4% YoY in 1Q26, 2Q26, and 3Q26, respectively. The company continued to step up investment in e-commerce operations, with traffic conversion efficiency improving steadily. Gross margin was 46.4%, 53.1%, and 44.8% in 1Q26, 2Q26, and 3Q26, up 2.2 pcts, down 1.5 pcts, and up 2.1 pcts YoY, respectively. By sales model, revenue from directly operated stores reached RMB4.94bn in 1Q-3Q26, up 26% YoY, with growth of 30%, 20.3%, and 28.1% YoY in 1Q26, 2Q26, and 3Q26, respectively. Gross margin was 62.7% in 1Q-3Q26, down 0.5 pct YoY. Revenue from franchised stores and other operations reached RMB10.11bn in 1Q-3Q26, up 8% YoY, with growth of 7%, 13%, and 3% YoY in 1Q26, 2Q26, and 3Q26, respectively.
Net profit attributable to shareholders of the parent company excluding non-recurring gains and losses grew steadily in 3Q26, while expense investment increased. In 3Q26, net profit attributable to shareholders of the parent company was RMB240mn, down 14.98% YoY, while net profit attributable to shareholders of the parent company excluding non-recurring gains and losses was RMB263mn, up 5.03% YoY. The difference was mainly due to a RMB35mn fair-value loss on financial assets, compared with a RMB25mn gain in the same period last year. The company's gross margin was 44.11% in 3Q26, up 2.34 pcts YoY, mainly driven by a higher revenue contribution from directly operated stores. The selling expense ratio, administrative expense ratio, R&D expense ratio, and financing expense ratio were 28.53%, 5.74%, 1.35%, and -0.34%, up 2.44 pcts, down 0.47 pct, up 0.10 pct, and up 1.84 pcts YoY, respectively. The increase in the selling expense ratio was mainly due to higher store-opening expenses. The increase in the financing expense ratio was mainly attributable to lower interest income. The net margin was 5.10% in 3Q26, down 1.25 pcts YoY.
Outlook: Domestic store optimization and overseas store expansion for the core brand should support steady growth. The group-purchase business is gradually recovering, while accelerated store openings for FCC and the post-adjustment contribution from JD Outlets should drive incremental growth. The core brand continues to strengthen the iteration of technology-enabled fabrics and functional products. Online, it is focusing on omnichannel operations to increase brand exposure and improve sales conversion. Offline, it is dynamically optimizing its existing store network while steadily expanding into high-quality channels such as shopping malls. On the franchise side, it is focusing on store quality and advancing expansion into emerging strategic markets in an orderly manner. The core brand is expected to maintain steady growth momentum. The group-purchase customization business is also gradually recovering as orders rebound. For new businesses, Adidas FCC will continue to open high-quality stores while improving store-level profitability. JD Outlets continues to optimize its product mix and remains loss-making. Operating performance is expected to improve following the team adjustment, supporting a gradual improvement in profitability.
Earnings forecast: Given the company's expense investment in new businesses, we lower our earnings forecasts. We expect revenue of RMB23.09bn, RMB25.13bn, and RMB27.34bn in 2026-2028, respectively, versus our previous forecasts of RMB23.54bn, RMB25.45bn, and RMB27.49bn, representing YoY growth of 6.8%, 8.8%, and 8.8%. We expect net profit attributable to shareholders of the parent company of RMB2.01bn, RMB2.1 4bn, and RMB2.30bn, respectively, versus our previous forecasts of RMB2.11bn, RMB2.31bn, and RMB2.52bn, representing YoY growth of -7.3%, 6.4%, and 7.5%. The corresponding P/E multiples are 13.8x, 12.9x, and 12.0x. We maintain “Buy” rating.
Risks:
1. Deeper retail discounts weighing on brand profit margins: If consumption falls short of expectations and the branded apparel industry faces high inventory levels, deeper discounts may be used to reduce inventory, intensifying price competition and impacting brand profit margins.
2. Sales recovery progress and magnitude slower than expected: It is expected that with the gradual recovery of travel and consumption, the sales performance of the company's brands will also benefit directly, if the progress or magnitude of the sales recovery of the company's brands is less than expected, it will affect the operating performance of the company.
3. Slower-than-expected store expansion: Currently, the company is striving to expand JD Outlets’ store network, the expansion is a critical driver of offline channel revenue growth. If the company's store expansion progress falls short of expectations, it will directly impact the company's revenue performance.