The growth rate of the main brand is slowing down.
$XTEP INT'L (01368.HK)$ Achieve total revenue of RMB 14.151 billion in 2025, representing a year-on-year increase of 4.2%.
After excluding the profit and loss impact of discontinued operations (K·SWISS and Palladium), profit attributable to ordinary shareholders reached RMB 1.372 billion, marking a year-on-year increase of 10.8% and setting a new historical high.
In terms of business structure, revenue from the core 'Xtep' main brand amounted to RMB 12.515 billion, with a year-on-year growth rate of only 1.5%, further decelerating compared to 2024's %.
By contrast, the professional sports segment, composed of Saucony and Merrell, achieved revenue of RMB 1.636 billion, reflecting a year-on-year increase of 30.8%, while operating profit surged by 46.4% to RMB 114 million, outlining the contours of a 'second growth curve'.
Facing the trend of sales growth plateauing for the main brand, Xtep International's strategic transformation has become imperative.
The company is drawing on Saucony's successful experience in DTC transformation, intending to replicate it extensively across the main brand’s sales channels.
Xtep has stated its plan to reclaim distribution rights from approximately 400 to 500 authorized distributor stores in the second half of 2025 and throughout 2026, aiming to enhance operational efficiency by directly operating flagship stores.
To this end, in February 2025, Xtep International raised HKD 1 billion, primarily to further develop the DTC business model for the Xtep main brand and Saucony.
However, channel pressures stemming from the transformation have already begun to emerge.
The inventory turnover days for the Xtep main brand’s channels extended from 'approximately four months' in 2024 to 'approximately four and a half months' in 2025. Analysis indicates that slower turnover may be influenced by multiple factors, including the decline in retail growth of the main brand and the 'channel stockpiling' effect prior to DTC transformation.
Meanwhile, the group's gross profit margin for continuing operations in 2025 was 42.8%, a slight decrease of 0.4 percentage points year-on-year, reflecting a certain degree of pressure on profitability as a result of increased direct investment and inventory clearance.
Globalization performance became a major highlight for Xtep in 2025.
In 2025, Xtep's overseas business revenue nearly doubled, with cross-border e-commerce experiencing growth exceeding 220% driven by strong performance on Southeast Asia's leading platforms such as Shopee, TikTok, and Lazada.
During the year, Xtep opened its first overseas running club in Singapore and partnered with Malaysia’s Bonia to launch a flagship running store, gradually shifting its overseas strategy from online penetration to an omnichannel expansion.
Positioned in the highly competitive sports goods sector, Xtep is solidifying its foundation by reinforcing its image as 'China's No. 1 Running Brand.'
In 2025, the group deepened its connection with professional runners by sponsoring 74 running events and expanding 71 running clubs; on the product front, the '160X 7' series and 'Qingyun' series achieved full coverage from elite racing to the mass market.
For Xtep, the strategic focus following the divestment of loss-making businesses has shown initial success, but inventory management and store efficiency under the DTC model remain key challenges for the coming year.
Whether profit growth can be translated into long-term brand moats still depends on its actual control over terminal channels.
Editor/Doris