Anta Sports: Controlling Discounts, Clearing Inventory, Can the 'Slimming Plan' Succeed?

$ANTA SPORTS(02020.HK) On the afternoon of August 27th Beijing time, Anta (2020.HK) released its performance for the first half of 2025. Since the company had previously provided sales data, the deviation from expectations was not significant, but the core concern for the market was the company's downward revision of the full-year guidance for its main brand and the declining profit margin.

The specific points are as follows:

1. Overall performance remained stable. The company achieved total revenue of RMB 38.54 billion in 25H1, a year-on-year increase of 14.3%, slightly exceeding the market consensus (RMB 38.1 billion). However, the company's guidance for the Anta main brand was lowered from high single digits to mid-single digits during the conference call, raising concerns about the sustainability of growth, leading to a decline in the stock price after the results were released.

2. Main brand underperformed expectations, while outdoor brands performed well. By brand, the Anta main brand achieved revenue of RMB 16.95 billion, a year-on-year increase of 5.4%, with growth slowing down compared to the previous quarter, falling short of the high single-digit target set at the beginning of the year, and overall performance was below market expectations. The core reason is that the company accelerated channel upgrades in the second quarter, moving the flagship store model from first- and second-tier cities (such as Champion stores, Super Anta stores) to lower-tier cities, resulting in the closure and renovation of many stores, significantly impacting franchise stores that rely heavily on foot traffic in lower-tier cities. Other brands achieved revenue of RMB 7.41 billion, a year-on-year increase of 61%, significantly exceeding the initial expectation (annual growth of around 30%), indicating that the outdoor sports track is still in a high prosperity stage.

3. Closing inefficient stores, converting small stores to large stores. In terms of store numbers, the Anta main brand had a net decrease of 10 stores to 9,909 stores in 25H1. Since the beginning of the year, Anta has started closing old franchise stores in lower-tier cities with annual store efficiency below RMB 2 million and integrating multiple small stores into a "large store model" (such as flagship stores, outlet stores) to improve average transaction value and sales per square meter.

4. Gross margin slightly declined. In terms of gross margin, due to Anta and FILA both increasing the proportion of sales through online channels (with greater discounts), the overall gross margin slightly declined by 0.7 percentage points to 63.4%,

5. Expense ratio remained stable. In terms of expenses, as the company gradually applied AI to product design, marketing, decision-making, and other aspects, internal operational efficiency improved, and the overall expense ratio remained stable, with the core operating profit margin ultimately declining by 0.4 percentage points to 22.9%.

6. Detailed financial report data:

Dolphin Research's overall view:

Overall, the biggest issue for Anta still lies in the inventory clearance of its main brand and FILA. As of the end of the first half, the company's inventory turnover days have increased to 135 days, approaching the historical high.

Based on research information, the current discount rate for the main brand is around 27% off, close to the gross margin warning line. If the discount rate further declines, the company's profit margin will be further squeezed, which is why the company deliberately controlled the discount rate during the 618 shopping festival, but this also meant sacrificing sales volume.

Although the high growth of outdoor brands has driven the company's overall revenue to maintain double-digit growth, once the growth of outdoor brands slows down, the group's overall revenue will also fall back to single-digit growth. Therefore, overall, Dolphin Research believes that Anta is facing considerable pressure at the current stage, and the most critical thing is to improve single-store efficiency through a series of operations to solve the problem of slow inventory turnover.

Below is a detailed interpretation of the financial report:

I. Revenue is stable, but there is a significant divergence between brands

The company achieved total revenue of RMB 38.54 billion in 25H1, a year-on-year increase of 14.3%, slightly exceeding the market consensus (RMB 38.1 billion). However, the company's guidance for the Anta main brand was lowered from high single digits to mid-single digits during the conference call, raising concerns about the sustainability of growth, leading to a decline in the stock price after the results were released.

1. Main brand underperformed expectations, outdoor brands performed well

By brand, the Anta main brand achieved revenue of RMB 16.95 billion, a year-on-year increase of 5.4%, with growth slowing down compared to the previous quarter, falling short of the high single-digit target set at the beginning of the year, and overall performance was below market expectations.

The core reason is that the company accelerated channel upgrades in the second quarter, moving the flagship store model from first- and second-tier cities (such as Champion stores, Super Anta stores) to lower-tier cities, resulting in the closure and renovation of many stores, significantly impacting franchise stores that rely heavily on foot traffic in lower-tier cities. With the completion of renovations in Q3 and the reopening of stores, Dolphin Research believes that the company's store sales are expected to gradually return to normal in the second half of the year.

In terms of channel structure, as the company increased live streaming, short videos, and other content on major social platforms, online exposure continued to rise, the Anta main brand's e-commerce revenue grew by 10% year-on-year, higher than offline, with the revenue share further increasing by 1.6 percentage points to 36.2%. However, from a trend perspective, the high growth of 20% in the same period last year has also significantly slowed down. Dolphin Research speculates that due to intense competition during the 618 shopping festival, the company controlled discount levels to maintain brand strength and profitability, thus sacrificing some sales.

FILA as Anta's second growth curve, achieved revenue of RMB 14.18 billion in the first half, a year-on-year increase of 8.6%, slightly exceeding market expectations. The biggest highlight is that the company focused on middle-class consumers, targeting the elite sports tracks of golf and tennis, and launched professional sports product lines that performed excellently.

Other brands: Other brands achieved revenue of RMB 7.41 billion, a year-on-year increase of 61%, significantly exceeding the initial expectation (annual growth of around 30%). Among them, Descente focused on three professional scenarios: skiing, golf, and triathlon, launching the TOUGH series (high-performance fabrics) and DELTA PRO EXP V2 racing shoes, both becoming super product IPs. Kolon Sport focused on hiking and camping, with the MOVE ALPHA hiking shoe series seeing a 740% year-on-year increase in sales, reflecting the brand's strong product innovation capability.

On the other hand, the company precisely targeted high-end outdoor circles through targeted marketing, significantly enhancing consumer repurchase rates by organizing hiking and other activities, strengthening the brand's professional image.

2. Closing inefficient stores, converting small stores to large stores

In terms of store numbers, the Anta main brand had a net decrease of 10 stores to 9,909 stores in 25H1. Since the beginning of the year, Anta has started closing old franchise stores in lower-tier cities with annual store efficiency below RMB 2 million and integrating multiple small stores into a "large store model" (such as flagship stores, outlet stores) to improve average transaction value and sales per square meter.

Considering that there are still many old stores nationwide with annual store efficiency below RMB 2 million (Anta's target is to increase the average annual store efficiency to over RMB 10 million), and in terms of store numbers, Anta is already leading the industry by a large margin (Li Ning currently has only 6,000 stores), therefore, controlling the speed of new store openings and optimizing the efficiency of old stores is clearly more rational for Anta.

FILA, on the other hand, closed some inefficient Fusion stores, focusing on high-end stores in core business districts (such as FILA ICONA, GOLF store types), with a net decrease of 6 stores to 2,054 stores in 25H1, enhancing the differentiated experience for customers.

Meanwhile, Descente and Kolon Sport added 15 and 8 stores, respectively, reaching 241 and 199 stores, still in an expansion phase amid the high prosperity of outdoor sports.

For the 2025 store opening guidance, for the Anta main brand, the company plans to reduce the number of stores to 9,600-9,800 (a reduction of 200-300 stores), eliminating low-efficiency stores, FILA will slightly increase to 2,100-2,200 stores, and Descente and Kolon Sport will continue to expand.

3. Sub-segment functional categories performed better

By category, footwear achieved revenue of RMB 16.39 billion, a year-on-year increase of 12%, with running shoe sales growing significantly, with PG7 running shoe sales exceeding 2 million pairs, surpassing market expectations, while basketball shoes and casual shoes performed moderately.

Apparel achieved revenue of RMB 20.89 billion, a year-on-year increase of 15.5%, with relatively stable growth, with outdoor functional apparel performing better, and the category is in an accelerated penetration state, while other casual apparel performed relatively moderately.

II. Increase in online share led to a slight decline in gross margin

In terms of gross margin, due to Anta and FILA both increasing the proportion of sales through online channels (with greater discounts), the overall gross margin slightly declined by 0.7 percentage points to 63.4%,

In terms of expenses, as the company gradually applied AI to product design, marketing, decision-making, and other aspects, internal operational efficiency improved, and the overall expense ratio remained stable.

Finally, in terms of turnover days, the company's inventory turnover days in 25H1 were 135 days, significantly higher than the same period, indicating that apart from the aforementioned better performance of functional categories, other general categories still face considerable demand pressure. Additionally, the store adjustments in the second quarter also delayed the speed of inventory clearance.