CMSC: The quality of operation needs to be optimized. Recommend leading brands with strong capabilities in expanding product categories and channel operations.

CMSC released a research report stating that the current market demand segmentation trend continues to evolve. It is recommended to focus on brands that expand their product categories and optimize their channels at a fast pace, have high brand influence, and are likely to maintain stable operations in market fluctuations and gain market share when demand recovers. ANTA SPORTS (02020) is recommended as a key recommendation within the industry. The main points of CMSC are as follows: In 2024, the leading sportswear brands are facing pressure on revenue flow, with declining profitability and operational capabilities. Currently, the trend of continuous market demand segmentation is evolving, with leading international sportswear brands accelerating new product launches, which is expected to improve the prosperity of segmented tracks. It is recommended to focus on brands that expand their product categories and optimize their channels at a fast pace, have high brand influence, and are likely to maintain stable operations in market fluctuations and gain market share when demand recovers. Overview of sportswear market in 2024 In 2024, the growth rate of terminal revenue of leading sportswear brands slowed down, with basketball categories still under pressure. Online sales mainly rely on the high growth of the Douyin platform (in 2024, LI NING, ANTA, and FILA saw sales growth of 25%, 112%, and 58% on Douyin, respectively), while offline stores are focusing on improving store efficiency (in 2024, LI NING store efficiency +5%, ANTA store efficiency +10%. FILA store efficiency -3%); profitability of leading sportswear brands is declining, and inventory structure still needs to be optimized. Tracking of overseas markets The performance of top brands is different, with continued acceleration in category expansion. Currently, brands and categories positioned in sports fashion are showing good growth. Brands are expanding market demand through expanding categories (expanding tennis, outdoor, and strengthening sports fashion layout), and top brands are speeding up the preheating of new products. It is expected that the second half of 2025 will see intensive new product releases, improving the prosperity of segmented tracks. Future expectations for the domestic market Category expansion and channel optimization are the core, and operational health needs to be maintained. Following the practices of leading international sportswear brands, companies that are ahead in category expansion and channel optimization are expected to see stable growth. Currently, leading sportswear brands such as ANTA and LI NING are expanding in outdoor and sports fashion categories, and continuously strengthening online operations and expanding new retail formats and store types. Additionally, attention should be paid to the health of brand management (balance of discounts and inventory, cost control, and cash flow adequacy), with ANTA SPORTS currently showing better overall performance. Risk warning: The risk of terminal consumer demand falling short of expectations; the risk of increasing online traffic costs eroding profits; the risk of lower-than-expected sales in self-operated stores but higher operating costs leading to profit pressure.