Guosen Textile and Apparel Q3 Earnings Summary: Divergence at the Brand End Widens Further; Manufacturing Shows "Midstream Recovery, Upstream Price Hikes"

Guosen released a research report stating that in 2026Q3, the textile and apparel industry continued the pattern of "weak domestic demand stabilizing, external demand recovering somewhat, and strong sector divergence." Divergence at the brand end widened further: high-end and differentiated brands continued rapid growth on the back of pricing power and channel quality, while mass-market brands came under broad pressure. The manufacturing end showed two main threads: "midstream recovery, upstream price hikes." Revenue at OEM companies was still declining but the decline narrowed for consecutive periods, and a profit inflection point was initially established; upstream materials benefited from rising prices of raw materials such as cotton, wool, and nylon, and from the realization of price pass-through. Guosen's main views are as follows: 2026 Q3 review: brand retail turned positive in September, manufacturing exports improved quarter by quarter. 1) Brand retail: January-September apparel retail sales rose 4.6% year-on-year cumulatively, with consecutive negative growth in July and August (-1.0%/-0.5%) and a return to positive growth of 1.2% in September; online apparel sales rose 3.8% cumulatively, broadly in line with all channels. On e-commerce, sports and outdoor fell deeply in July-August and turned positive in September (sports +4%, outdoor +5%), with ASICS, adidas, KAILAS, PELLIOT, and Decathlon leading, while casual apparel and home textiles remained under pressure (-8% and -18%, respectively, in September); on social media, adidas ranked first in all four metrics, while LI NING, Uniqlo, and MIUMIU led in follower growth and engagement. 2) Manufacturing exports: U.S. apparel end-demand remained resilient, with August retail sales up 4.5% year-on-year, channel inventory continued to destock and is nearing its end; China's textile and apparel exports have trended favorably since July, with September apparel/footwear up 23.8%/20.2% year-on-year, January-September textiles/apparel/footwear up 5.4%/4.8%/-2.5% cumulatively, and Vietnam's September textiles/footwear up 4.4%/7.7%, with growth accelerating; revenue declines at Taiwanese OEM companies narrowed quarter by quarter in Q3, with September Yue Yuen/Ru Hung/Makalot/Eclat up 5.6%/8.3%/24.1%/14.0% year-on-year, and Ru Hung's orders already visible through early Q2 2027, with Q4 better than Q3. 3) Raw materials and inventory: year-to-date domestic cotton/international cotton rose 7.8%/15.2%, nylon filament and polyester filament rose 30%-45%, fluctuating upward since July after a pullback in May, with domestic and international cotton diverging and the price spread narrowing in October; inventory-to-sales ratios at key overseas brands were generally healthy, with Nike and Fast Retailing rising year-on-year in Q3 but still manageable, while adidas, Puma, Deckers, and VF saw inventory-to-sales ratios decline sequentially and remain broadly stable year-on-year. Q3 report summary: high-end brands lead, OEM manufacturing profits improve, upstream manufacturing price hikes realized. In 2026Q3, the industry continued the pattern of "weak domestic demand stabilizing, external demand recovering somewhat, and strong sector divergence." Divergence at the brand end widened further: high-end and differentiated brands continued rapid growth on the back of pricing power and channel quality, with Biem.L.Fdlkk Garment and Dazzle Fashion maintaining double-digit or higher growth, Beijing Sanfo Outdoor Products achieving double-digit growth in both revenue and profit driven by professional outdoor, and home textile leader Luolai Lifestyle Technology maintaining relatively fast profit growth; mass-market brands came under broad pressure, with Zhejiang Semir Garment's growth slowing to flat, BXN Holding Co.,Ltd., Shanghai Shuixing Home Textile, and Shenzhen Fuanna Bedding and Furnishing seeing both revenue and profit weaken, and Hla Group Corp.'s main brand and online channels maintaining relatively fast growth, while declining group-buy sales and fluctuating investment income dragged on reported results. The manufacturing end showed two main threads: "midstream recovery, upstream price hikes." Revenue at OEM companies was still declining but the decline narrowed for consecutive periods, and a profit inflection point was initially established, with Huali Industrial Group's gross margin rising both year-on-year and sequentially and Anhui Korrun's quarterly profit returning to positive growth; upstream materials benefited from rising prices of raw materials such as cotton, wool, and nylon and from the realization of price pass-through, with Zhejiang Weixing Industrial Development and Zhejiang Xinao Textiles Inc. seeing both volume and price rise and profits accelerate, Bros Eastern Co.,Ltd seeing volume decline but price increase and cost dividends released, and Zhejiang Taihua New Material Group seeing revenue growth combined with gross margin recovery, with non-recurring profit elasticity significantly amplified. Q4 outlook: structural divergence at the brand end continues, and orders and profit recovery at the manufacturing end are imminent. At the brand end, terminal conditions have improved sequentially since September, and the National Day Golden Week continued the recovery trend; Q4 brands are expected to maintain weak recovery and strong divergence, with high-end outdoor, differentiated casual, and home textile leaders offering greater certainty. At the manufacturing end, accelerating exports, the landing of tariffs, and customer restocking are jointly driving improved order visibility, with both revenue and profit recovery imminent; leading companies' valuations are at historical lows, providing a basis for both fundamental and valuation improvement. Risk warnings: weak macroeconomic and consumer demand; international political and economic risks; sharp fluctuations in exchange rates and raw material prices; deterioration of the brand competitive landscape.