CROSBY Research – Xtep International (1368 HK/BUY): Soft Double 11 sales; guidance cut

15 Nov 2023

Xtep management provided sales update on Double 11 recently. Xtep core brand online growth was only HSD YoY, which is below both the market and mgmt. expectations. We believe the slow growth is mainly due to the lackluster performance of the whole industry during Double 11, with a particular slowdown in growth for traditional e-commerce platforms. On the other hand, offline channels performed better than expected, with November month to date sales up 40% YoY already, and channel inventory turnover is expected to return to near normal levels by the end of the year and inventory level is expected to scale back to around Rmb2bn. However, due to the impact of weak consumer recovery, the profitability of Xtep Group is being affected.