23 Mar 2023

Xtep’s FY22 revenue was up by 29.1% YoY to Rmb12,930m, mainly driven by i) robust growth of 25.9% YoY from core brand sales to Rmb11,128m due to strong sales orders from distributors, continual growth in e-commerce on scaling up marketing efforts, and also 52% growth in kids biz with Xtep Kids POS up from 1,179 POS by end-FY21 to 1,520 POS by end-FY22; ii) 99% YoY sales increase to Rmb400m for S&M (3.1% of FY22 revenue) particularly from online sales, and iii) 44% YoY sales increase to Rmb1,402m for K&P (10.8% of FY22 revenue). Overall GPM was down by 0.8ppt YoY to 40.9% due to i) 0.1ppt YoY drop in core brand to 41.3% as higher sales contribution from lower margin kids segment, and ii) a 7.0ppt YoY drop in K&P to 37.6% due to higher costs in logistics and supply chain last year. On the cost side, S&D ratio edged up 1.9ppt to 20.8% on increase in A&P due to upgrade for its core brand; while admin ratio was down by 1.7ppt to 11.2% on good cost control. Core XTEP brand’s FY22 NP surged 10.7% YoY to Rmb1,345m, and for the new 4 brands, operating loss summed up to Rmb208m, which missed mgmt. target of no more than Rmb150m due to the pandemic in 4Q22. As a result, the group’s FY22 NP surged by 1.5% YoY only to Rmb922m, which is exactly the same as our estimates. Xtep declared a final-DPS of HK7.1 cents, representing a full year payout ratio of 50%.

CROSBY Research – Xtep International (1368 HK/BUY): Inline FY22 results, increasing sales contribution from new brands