Nomura released a research report stating that it has a 'buy' rating on Xtep Int'l (01368) and lowered the target price from HKD 6.8 to HKD 6.7. The company's growth accelerated in the second quarter of this year, and inventory and discount levels have improved. Xtep's management has reiterated its guidance for the fiscal year 2024, which is to achieve a retail sales growth of more than 10%, income growth from mid to high single digits, and improved inventory levels. Nomura believes that Xtep is expected to achieve its fiscal year 2024 business guidance through flexible cost control strategies.
The bank cited Xtep's 24Q2 operating data, which showed that online sales increased by more than 25% year-on-year during the period, while offline sales increased by low single digits year-on-year, and same-store sales recorded a low single-digit decline, mainly due to the adverse weather conditions in southern China leading to a decrease in customer traffic. The retail discount level narrowed from 25% to 30% in the first quarter of this year to 25% in the second quarter of this year; inventory turnover improved to 4-4.5 months, and then improved to 4 months. The sales performance of new brands (including Saucony and Milestone) maintains a growth momentum, with an annual growth rate of over 50%, and the growth guidance value for the second quarter of this year is 40%. Among them, the performance of Saucony brand is strong, with same-store sales growth of over 30% and a net increase of 20 stores in the first half of this year.