Guosheng Securities: 361 Degrees (01361.HK) Q1 full-channel revenue growth impressive, with continuous improvement in product strength and brand power

361 Degrees disclosed its Q1 2026 operating situation report, maintaining a strong growth momentum in all-channel sales.According to company disclosures, for Q1 2026, 361 Degrees' adult apparel offline channel sales grew by approximately 10%, children's wear offline sales increased by about 10%, and e-commerce business saw double-digit sales growth. Overall performance remained robust. We expect the offline inventory-to-sales ratio at the end of Q1 2026 to remain between 4.5 and 5, with operational conditions staying healthy.

361 Degrees Adult Apparel: Continuous accumulation of product and brand strength, with gradual release of channel upgrade benefits.In Q1 2026, 361 Degrees' adult apparel offline channel sales grew by approximately 10% year-over-year, continuing a steady growth trend. 1) Product side: The company steadily advanced the update and iteration rhythm of its two core categories, running and basketball products, while benefiting from the premium track. We believe that the sales growth rate of the running category in Q1 2026 remained excellent, with the brand’s professional sports image recognized by the market. 2) Brand side: The new strategic cooperation cycle between 361 Degrees and the Olympic Council of Asia began in 2025. We believe that the brand's exposure in international sporting events is expected to increase further, supported by endorsements from NBA stars such as Nikola Jokic and Aaron Gordon, driving steady progress in 361 Degrees' global branding efforts. 3) Channel side: By the end of 2025, there were 126 premium stores nationwide. We believe that the efficiency improvement effect of these premium stores will gradually be realized in 2026, with a clear trend of mid- to long-term brand channel optimization. At the same time, 361 Degrees is actively promoting its global layout, and we believe it will contribute to the company’s growth in the long term.

361 Degrees Kids: Strong positioning in professional sports, maintaining steady growth.In Q1 2026, offline sales for 361 Degrees Kids grew approximately 10% year-over-year. The children’s business continues to solidify its positioning as the 'Youth Sports Expert.' By the end of 2025, the number of children's stores reached 2,364, with the increasing rollout of fifth-generation stores enhancing the brand image at retail endpoints. We expect that the children's business will maintain a steady growth trajectory in 2026.

361 Degrees E-commerce: Growth outperforms offline channels; optimistic about medium- to long-term performance.In Q1 2026, e-commerce platform sales showed mid-teens percentage growth year-over-year, continuing an impressive growth trend. In the short term, the company is actively expanding into instant retail channels beyond traditional and social e-commerce platforms. Over the medium to long term, we believe the company’s e-commerce business holds a distinct competitive advantage, with potential for further market share gains.

Looking ahead to 2026, we expect the company’s revenue and net profit attributable to shareholders to maintain steady growth.In 2025, driven by continuous improvements in product strength and channel operational efficiency, the company delivered strong revenue and earnings results. Based on recent order meetings, we currently project the company’s revenue to grow by 9% in 2026, with net profit attributable to shareholders expected to increase by 11%.

Earnings forecast and investment recommendation:As one of the leading companies in the athletic footwear and apparel industry, the company has demonstrated excellent performance growth. We forecast net profit attributable to shareholders to reach 1.455/1.624/1.796 billion yuan in 2026-2028 respectively. At current prices, this corresponds to a 2026 price-to-earnings (PE) ratio of 8.5x. We maintain a 'Buy' rating. Risks: Potential underperformance in store expansion and renovation efforts, slower-than-expected recovery in consumer environments, and fluctuations in financial results due to changes in the RMB exchange rate.

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