Shanxi Securities: 361 degrees (01361.HK) 24Q1 retail sales continued to perform well, retail discounts remained stable

On April 10, the company released operating data for the first quarter of 2024. 2024Q1, 361 degree retail sales of major brands increased by double digits year on year, retail sales of 361 degree children's clothing brands increased by 20%-25% year on year, and retail sales on 361 degree e-commerce platforms increased 20%-25% year on year.

The offline sales performance of the main brands in 24Q1 exceeded expectations, and the growth rate of online and offline channels converged.2024Q1, 361 degree retail sales of major brands increased by double digits year on year, retail sales of 361 degree children's clothing brands increased 20%-25% year on year, retail sales of 361 degree e-commerce platforms increased 20%-25% year on year. Children's clothing performance continues to be superior to adult clothing. The company's online channel growth rate is expected to be close to offline channels. 2024Q1, the average retail discount for the company's new products this season is about 30% off, and the inventory ratio is in the 4.5-5 month range. In terms of offline channel expansion, 2024Q1 expects 361 degree children's clothing brands to open net stores, the average single store area will maintain an upward trend, and the number of 361 degree main brand stores will remain stable. The company expects the main brand and children's clothing brand to open about 100-200 net stores in 2024.

The basketball category is leading the growth rate, and marathon sponsorship enhances influence in the field of running.By category, 2024Q1 is expected to lead the growth rate of retail sales in the basketball category. Following the official announcement of Nikola Jokic in the fourth quarter of 2023, on February 9, 2024, the company officially announced Denver Nuggets defender Kentavios Caldwell Pope as the spokesperson for the basketball category, and the brand influence in the basketball field is expected to continue to increase. The retail sales volume of the running shoe category is expected to be slightly faster than the overall. 2024Q1, the company launched the Shippeng CQT lightweight speed training running shoes, with a tag price of 439/459 yuan. In addition, the company will sponsor the “2024 Qingdao Marathon” event to be held on April 21, and the professional image in the field of running will continue to strengthen.

We maintain our profit forecast. We expect the company's 2024-2026 revenue to be 100.40, 116.28, and 13.370 billion yuan, up 19.2%, 15.0% year on year; net profit to mother will be 11.53, 13.48, and 1,549 billion yuan, up 19.9% year on year. The closing price on April 10 corresponds to the company's 2024-2026 PE about 7.9, 6.7, and 5.9 times, maintaining a “buy-B” rating.

Competition in the mass sports market intensified; e-commerce channel growth fell short of expectations; raw material prices fluctuated sharply.