Core brand sales dropped in 2Q26: Sales momentum weakened meaningfully in 2Q26; downgrade to Neutral

Research evidence excerpt

Core brand sales dropped in 2Q26: Sales momentum weakened meaningfully in 2Q26; downgrade to Neutral

Global Markets Research

Xtep 1368.HK 1368 HK 19 July 2026

EQUITY: CONSUMER RELATED

RatingCore brand sales dropped in 2Q26 Down from Buy Neutral

Target priceSales momentum weakened meaningfully in 2Q26; Reduced from HKD 4.20downgrade to Neutral HKD 6.90

Weakened 2Q26 sales performance Closing17 July 2026price HKD 3.69

Xtep reported a set of mediocre 2Q26 operating data (17 July): the Xtep core brand

recorded a y-y sales decline of mid-single-digit% (MSD%) in 2Q26, leading to a low- Implied upside +13.8%

single-digit% (LSD%) y-y sales decline in 1H26. The softening sales momentum was due

to tepid demand, Xtep’s less exposure to shopping malls with higher consumer foot traffic, Market Cap (USD mn) 1,325.0

intensified competition in the mass market, as well as unfavorable weather conditions. On ADT (USD mn) 7.6

the other hand, for the historically fast-growing Saucony brand as well, sales moderated

with only LSD% y-y growth of 2Q26 sales, slowing down from the 20%+ y-y growth in Relative performance chart

1Q26 (Fig.1). Saucony’s declining sales momentum was mainly due to the brand’s

conservative actions for the online channel with no aggressive promotions, dragging its

online sales; the offline sales of Saucony still grew 20%+ y-y in 2Q26. In all, we see

growing uncertainties for the company to defend its market share, mainly considering the

sluggish sales of the Xtep core brand. We thus reduce FY26F revenue/earnings estimates

by 2-3%/4-5% (Fig.2), leading to a lowered target price of HKD4.20. We downgrade Xtep

to Neutral from Buy. We prefer ANTA (2020 HK, Buy).

Core brand suffers more, while Saucony should retain premium recognition