361 Degrees has released its 3Q26 operating update: offline retail sales for both the 361° core brand and the 361° kids brand grew by mid-single digits YoY, while overall e-commerce retail sales rose by mid-to-high single digits. Performance remained steady despite subdued consumption and a higher comparison base. Overall retail sales recorded solid growth during the Mid-Autumn Festival and National Day holidays, meeting management expectations. The company continues to strengthen its quality-to-price proposition and accelerate performance footwear upgrades. Super premium stores met the full-year opening target ahead of schedule, while e-commerce and overseas markets provided incremental growth. Order growth at the 2Q27 new-product trade fair met management expectations, and management remains confident of outpacing industry growth in 1H27. We remain positive on the growth resilience supported by product competitiveness and international expansion. Together with healthy inventory and relatively attractive dividend returns, we maintain BUY.
Functional footwear upgrades; offline discounts manageable
Offline retail sales for both the core brand and the kids brand grew by mid-single digits YoY in 3Q26. By category, running maintained steady growth, with the product range catering to different runner profiles and price points. During the quarter, the company launched or upgraded Motan 3, the plateless MEGA3 running shoe for racing and training, Rain-block 10th-generation and Flying Flame 5.5. Basketball also delivered solid growth despite competitive and discounting pressures, with AG7 launched in September. Newly launched tennis shoes gained strong market traction. Meanwhile, the company extended its official partnership with the Asian Games for a fifth consecutive term and bolstered its professional performance credentials through high-profile events such as the Berlin Marathon. Offline retail discounts averaged approximately 30% in 3Q26, slightly deeper than the 29% in 2Q26. The inventory-to-sales ratio remained at 4.5–5x, while sell-through rates and units per transaction stayed broadly normal, keeping overall inventory healthy.
Earnings forecasts and valuation
We maintain our 2026/2027/2028E attributable net profit forecasts at RMB1.49bn/1.66bn/1.84bn. Peers trade at an average of 10.9x 2026E PE on our forecasts (previously 9.8x). Given 361 Degrees’ smaller brand scale and lower market share relative to its peers, we retain our valuation discount and raise our target multiple to 10.0x 2026E PE (previously 9.0x). Incorporating an exchange rate of RMB0.858 per HKD (previously RMB0.866), we raise our target price modestly to HKD7.99 (previously HKD7.12). Maintain BUY.
Risks: intensifying industry competition, weaker-than-expected consumption recovery and e-commerce growth, store adjustments falling short of expectations.