1Q25 was slightly better than expected. And despite the weak macro and weather in Apr 2025 MTD, we are still cautiously optimistic about the trend in 2Q25E. For the Jack Wolfskin’s deal announced on 10 Apr 2025, we do think the acquisition price is attractive and the potential there (mid-priced outdoor industry and the expansion to Europe) is meaningful. Maintain BUY but trim TP to HK$ 119.08, based on 24x FY25E P/E (unchanged). The stock is trading at 17x, still attractive, in our view.
Anta’s retail sales growth was inline in 1Q25; inventory improved with higher discounts. Anta reported a HSD retail sales growth in 1Q25 (HSD/ HSD/ low-teens for Anta adults (offline + online)/ kids (offline + online)/ E- commerce), which is inline with CMBI est. and FY25E guidance, and also similar to that in 4Q24. We do find this number satisfactory given the high base last year (esp. for online). Inventory to sales ratio was at 4.5 to 5.0 months in 1Q25, similar to 1Q24 but improved from the 5 months in 4Q24, which was slightly better than expected and we also believe the excessive inventory left over from the 2024-2025 warm winter has mostly been cleared. However, the retail discounts kind of deepened a little bit for online channel (by 1-2ppt to 28% off) YoY and QoQ while that for offline channel was rather flattish YoY and QoQ in 1Q25.
FILA’s retail sales growth was better than expected in 1Q25; inventory stayed flattish but discounts widened. FILA also reported a HSD retail sales growth in 1Q25 (MSD/ low-teens/ mid-teens/ 20%+ for FILA adults (offline + online)/ kids (offline + online)/ Fusion (offline + online) / E- commerce), better than CMBI est. and FY25E guidance of MSD, and similar to that in 4Q24. We are rather impressed by the rapid growth for kids and fusion, with both having been benefiting from the reforms on products’ design last year. Inventory to sales ratio was at 5 months in 1Q25, similar to that in 4Q24 but lengthened a bit vs 1Q24. Retail discounts for online channel deepened (by 1-2ppt to 40% off) YoY while that for offline channel was at 26% off, same as that in 4Q24 but widened by 2ppt vs 1Q24.
Other brands’ retail sales growth, inventory and retail discounts all remained exceptionally strong in 1Q25. Other brands’ retail sales growth was at 65% to 70% in 1Q25 (about 60%/ around 100%/ 30%+ for Descente/ Kolon/ Maia active), way better than FY25E guidance of 30%+. Inventory to sales ratio for Descente/ Kolon was at 5 to 6 months/ 4 months, which is a fairly healthy or even low level, to some extent. However, all in all, the retail sales growth of Anta group in 1Q25 should be at mid-teens, which is not only better than the Company’s target, but also ahead of CMBI est. sales growth of about 10%. And as a result, the profit margin should also be better than expected.
Retail sales growth in Mar- Apr 2025 might have trended down slight, but we are still cautiously optimistic about 2Q25E. Management did mention that retail sales growth has slowed down slightly in Mar-Apr 2025 vs Jan-Feb 2025, perhaps due to the unfavorable weather and macro uncertainties. However, supported by company specifics growth drivers, namely: 1) decent sales momentum from the different new stores formats (Super Anta stores, Anta Champion stores, Anta Campus stores, etc.), 2) Anta’s overseas expansion, 3) continual rollout of many star products (e.g. those value for money products such as PG7), 4) successful reforms on the product design of FILA fusion and kids, 5) widening of the price range for different FILA brands and 6) massive reform plan for FILA planned in 2Q25E. Noted we are also worried about the potential slowdown in e-commerce sales (esp. for the douyin channel), therefore we will continue to monitor that closely.
We see a few positives and synergies from the M&A deal. Anta could benefit Jack Wolfskin in the following ways: 1) rebranding, 2) product upgrade, 3) efficiency boost (on both store level and supply chain level) and 4) expansion in China. Moreover, we believe Jack Wolfskin: 1) is a hard core brand with high-quality technology know-how and a decent brand awareness in Europe (Topgolf has actually done a consumer survey in 2022 and Jack Wolfskin was ranked as the No.2 outdoor brand in Europe), 2) could supplement Anta’s coverage on mid-priced outdoor segment (ASPs of footwear and apparel are at around RMB 470 and RMB 1,073 on Tmall, about 64%/ 234% higher than Anta’s but 73%/ 46% cheaper than the average of Descente/ Kolon/ Arc'teryx), 3) shall support Anta’s global expansion (esp. in Germany and in Europe).
Potential impact by the US-China tariffs (mainly for Amer Sports). Since Anta does not have much direct sales to the US, therefore the direct impact from the recent increases in tariffs is limited. However, we believe Anta group will be indirectly affected as the Amer Sports group could be dragged by the new tariffs. According to our understanding, Amer Sports has about 38% sales from the US and about 20% of its supply chain is from China or Vietnam. Therefore, holding everything else constant and assuming a 1% increase in import tariffs, the impact on Amer Sports’ GP margin could be at about -0.08%. However, the actual drag might be smaller, because Anta group is a highly sophisticated company with a fairly diversified and agile supply chain (note that Wilson’s supply chain is mostly in China and that might take a longer time to adjust).
Acquisition of the “Jack Wolfskin” brand. Anta group also announced the takeover of the Jack Wolfskin brand from Topgolf Callaway (MODG US, NR) for US$ 290mn (about RMB 23.5bn) in cash. The target company was incorporated in Germany, owning and operating “Jack Wolfskin”, which is a world-leading outdoor apparel, footwear and equipment brand. Its star products include the 3-in-1 Windbreaker jacket as well as the “Texapore” material, a fabric that is both waterproof and breathable. Based on the seller Topgolf’s estimates, Jack Wolfskin could generate about EUR 325mn sales and EUR 12mn adjusted EBITDA in FY25E (EUR 115mn/ EUR 210mn sales and EUR -12mn/ EUR 30mn adjusted EBITDA in 1H25E/ 2H25E due to seasonality). Therefore, the valuation is not particularly demanding in our view. The FY25E P/S Anta paid is at around 0.8x, much lower than Anta group’s 2.8x and global sports industry average of 1.5x and also cheaper than the 1.3x valuation that Topgolf bought it (Topgolf paid about EUR 418mn back in FY19, where sales were roughly at EUR 319mn). The FY25E EV/ EBITDA is at about 21.3x (EV should be fairly similar to the market cap as the management mentioned the net cash or debt are negligible), slightly higher than Anta group’s 9.6x and industry average of 10.5x, but we still think it is reasonable because Anta has a decent track record (the returns can still be highly meaningful once the brand is rebranded and products are upgraded). Jack Wolfskin sales mix from Europe/ China was roughly at 72%/ 28%, while the number of stores in Europe/ China was at about 220-230 (based on the numbers on its official website)/ 290-300 (based on management, 41 direct retail stores and 250-260 franchise stores) in 2024.
Maintain BUY and trim TP to HK$ 119.08, based on 24x FY25E (unchanged). We revise down FY25E/ 26E/ 27E net profit forecasts by -1%/ -1%/ -2%, in order to factor in decreases in cash and interest income after the acquisition. The stock is trading at 17x FY25E P/E, still rather attractive in our view, compared to its 5-year average of 25x.