Xtep International Holdings reported a 6.16% gain in its Hong Kong-listed shares on Tuesday after releasing interim results for the first half of 2026, which showed gross profit margin expansion amid a broader segmental shift toward higher-margin professional sports brands.
The sportswear company posted revenue of RMB 6.795 billion for the six months ended June 30, 2026, a 0.6% decline from the same period a year earlier. Gross profit rose 2.6% to RMB 3.155 billion, lifting the gross margin to 46.4% from 45.0% in H1 2025. Net profit, however, declined 10.5% to RMB 818 million, with net margin compressing to 12.0% from 13.4%.
The professional sports division, comprising Saucony and Merrell, recorded an 11.4% increase in revenue to RMB 875 million, representing 12.9% of total revenue compared with 11.5% a year earlier. Operating profit in the segment rose 15.5% to RMB 91 million, with operating margin improving to 10.4% from 10.0%. The mass-market Xtep brand, which accounts for 87.1% of revenue, saw a 2.2% revenue decline to RMB 5.92 billion, though gross margin expanded to 45.1% from 43.6%.
Operating expenses climbed 9.5% to RMB 2.323 billion, driven by higher selling, distribution and administrative costs, which rose to 34.2% of revenue from 31.0%. Adjusted operating profit fell 6.2% to RMB 1.204 billion, with the adjusted operating margin at 17.7% versus 18.8% in the prior-year period. R&D spending held steady at 2.7% of revenue, with management indicating plans to maintain the ratio near 3%.
The company declared an interim dividend of HK 18.0 cents per share, marking a payout ratio of 53.8%—the highest in five years. Cash and equivalents surged 36.3% to RMB 2.326 billion, while bank borrowings fell 41.9% to RMB 637 million. Net cash position improved to RMB 2.326 billion, up from RMB 1.706 billion at year-end 2025.
Chairman and CEO Ding Shui Po noted that the first half of 2026 presented a complex and volatile domestic macroeconomic environment with persistent industry competition. The company emphasized a focus on operational quality and strategic consolidation. CFO Dona Ding highlighted stable revenue and a 1.4 percentage-point improvement in gross margin to 46.4%, describing brand momentum as steadily improving.
Xtep operates 6,308 stores across mainland China and overseas markets. The company also reported progress in sustainability initiatives, including an MSCI ESG rating of 'A' and recycled fabric waste totaling 92 tons from its supply chain.
