"‘Firefighting’ Adidas, teaming up with JD.com: Is HLA turning into a ‘contractor’ for the lower-tier market?"

``` For the first time, the name of a long-established menswear brand—HLA (Heilan Home)—appeared on the sponsor list of a trail running event. Recently, the SKYLINE Trail Series was launched in Shanghai, with HLA presenting its professional sports brand “HLA POW 兰跑” as a core partner, exclusively naming the high-altitude events at Basongcuo and Helan Mountain. In the past two years, from the Wuxi Marathon to the “Sichao” City Football League, and on to the Jiangyin “Village BA” and China Men's Basketball warm-up matches, HLA has been increasing its presence in sports scenarios, attempting to use events, communities, and brand IP to reshape the “men's wardrobe.” However, on a more practical business level, such high-frequency exposure has not resulted in corresponding growth. In 2025, HLA achieved revenue of 21.626 billion yuan, a year-on-year increase of 3.19%, with profit growth almost stagnant. The main brand has peaked in first- and second-tier markets, and diversified businesses have not yet become an effective support. “Selling our own clothes” has become increasingly difficult. HLA has begun to consider: can it use its offline channel management capabilities, accumulated over more than 20 years, to sell other people’s clothes? Over the past two years, HLA started exploring this question. Through its subsidiary "Sports Brand Management (Shanghai) Co., Ltd.", the company has taken on two seemingly different yet logically similar businesses: the Adidas FCC store system and JD Outlet channels. As of 2025, Adidas FCC stores have grown from 433 to 723. JD Outlets have expanded from 12 stores to 60. In 2025, revenue from “other brands,” including diversified private labels and the new businesses above, reached 3.447 billion yuan, a year-on-year increase of 29.18%. The expansion path beyond self-owned brands is becoming clearer, but problems are arising: As the former “asset-light king” gradually shifts towards self-operated retail, is this a second growth curve beyond the men’s wardrobe, or the prologue to another round of inventory risk coming back onto the books? Sports Giants’ Path to Lower-Tier Markets At the end of 2022, HLA, via a subsidiary, jointly established Sports Brand Management (“Sibozhi”) with Haixin Sports. In the early phase, relying on platforms like JD and Vipshop, they distributed inventory stock of international brands such as Nike, Adidas, PUMA, Vans, and ASICS. In 2023, Sibozhi achieved operating income of 597 million yuan and net profit of 85 million yuan, with a net margin of about 14%, contributing about 34 million yuan in investment returns to HLA. However, Sibozhi did not stop at being a middleman for clearing inventory online. In 2023, HLA established a long-term partnership with Adidas, increasing its stake in Sibozhi to 40%; by 2024, HLA took control and consolidated Sibozhi, which gradually transformed into a “channel operator.” The real business transformation came from the launch of the Adidas FCC (Future City Concept) project. FCC stands for “Future City Concept Store”, a channel expansion in the Adidas system targeting lower-tier markets. Product prices sit between regular price stores and outlets, offering new products, out-of-season items, and early launches of the youthful sport-casual line “adidas Neo”. In this setup, Adidas exclusively develops product lines for the FCC channel, emphasizing cost-effective prices and casual designs, while HLA handles site selection, store openings, and operations, controlling merchandise assortment and sales rhythm through a buyout model. The advancement of the FCC project coincided with Adidas’ crucial period of inventory reduction. After the pandemic, international sports brands broadly entered an inventory reduction cycle. Traditional paths—e-commerce promotions, outlet systems, channel clearance—are either inefficient or damage the price system. It is argued that FCC, by “custom supply + channel segmentation,” is a compromise to handle specific inventories. HLA’s operational know-how and channel acumen in lower-tier markets made it a key partner in this model. On the expansion method, FCC franchise stores are highly similar to the classic “HLA model”: partners cover rent and operating costs, bear no inventory risk, and Sibozhi delivers the goods on a consignment basis. According to HLA’s prospectus, by mid-2025, there were 529 FCC stores in China: 236 directly operated and 293 franchised. Nevertheless, skepticism persists. Adidas’ move into lower-tier markets cannot avoid the hidden worry of brand dilution. Tang Xiaotang, a fashion industry analyst with No Agency, told All-weather Technology: Adidas’ strategy is essentially “trading brand for market share,” but the actual results are uncertain. The core concern is whether some product lines—such as adidas Neo, which once failed in China due to price competition with local brands—will be competitive in lower-tier markets. Industry-wide, since the second quarter of 2023, Adidas’ performance in China has gradually recovered, reaching a stage high in 2025, but its growth rate and share remain under pressure in the overall sportswear market. A senior shoe and apparel consultant also told All-weather Technology that the general decline of street-front stores is difficult to reverse, so FCC’s store growth may be limited. Nevertheless, the pace of cooperation has clearly accelerated. At the end of 2025, HLA and Adidas announced a joint “Sports+” ecosystem, extending cooperation from channel distribution to event operations, co-created products, public welfare, and cultural communication. The “Lanpao Learning Club” is now the core platform for co-marketing, and its event IP “HLA POW King Challenge” has attracted more than 10,000 runners and millions of livestream views. Channels remain the foundation. By the end of 2025, Sibozhi was operating 723 Adidas FCC stores, a net increase of 290 for the year. The “Transit Station” for Clearance Goods After FCC proved the “major brand cooperation + clearance stock + lower-tier market” framework, HLA is seeking to replicate and expand this into a multi-brand, all-category discount retail matrix. In July 2024, HLA reached a strategic cooperation with JD, jointly advancing the omni-channel outlet business. The operating entity, Shanghai Jinghai Outlet, was established. In March 2026, JD, via Suqian Hanbang, increased its investment to a 20% stake (HLA holds 70%), completing a deep, long-term equity tie-up. Division of labor: JD provides traffic and brand endorsement, Sibozhi handles procurement and online operations, while HLA leads on offline site selection and store management—the areas with the strongest competitive moat. JD Outlets show a clear “asset-light + consignment” model. According to Founder Securities estimates, about 90% of products are consigned, while 10% of bestsellers are bought out. In the consignment system, HLA keeps roughly 40% commission from sales, sending unsold items back to suppliers risk-free. At the channel end, JD Outlets cooperate with shopping centers on a revenue-share model, typically paying only 5%-6% in rent plus about 3% platform fee. Compared with the asset-heavy buyout method of traditional suburban outlets, this approach greatly reduces capital occupation and inventory risk, with higher turnover and ROE. Lower-tier deployment also avoids direct conflict with full-priced stores. This model is practical now due to the industry environment. Brands urgently need to clear inventory through new channels without damaging price systems in top cities; meanwhile, lower-tier commercial real estate faces a cold investment climate and is open to traffic-driving discount formats. Du Bin, Secretary-General of the Brand Professional Committee at the Shanghai Shopping Center Association, noted that even top projects like Wanda and Longfor increasingly value the complementary role of the outlet format: “Introducing such an anchor store is reasonable even at the cost of a few brands.” Driven by both supply and demand, JD Outlets have opened 48 stores in just one year. Physical stores are mainly in core districts of 3rd- to 5th-tier cities, covering 3,000–5,000 square meters, introducing brands like Adidas, PUMA, and COACH, and emphasizing high cost-performance and one-stop shopping. In the first half of 2025, JD Outlets revenue reached 42.18 million yuan. Under the consignment model, the company recognizes income as an agent (commission only), resulting in a gross margin as high as 95% on the reports. However, with the consignment model, HLA’s control over procurement, pricing, and supply chain weakens. A senior footwear/apparel consultant told All-weather Technology that while JD Outlets can now get international brand clearance, the tight domestic distribution system makes it hard to access inventories from local brands such as Anta, Li Ning, and Lilanz—these are still the “basic plate” of lower-tier markets. For comparison, overseas outlet leader TJX relies on a buyer model for “opportunity buyouts,” building a moat in selection and negotiation power. JD Outlets’ competitive barriers still rest on channel advantages and site selection inertia. A deeper concern is that when inventory risk is simply shifted to brands, rather than absorbed by retail capability, the channel’s surface prosperity can hide supply chain lag. Will this “channel integration” fueled by the halo of external brands lead to another inefficient cycle, as HLA’s main brand once experienced? The “Heavy Burden” of Asset-Light Operations? HLA’s joint operation + returnable inventory model once gave it huge operational leeway. Upstream, the company took goods on account with a “returnable” clause, passing unsold risk to suppliers. Downstream, franchisees mainly provided funds and bore expenses as “financial investors,” sharing income proportionally. This structure enabled HLA to expand scale and achieve high profit without much capital tied up or taking on inventory risk. Under founder Zhou Jianping, HLA was once an industry “money machine”: net margins exceeded 20% for years, with ROE as high as 30%. But the core of “asset-light” is to use brand and channel power to leverage supplier and franchisee funds—the premise being strong brand and channel. That premise is falling apart. In recent years, though HLA signed stars like Lin Gengxin, Pan Zhanle, and Zeng Shunxi as spokesmen, the “men’s wardrobe” stereotype has become increasingly fixed as “dad’s wardrobe,” and brand appeal is waning. If end-sales slow, franchisees cannot cover costs with income and are more likely to close, undermining scale and supply chain bargaining power on both sides. In this sense, HLA’s recent adjustments—including new businesses—are not a proactive choice to “get heavier,” but a forced move to retail fundamentals as its original model fails. On channels, the company is “reducing franchise, increasing direct operation.” By the end of 2025, direct stores accounted for 32.4% of all brand stores, up nearly 17 percentage points from three years before. Gross margin at direct stores in 2025 reached 62.6%, much higher than franchise stores at 40%, but higher wage and rent costs have pushed overall selling expense rate up by over 5 percentage points in three years to 23.8%. If channel changes mean “costs move up,” then changes in inventory mean “risks return to the books.” By the end of 2025, inventory book value hit 10.819 billion yuan and inventory turnover days rose to 344 (up 14 days year-on-year). For the year, the company provisioned 495 million yuan for inventory impairment, with cumulative provisions at 941 million yuan. New business investment amplifies this trend. Whether the Sibozhi-led FCC model or the JD outlet format, both are essentially self-operated retail: the company must be more hands-on in merchandise management and bear corresponding unsellable and impairment risks. In 2024, HLA’s inventory rose from 9.337 billion to 11.987 billion yuan, with a surge in “non-returnable” stock—the core reason being Sibozhi’s consolidated inventory. In 2025, losses to non-controlling shareholders reached -34 million yuan (HLA holds 51%/70% of Sibozhi/Jinghai, respectively), indicating the new businesses are still loss-making. Analysts attribute this to provisions for Sibozhi inventory and the ramp-up phase for JD Outlets. Additionally, to support Sibozhi’s purchases from Adidas, HLA Group has provided up to 800 million yuan in accounts payable guarantees. Amid ongoing main business restructuring, these upfront investments have further reduced HLA’s net profit margin: in 2025, net margin attributable to shareholders fell 0.3 percentage points to 10%. Whether it is FCC store expansion or asset-light replication with JD Outlets, all must answer the same question: with the “returnable” moat fading, can HLA’s self-operated retail capability support a new growth curve? The answer is yet unknown, but HLA’s room for trial and error is running out. Risk Warning and Disclaimer The market has risks, and investment must be cautious. This article does not constitute individual investment advice, nor does it consider the special investment objectives, financial status, or needs of any particular user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investment decisions based on this article are at your own risk. ```