Xtep in 2025: Main brand growth slows, DTC challenges arrive albeit late

Xtep International achieved total revenue of RMB 14.151 billion in 2025, a year-on-year increase of 4.2%. Excluding the impact of the profit and loss from discontinued operations (K·SWISS and Palladium), the profit attributable to ordinary shareholders reached RMB 1.372 billion, a year-on-year increase of 10.8%, marking a historic high. From a business structure perspective, the core "Xtep" main brand revenue was RMB 12.515 billion, with a year-on-year increase of only 1.5%, further slowing compared to 2024. In contrast, the professional sports division consisting of Saucony and Merrell grew 30.8% year-on-year to RMB 1.636 billion, with operating profit increasing 46.4% to RMB 114 million, outlining the contours of a "second growth curve." Facing the trend of main brand sales growth peaking, Xtep International's strategic transformation is becoming urgent. The company is learning from Saucony’s successful DTC transformation and intends to replicate it on a large scale in its main brand sales channels. Xtep has stated its plan to recover distribution rights from about 400 to 500 authorized distributor stores in the second half of 2025 and 2026, with direct operation of flagship stores to improve operational efficiency. To this end, in February 2025, Xtep International raised HK$1 billion, mainly to further develop the DTC business model for both the Xtep main brand and Saucony. However, the channel pressures brought by the transformation have already begun to emerge. The channel inventory turnover days for the Xtep main brand extended from “about 4 months” in 2024 to “about four and a half months” in 2025. Analysis indicates the slowdown in turnover may be affected by multiple factors such as slowing retail growth for the main brand and “channel stocking” effects prior to the DTC transformation. Meanwhile, the group’s gross margin from continuing operations in 2025 was 42.8%, a slight year-on-year decline of 0.4 percentage points, reflecting that profit margins are being compressed as direct investment increases and inventory is cleared. Global performance became a major highlight for Xtep in 2025. In 2025, Xtep’s overseas revenue nearly doubled, and cross-border e-commerce, driven by strong growth on key Southeast Asian platforms such as Shopee, TikTok, and Lazada, achieved over 220% growth. During the year, Xtep opened its first overseas running club in Singapore and worked with Malaysia’s Bonia to open a flagship running store, with its overseas layout gradually shifting from online penetration to all-channel expansion. Based in the fiercely competitive sportswear track, Xtep is strengthening its image as "China’s No. 1 running brand" to consolidate its foundation. In 2025, the group deepened ties with professional runners by sponsoring 74 running events and expanding 71 running clubs; on the product side, the "160X 7" series and the "Qingyun" series enabled full coverage from elite racing to the mass market. For Xtep, strategic focus after divesting loss-making businesses has begun to show results, but inventory management and store efficiency improvement under the DTC model remain core challenges in the coming year. Whether profit growth can be transformed into long-term brand moat still depends on its actual control level over terminal channels. Risk Warning and Disclaimer The market has risks; investments require caution. This article does not constitute personal investment advice, nor does it consider the specific investment goals, financial circumstances, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at your own risk.