Analysis Report on HLA's Agency of Adidas FCC Business

Based on the information I have collected, let me conduct a comprehensive analysis for you.

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HLA has established a partnership with Adidas through its holding subsidiary

Sibozi is responsible for the exclusive agency of Adidas’ product series’ retail business in mainland China [1]. HLA holds a 55% stake in Sibozi, giving it a controlling position.

• Sinking Market Strategy
  : FCC is a dedicated product line and store format launched by Adidas for China’s lower-tier cities (fourth- and fifth-tier cities and county-level markets)
• Cost-Effective Product Line
  : Customized products are launched to meet the needs of the sinking market, aligning with local consumption capacity and preferences
• Channel Empowerment
  : Leveraging HLA’s accumulated channel network in the sinking market, Adidas can deeply reach consumers in lower-tier cities

Time Node	Number of FCC Stores	Remarks
H1 2025	529	Already profitable
Expected by end of 2025	Over 700	Sustained rapid expansion

As of June 30, 2025, the total number of HLA’s full-brand stores has reached

, including 2,099 directly-operated stores and 5,110 franchise and other stores [2].

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According to institutional forecast data, the revenue contribution of the Adidas FCC project is as follows [3]:

Indicator	2024	2025 (E)	2026 (E)
Operating Revenue (RMB 100 million)	3.33	12.86	21.13
YoY Growth Rate	-	286.8%	64.2%
Number of Stores	480	830	1,030
Store Efficiency (RMB 10,000/year)	69.3	155.0	205.1
Net Profit (RMB 100 million)	0.008	0.82	2.14
Net Profit Margin	0.2%	6.3%	10.1%

• The FCC business is expected to achieve revenue of
  RMB 1.286 billion
  in 2025, accounting for
  5.3%
  of HLA’s full-year revenue forecast (RMB 24.13 billion)
• The business is in a rapid growth phase, with store efficiency increasing from RMB 693,000 per year in 2024 to the forecasted RMB 1.55 million per year in 2025
• The net profit margin has increased from 0.2% to 6.3%, with profitability continuously improving

HLA’s “Other Brands” business segment has performed impressively, achieving revenue of

in H1 2025, with a year-on-year growth of [2], which is significantly higher than the company’s overall growth rate. This segment includes:

• Adidas FCC business
• Austrian sports brand HEAD
• JD Outlets business

In the first three quarters of 2025, the Other Brands business achieved operating revenue of

, with a year-on-year growth of , becoming an important engine for the group’s growth [4].

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Business Segment	Revenue (RMB 100 million)	Proportion	YoY Growth Rate
HLA Series (Core Brand)	83.95	74.7%	-5.86%
HLA Group Customization	13.43	11.9%	+23.70%
Other Brands	15.00	13.3%	+65.57%
Total	115.66	100%	+1.73%

It should be noted that HLA’s concept of “non-apparel categories” is divided into

:

• JD Outlets business (covering multiple categories such as sports, light luxury, and beauty)
• Jiangyin HLA Water Beverage Co., Ltd. established in 2023 (cross-industry attempt)
• Other non-apparel businesses

• Adidas FCC business (sportswear)
• HEAD brand (sportswear)
• Extended self-owned brands such as OVV Women’s Wear, Black Whale Men’s Wear, and Yeehoo Children’s Wear

Business Segment	2024 Revenue Contribution	2025 Estimated Contribution	Trend
Core Brand	RMB 15.069 billion (72.5%)	RMB 15.92 billion (66.0%)	Proportion Declining
Adidas FCC	RMB 333 million (1.6%)	RMB 1.286 billion (5.3%)	Significant Increase
JD Outlets Online	RMB 1.05 billion (5.1%)	RMB 1.208 billion (5.0%)	Stable
JD Outlets Offline	RMB 15 million (0.1%)	RMB 1.062 billion (4.4%)	Rapid Expansion
Growth Brands	RMB 1.458 billion (7.0%)	RMB 1.543 billion (6.4%)	Basically Stable
HLA Group Customization	RMB 2.081 billion (10.0%)	RMB 2.191 billion (9.1%)	Stable
Other	RMB 1.018 billion (4.9%)	RMB 916 million (3.8%)	Slight Decline

• The proportion of the traditional core brand (men’s wear) has decreased from 72.5% to 66.0%, a drop of 6.5 percentage points
• The combined proportion of new businesses (Adidas FCC + JD Outlets Online + Offline) has increased from 6.8% to 14.7%, an increase of 7.9 percentage points
• The revenue proportion of non-traditional apparel categories (including sports brand agency) shows a clear upward trend

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1. Category Breakthrough
   • Enter the sportswear track, filling the gap in the product matrix
   • Leverage Adidas’ brand momentum to enhance brand vitality
   • The sports and outdoor track has high prosperity, which is in line with consumption trends

2. Channel Reuse
   • Utilize HLA’s channel network in the sinking market (over 7,000 stores)
   • FCC stores form a synergistic effect with existing stores
   • Reduce the cost of developing new channels

3. Model Verification
   • Provide an experience template for subsequent cooperation with international brands
   • Demonstrate the company’s capabilities in brand operation and channel management

1. Channel Sinking
   • Reach consumers in fourth- and fifth-tier cities through HLA’s network
   • Increase market share and expand incremental markets

2. Cost Control
   • Adopt an asset-light model to reduce capital expenditure for channel expansion

Evaluation Dimension	Performance	Rating
Revenue Contribution	Expected to contribute RMB 1.286 billion in 2025, accounting for 5.3%	★★★☆☆
Growth Performance	Expected to grow 286.8% YoY in 2025	★★★★★
Profitability Improvement	Net profit margin increased from 0.2% to 6.3%	★★★★☆
Store Expansion	From 529 to over 700 stores, rapid expansion speed	★★★★★
Strategic Synergy	Forms complementarity with the core brand	★★★★☆
Risk Control	55% holding in Sibozi, risks are controllable	★★★★☆

1. Limited Scale Proportion
   • Even if the Adidas FCC business reaches RMB 1.286 billion in 2025, its proportion in total revenue is only 5.3%
   • The core brand still contributes 66% of the revenue, and the label of “Men’s Wardrobe” is difficult to change in the short term

2. Profitability Needs Improvement
   • The net profit margin of the FCC business is 6.3%, lower than the core brand’s expected 10.9%
   • The new business has high initial promotion costs, and profitability requires time to cultivate

3. Brand Dependence Risk
   • As an agency business, it relies on the Adidas brand
   • If Adidas adjusts its China region strategy, it may affect business stability

4. Inventory Management Pressure
   • HLA’s overall inventory turnover days are as high as 323 days
   • The consolidation of the new business may increase the complexity of inventory management

5. Intensified Market Competition
   • The sportswear track is highly competitive, and it needs to compete with brands such as Anta and Li Ning
   • The consumption capacity of the sinking market is limited, and price sensitivity is high

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1. Significant Contribution
   : The combined expected revenue contribution of new businesses (Adidas FCC + JD Outlets) in 2025 is approximately
   RMB 3.56 billion
   , accounting for
   14.7%
   of the full-year revenue forecast, an increase of about 8 percentage points compared to 2024
2. But Caution is Needed in Defining Non-Apparel Categories
   : If strictly defined as “non-apparel” (excluding sportswear agency), the proportion of genuine non-apparel categories is extremely low; if including sportswear agency, the proportion can reach about 15%
3. Transformation is Still in Progress
   : The core brand still contributes 66% of the revenue. The diversification strategy has initially shown results but has not fundamentally changed the company’s business structure

• Number of Adidas FCC stores reaches 1,030
• Revenue contribution reaches RMB 2.113 billion
• Proportion of total revenue increases to 7.5%
• Net profit margin increases to 10.1%

• Number of Adidas FCC stores reaches 900
• Revenue contribution reaches RMB 1.8 billion
• Proportion of total revenue increases to 6.5%
• Net profit margin increases to 8%

• Expansion of Adidas FCC stores falls short of expectations
• Revenue contribution reaches RMB 1.5 billion
• Proportion of total revenue is about 5.5%
• Net profit margin remains at around 6%

1. Macroeconomic Risk
   : Consumption recovery falls short of expectations, affecting sportswear sales
2. Business Expansion Risk
   : FCC store expansion speed falls short of expectations
3. Brand Cooperation Risk
   : Adidas adjusts its China region channel strategy
4. Inventory Management Risk
   : High inventory turnover days, inventory impairment pressure
5. Industry Competition Risk
   : Intensified competition in the sportswear track

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HLA’s agency of Adidas FCC business

, but due to limitations in business scale and profitability, it is difficult to fundamentally change the company’s business structure dominated by men’s wear in the short term. The specific conclusions are as follows:

1. Quantitative Evaluation
   : The new businesses (Adidas FCC + JD Outlets) are expected to contribute RMB 3.56 billion in revenue in 2025, accounting for 14.7% of total revenue, an increase of about 8 percentage points compared to 2024, indicating that the diversification strategy is producing actual results
2. Qualitative Evaluation
   : Through cooperation with an international brand, HLA has successfully entered the sportswear track, enriched its product matrix, enhanced brand vitality, and laid a foundation for subsequent international development
3. Investment Recommendation
   : In view of the high-speed growth of the new business and continuous improvement in profitability,
   we maintain a “Buy” rating
   with a target price of RMB 8.56 per share. However, investors need to pay attention to changes in the consumption environment and the progress of new business expansion

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[1] Weikehao - Interpretation of HLA’s 2025 Half-Year Report: Running at “Acceleration” in a Weak Market (https://mp.ofweek.com/finance/a456714576597)
[2] Nandu Bay Finance - “Men’s Wardrobe” HLA Achieves RMB 11.5 Billion in H1 Revenue, Overseas Business Grows Rapidly (https://m.mp.oeeee.com/a/BAAFRD0000202508291118616.html)
[3] Dongfang Fortune Securities Research Report - In-Depth Report on HLA: Leading Position in Men’s Wear Remains Stable (https://pdf.dfcfw.com/pdf/H3_AP202501241642530455_1.pdf)
[4] Efu.com - Behind HLA’s Countertrend Growth: What Business Secrets Are Hidden in Its 2025 Q3 Financial Report? (https://m.ef360.com/news/391262.html)
[5] 36Kr - HLA Begins to Build Its Own Ecosystem (https://www.36kr.com/p/3624935467549961)
[6] Ebrun - HLA’s Weekly Trends: Co-Building a Sports Ecosystem with Adidas and Seeking Growth Through Hong Kong IPO (https://www.ebrun.com/20260109/636135.shtml)
[7] DoNews Column - HLA No Longer Wants to Only Do “Straight Male Business” (https://www.donews.com/article/detail/7489/95470.html)
[8] Jiemian News - HLA Crosses into “Selling Water”? Zhou Lichen Doesn’t Want to Be Trapped in “Dad Vibe” (https://www.jiemian.com/article/13746259.html)
[9] Soochow Securities - Review of HLA (600398) 2025 Half-Year Report (https://pdf.dfcfw.com/pdf/H3_AP202509011737672692_1.pdf)
[10] Securities Times Network - HLA Achieves Over RMB 11.5 Billion in H1 Operating Revenue, Multi-Brand Matrix Builds Ecological Barriers (https://stcn.com/article/detail/3281486.html)