Offline growth moderated in 2Q26 on a high base – The company held an investor call to provide its 2Q26 business update.  361 Degrees saw a moderation in offline sales growth against a high comparable base. Retail sales of both the core brand and the kids' brand (offline channels) recorded mid-to-high single-digit YoY growth, with the discount rate stable at 71%. Growth in both segments slowed compared with the same period over the past three years and recorded a sequential decline on a QoQ basis. This moderation is largely attributable to a high base, given that the company had sustained double-digit annual growth since 2021. Against this backdrop, we consider the sales performance to be resilient.

E-commerce sales growth decelerated sharply – Retail sales through e-commerce platforms recorded high-single-digit YoY growth, representing a sharp slowdown compared with previous quarters where growth ranged from 20% to 40%. Despite the support of the “618 shopping festival”, the company's online platform posted only sluggish growth, reflecting intensifying competition in the e-commerce space. That said, we remain confident in the future growth of the e-commerce channel. This optimism is underpinned by the company's dual-track inventory model, which features online-exclusive products, as well as the continued structural shift of Chinese consumers toward online shopping.

Our views: Looking ahead to 3Q26, we view the Asian Games (scheduled from 19 September to 4 October), for which 361 Degrees is an official sponsor, as a potential catalyst. The event is expected to enhance its brand exposure in neighboring countries while the company is expanding overseas. At the same time, the company has remained disciplined in advertising and promotion expenses. With recent order booking sessions broadly in line with expectations, and Super Premium Store expansion remaining on track, we maintain our FY26E topline growth forecast of 8–10%, in line with previous official guidance. The stock is trading at 5.4x FY26E P/E. (Amelia Deng)