Ding Shuibo can't sit still! Xtep's performance falls short of expectations, relying on a cross-border acquisition from two years ago to prop up the situation.

How will Ding Shuibo lead Xtep in responding to stock price fluctuations?

On Thursday afternoon, Xtep International (01368.HK) saw its stock plunge over 9% during trading, dropping to HKD 4.66 per share, the lowest level since April of last year.

From the newly released 2025 financial report, this drop may be related to the group’s performance not meeting expectations, declining gross margins, and excessive reliance on the professional sports sector for growth.

By the end of trading, Xtep International closed at HKD 4.78 per share, down 7%, with a total market capitalization of approximately HKD 13.4 billion.

On the same day, Xtep International released favorable 2025 performance results, but it still could not stop the sell-off, possibly related to the results not meeting expectations.

It is noteworthy that several well-known Hong Kong-listed companies have recently experienced stock price drops after releasing impressive financial reports for the previous year. Previously, Alibaba-W and Pop Mart saw significant declines after their earnings announcements, and on Thursday, Kuaishou’s stock plummeted nearly 15% after its earnings report.

01

The decisive role of the “professional sports division”

Xtep International’s 2025 performance report indicates that total revenue for 2025 reached RMB 14.15 billion, a year-on-year increase of 4.2%, below the estimated RMB 14.38 billion; net profit for the year was RMB 1.37 billion, a year-on-year increase of 10.8%, also below the estimated RMB 1.38 billion. Both key metrics fell short of expectations.

In the annual report, Xtep International particularly emphasized the decisive role of the “professional sports division.”

Xtep International pointed out that the revenue growth in 2025 was mainly driven by the solid performance of the Xtep main brand and the strong growth of the “professional sports division.”

The revenue of the Xtep main brand only grew by 1.5% year-on-year, while the revenue of the professional sports division surged by as much as 30.8% year-on-year.

02

The fruits of a two-year-old multinational acquisition

The “professional sports” referred to by Xtep mainly pertains to marathon events, as well as outdoor (Mizuno brand) and basketball.

Regarding marathons, Xtep International noted that the Xtep and its Saucony brand maintained the top position in the domestic major marathon event wear rate during 2025 to 2026, capturing the highest overall wear rate in six key marathon events: Shanghai, Beijing, Xiamen, Guangzhou, Wuxi, and Chengdu, “fully validating the effectiveness of the ‘professional impacting the public’ strategy.”

Data shows that Saucony was originally a brand under the American Wolverine World Wide Group, established in 1898 and headquartered in Pennsylvania, USA, focusing on the design, research, and manufacturing of running shoes.

On December 17, 2023, Xtep International announced the acquisition of the equity held by the joint venture company where Saucony is located for USD 61 million, along with acquiring 40% ownership rights of Saucony in China. Since then, the joint venture company has become a wholly-owned subsidiary of Xtep. Xtep’s wholly-owned subsidiary XMS Sports will acquire 40% of the ownership rights of Saucony Asia IP Holdco, which holds the intellectual property rights of the Saucony brand in mainland China, Hong Kong, and Macau.

It is Saucony’s outstanding performance that has laid the foundation for the significant revenue growth of Xtep International’s professional sports division.

Xtep International stated that benefiting from Saucony’s strong revenue growth, the professional sports division “achieved excellent financial performance” in 2025. As of December 31, 2025, Saucony had 175 stores in mainland China.

Additionally, Saucony has established a high-end brand image among running and elite social groups and further enriched its lifestyle and leisure product line in 2025, broadening its market reach.

03

Gross margin decline raises concerns

Despite this, the decline in the gross margin of the professional sports division is more pronounced and deserves attention.

Xtep International stated that the gross profit of the professional sports division significantly rose by 27.0% to RMB 900 million (compared to RMB 715 million in 2024), but the gross margin was 55.5%, down nearly 2 percentage points from 57.2% in 2024.

In contrast, the gross profit of the mass sports division grew by only 0.1%, but the decline in gross margin was slight, dropping from 41.8% in 2024 to 41.2% in 2025.

Xtep International explained that the lower gross margin of the professional sports division is due to a higher contribution from apparel sales, which have a lower gross margin than footwear.

04

Limited overseas business promotion to Southeast Asia

In terms of Xtep International’s emphasis on “accelerating the advancement of globalization strategy,” the group primarily promotes in Southeast Asia and deepens cross-border e-commerce business.

In September last year, Xtep opened its first overseas running club at the Kallang Wave Mall in Singapore, promoting it as a community center.

Additionally, Xtep further strengthened its retail layout by reaching an important partnership with Malaysia’s Bonia, opening a 300-square-meter running flagship store at the famous Mid Valley Megamall in Kuala Lumpur.

At the same time, Xtep’s cross-border e-commerce business achieved rapid growth of over 220%. Platforms such as Shopee, TikTok, and Lazada in Southeast Asia performed particularly strongly.

Overall, although Xtep saw significant increases in revenue and profits, they were slightly below expectations, and most of the growth came from sub-brands in the professional sports sector, with the main brand showing no significant growth. The decline in gross margins also poses concerns. This may be the reason for the sharp drop in stock price.

05

Ding Shuibo: Responding to external market fluctuations

At 56 years old, Xtep founder Ding Shuibo entered the shoe industry in 1987 and established the Xtep brand in 2001, headquartered in Quanzhou, Fujian Province, inviting Nicholas Tse to serve as the brand ambassador, thus initiating the era of entertainment marketing for Chinese sports goods companies. On June 3, 2008, Xtep was listed on the Hong Kong Stock Exchange.

In 2019, Xtep signed a joint venture agreement with Wolverine to develop, market, and distribute Merrell and Saucony in mainland China, Hong Kong, and Macau, and fully acquired K-Swiss and Palladium brands under the E-Land Group, entering the stage of multi-brand and international development.

Currently, Ding Shuibo serves as the chairman and CEO of Xtep International.

In the 2025 financial report, Ding Shuibo pointed out that “market leadership can better respond to external market fluctuations.” However, in the report, he did not specify what the external market fluctuations referred to.