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Author｜H.H
Editor｜Yang Yong
ID|HQingXiaoFei
Following the best performance in the past 10 years in 2023, 361 Degrees continued to show impressive growth in the first half of this year.
On August 12, 361 Degrees officially released its financial report for the first half of 2024. The data shows that the revenue for the first half of this year was 5.14 billion, a year-on-year increase of 19.2%; net profit attributable to equity holders was 790 million, a year-on-year increase of 12.2%, with a gross profit margin of 41.3%.
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Image Source: 361 Degrees Financial Report
Looking back at 2023, 361 Degrees' revenue increased from 6.961 billion to 8.423 billion, a growth of 21%. In comparison, Anta's growth was 16%, Li-Ning 7%, and Xtep 11%. In terms of growth rate, 361 Degrees is undoubtedly leading by a significant margin.
The reason for such performance is multifaceted, but the key factor is likely the cost-effective strategy that 361 Degrees has been focusing on. To differentiate itself from competitors, 361 Degrees has been deeply cultivating the lower-tier market for a long time.
In the era of consumption downgrading, 361 Degrees has an absolute cost-effective advantage. However, this does not mean there are no hidden concerns. In fact, for 361 Degrees, which has risen again with the support of young people from small towns, playing the card of ultimate cost-effectiveness is also a double-edged sword. With low profit margins and difficulties in moving towards the high-end market, the pressure is evident once competitors choose to target the lower-tier market.
To address this, 361 Degrees has employed a combination of vertical tracks, technological innovation, and omni-channel marketing. However, in the continuously intensifying sports industry, the actual effects of these strategies still need further verification.
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Are young people from small towns buying up 361 Degrees?
In the first half of 2024, through horizontal comparison, it is easy to see that 361 Degrees has maintained a leading position in growth among domestic sports brands.
Revenue in the first half of the year increased by 19.2% year-on-year, with a gross profit growth of 18.3%, reaching 2.125 billion. Compared to Li-Ning, which just released its mid-year performance for 2024, the advantage of 361 Degrees is more pronounced. Li-Ning's revenue increased by 2.3% to 14.345 billion, with a gross profit growth of 5.8% to 7.236 billion. Considering Anta's previous performance forecast, the growth rate in the first half of the year was also in the single digits.
When segmented into different categories and channels, the outstanding performance in children's clothing business and e-commerce channels has greatly contributed to the growth of 361 Degrees
As one of the core drivers of 361 Degrees' performance growth, the children's business continues to maintain a high-speed growth momentum. In the first half of the year, 361 Degrees' children's business revenue reached 1.132 billion, a year-on-year increase of 24.2%, further increasing its share in total revenue to 22%.
Looking at the performance of the e-commerce channel, during the reporting period, 361 Degrees' e-commerce turnover was 1.253 billion, a year-on-year increase of 16.1%. The sales volume of flagship store's popular products increased by 79% year-on-year. During this year's 618 promotion period, 361 Degrees promoted professional racing shoes as its flagship product, quickly becoming the third largest domestic sports brand. The overall sales on e-commerce platforms increased by 94%, with the &#34;Fei Ran 3&#34; series, which is highly favored by consumers, becoming the top-selling marathon running shoe.
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As another domestic sports brand that emerged from Jinjiang, what makes 361 Degrees achieve counter-growth in the fiercely competitive sports arena? This may need to be found in the sinking market.
Undeniably, more than ten years ago, 361 Degrees emphasized the importance of the sinking market and gradually increased the proportion of stores in the sinking market, which is related to the more complete layout of first and second-tier cities by brands like Anta and Li-Ning. However, this also led 361 Degrees to take a differentiated path.
According to the financial report, in terms of store distribution, third-tier and below cities are the core layout areas for 361 Degrees. In the first half of this year, 361 Degrees had 5,740 stores, with 75.7% of the stores located in third-tier and below cities, while the proportion of stores in first and second-tier cities was only 24.3%.
The most important aspect of the sinking market is the ultimate value for money of the products, which 361 Degrees has almost maximized, to the point that many consumers' first impression of 361 Degrees is that it often offers discounts.
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Promotions at 361 Degrees' offline stores are everywhere, with discounts starting at 30% off for the entire store, 50% off for one item, 60% off for two items, and even shoes can be discounted to 70% off.
Continuous offline activities are complemented by online promotions. Taking the 361 Degrees Tmall flagship store as an example, most of the top 10 shoe products in terms of sales rankings are priced between tens of yuan to over two hundred yuan. Especially during the &#34;Vipshop Special Sale&#34; held on April 19th this year, 361 Degrees offered discounts as low as 40% off across the board, setting a new high for discounts this year.
Relying on ultimate value for money, 361 Degrees has successfully captured the hearts of young people in small towns. Today, if you have a budget of a hundred yuan and are ready to buy a pair of professional sports shoes, 361 Degrees has become one of the consumers' top choices
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The &#34;double-edged sword&#34; effect of ultimate cost-effectiveness
Public information shows that 361 DEGREES was established in 2003 and successfully listed on the Hong Kong Stock Exchange in just six years by focusing on the main brand and strengthening its three business lines: adult clothing, children's clothing, and international. At its peak, it was once in the same league as Anta and Li-Ning.
However, due to sticking to offline terminal sales and missing the trend of e-commerce platforms, the operational situation of 361 DEGREES has been deteriorating. The most obvious change is the continuous closure of offline stores. By the 10th anniversary of its listing in 2019, 361 DEGREES had closed more than 2,500 stores compared to the peak period of over 8,000 stores.
It wasn't until the recent one or two years that 361 DEGREES achieved a turnaround by focusing on the sinking market and vertical fields, engaging in differentiated competition with peers, and catering to the trend of consumer downgrading.
The key issue is that 361 DEGREES, which maximizes cost-effectiveness, is easily affected by the &#34;double-edged sword&#34; effect. After all, binding too deeply to the sinking market and then trying to take the high-end route will only make it more difficult.
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Image Source: 361 DEGREES Official Weibo
First, let's look at the gap between 361 DEGREES and other competitors among the four major domestic sports brands. Taking the 2023 financial report as an example, as the industry leader, Anta achieved a revenue growth of 16.2% to 62.356 billion, with a net profit of 10.945 billion; Li-Ning's revenue was 27.598 billion, a year-on-year growth of 6.96%; Xtep's annual revenue was 14.346 billion, a year-on-year growth of 10.9%, while 361 DEGREES ranked last with an annual revenue of 8.42 billion.
In terms of revenue scale, 361 DEGREES lags behind, and naturally, its market share is not ideal. According to data from the Huajing Industry Research Institute, as of the end of 2022, domestic sports brands accounted for 50.5% of the domestic market share, surpassing many international brands. Among them, Anta's market share is 22.6%, Li-Ning's market share is also over 10%, while 361 DEGREES is only around 3%.
In terms of company valuation, it goes without saying that Anta has a market value of over 200 billion, Li-Ning has over 50 billion, and 361 DEGREES is still striving towards the goal of reaching a market value of billions.
Having an absolute difference in magnitude compared to major competitors is just one aspect. Although vigorously expanding into the sinking market and playing the cost-effective card can boost 361 DEGREES' sales performance, it may be a helpless move to trade volume for profit.
Looking at the past performance in 2023, Anta's gross profit margin is 62.6%, Li-Ning's is 48.4%, and 361 DEGREES saw a slight increase of 0.58% to 41.1%. Over the past few years, 361 DEGREES' gross profit margin has remained stagnant
Undeniably, 361 DEGREES has handed in a report card with a significant increase in performance, but the hidden concerns behind it are quite obvious.
While performing well in the lower-end market, the emphasis on cost-effectiveness has made its own profit level worrying. With the intensifying competition in first and second-tier cities, more and more brands like Nike, Adidas, and Li-Ning are focusing on the growth potential of the sinking market. Even 361 DEGREES, which has been in its &#34;comfort zone&#34; for many years, is bound to face greater challenges.
The question to ponder is whether 361 DEGREES can fully leverage the advantages it has accumulated in the sinking market layout over the years in this trend of consumer downgrading with cost-effectiveness as the mainstream.
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What other cards can the King of the Sinking Market play?
Objectively speaking, China's sports footwear and apparel market still maintains a certain growth trend. According to iResearch Consulting data, the market size of China's sports footwear and apparel in 2023 was 492.6 billion, and with major domestic brands continuously surpassing international brands, it is expected that this number will reach 598.9 billion by 2025.
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Image Source: iResearch Consulting
For both 361 DEGREES and other sports brands, it is both an opportunity and a challenge. So, what other cards can 361 DEGREES play in the continuous expansion of the sinking market?
In 2024, recognized as a sports grand year, 361 DEGREES continues to strengthen its presence in the vertical sports track. In February, it officially partnered with the International Swimming Federation to become the official sports apparel supplier; in April, it signed a contract to become the official partner of the 9th Asian Winter Games in Harbin in 2025; and at the recent Paris Olympics, 361 DEGREES, as a long-term sponsor of the national triathlon team, attracted attention as a sports brand.
Sponsoring marathon events in the running field goes without saying. Just in the first half of this year, 361 DEGREES' endorsers such as Li Zicheng and Guan Yousheng, top domestic runners, have achieved outstanding results.
In addition to cooperating in various international major events, 361 DEGREES is also sparing no effort in its investment in its own IP events.
In 2021, the &#34;Third Track&#34; emerged, setting up a 10-kilometer speed series race for elite runners, with over 180 events held in the first half of the year, and the community numbers showing exponential growth. As early as 2020, 361 DEGREES founded the &#34;Ignition on Ground&#34; basketball event, which has gradually grown into a phenomenon-level IP in China. In just the first half of this year, the event has held over 270 games, with a cumulative fan base of over 76,000.
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Source: Official Weibo account of 361 Degrees
To this day, 361 Degrees has gradually formed a brand matrix in the vertical field, focusing on running series, basketball series, and sports lifestyle series, aiming to create a professional sports image.
Looking at the research and development side, nowadays, major sports brands are all stepping up their efforts in technological innovation, and 361 Degrees is no exception.
According to past financial reports, from 2019 to 2023, 361 Degrees' investment in research and development increased from 214 million to 313 million, with a compound annual growth rate of 10%. In the first half of 2024, R&amp;D investment was 140 million, and it is expected to further accelerate in the second half of the year. It is worth mentioning that as of the first half of this year, 361 Degrees has already obtained 562 patented achievements.
Investments in research and development are reflected in the product side, with 361 Degrees successively launching popular products such as Fei Ran 3, Fei Fei Future1.5, and BIG3 5.0 QUICK, which have been well received by the industry and consumers.
In addition to sports products, 361 Degrees has also introduced the &#34;Light Outdoor Series,&#34; catering to the demand for a healthy and lightweight lifestyle among young consumers through three-proof technology fabrics that are water-resistant, oil-resistant, and stain-resistant.
Whether it is deep cultivation in the professional sports field or continuous investment in research and development such as technological innovation, 361 Degrees' core purpose is to pursue broader development space, rather than falling behind in a multitude of domestic sports brands and becoming a &#34;second-tier player.&#34;
However, at present, 361 Degrees' brand strength is still in an awkward position of &#34;neither high nor low.&#34; If it cannot achieve a true rise in this trend of consumer downgrading, it may have to struggle in the crevices of niche fields for a long time in the future

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361 DEGREES performed well in the first half of 2023, with revenue reaching 5.14 billion, a year-on-year increase of 19.2%. Despite outpacing competitors such as Anta and Li-Ning in terms of growth rate, the company faces concerns arising from intense competition, especially in the challenges of low-profit margins and the path towards high-end products. To address this, growth driven by children's business and e-commerce channels demonstrates 361 DEGREES' position among domestic sports brands

Young people in the small town, unable to stop 361 DEGREES from moving forward continuously