Arc'teryx &#34;flies high,&#34; and Anta (2020.HK) enters a new stage in its story.
In 2024, Anta's scale once again reaches a new high: revenue increased by 13.5% year-on-year to 70.826 billion yuan; combined with off-balance-sheet Amer Sports, the total annual revenue of the &#34;Anta system&#34; will exceed 100 billion yuan.
However, many issues have also arisen at this time.
Anta and FILA, with a scale exceeding 26 billion yuan, are gradually hitting a growth bottleneck.
Descente and KOLON enjoy the dividends of middle-class consumption, but their positioning as niche high-end brands limits them, bringing the main brand back into focus regarding the basic market.
Looking around, various segments of the sportswear market are filled with competitors.
At the beginning of 2025, Anta CEO Xu Yang proclaimed the slogan &#34;surpass Nike China with a single brand within three years.&#34;
It seems that the focus is beginning to return to &#34;Anta.&#34;
<h2>Entering the Second Half</h2>
For a long time, Anta's growth myth was driven by external brands acquired through mergers and acquisitions.
In 2019, the revenue of FILA, acquired by Anta, increased by 73.9% year-on-year to 14.77 billion yuan, and operating profit grew by 87.1% year-on-year to 4.023 billion yuan, contributing 43.5% and 46.3% to the group, respectively.
In the following two years, the number of FILA stores continued to rise, with revenue growth rates of 18.1% and 25.1%, earning the title of Anta's &#34;cash cow.&#34;
The successful experience was quickly replicated in the operations of other brands under its umbrella.
The most typical example is the phenomenal success of Arc'teryx, which has become a testament to Anta's resource integration and operational capabilities after acquiring brands.
In just five years, Arc'teryx helped Amer Sports (AS.NYSE) turn from loss to profit and successfully listed on the New York Stock Exchange in early 2024.
The one-time equity income from this capital operation boosted Anta's net profit attributable to the parent company by 52.36% year-on-year, reaching 15.596 billion yuan.
Other brands represented by Descente and KOLON are experiencing rapid growth, situated next to Arc'teryx in high-end shopping centers, showing a strong upward trend.
While the market is immersed in the rapid growth of emerging brands, it often overlooks that nearly 85% of Anta's basic revenue still comes from the Anta main brand and FILA.
However, now that the two major segments are gradually hitting growth bottlenecks, the difficulty of extensive expansion has increased.
Firstly, FILA, which has maintained an ultra-high gross profit margin of nearly 70% for a long time, is experiencing a speed decline that exceeds expectations.
In the third quarter, FILA became the only laggard with negative growth among all Anta brands. Although retail sales improved in the fourth quarter, the annual revenue growth of only 6.1% still fell short of expectations.
In terms of industry dynamics, FILA is facing a dual crisis of intensified competition in the mid-to-high-end market and sluggish growth in the trendy market.
Fangzheng Securities analyst Chen Jiani believes that the early incubated FILA KIDS and FILA FUSION are dragging down the brand's performance. The former is affected by a saturated children's market, while the latter is impacted by cyclical and insufficient differentiation.
In the first half of 2024, FILA FUSION net closed about 10% of its stores
Secondly, under the &#34;cost-performance&#34; consumption cycle, Anta, which places greater emphasis on the middle-class customer base, has been outmaneuvered in the sinking market by 361 Degrees (1361.HK), whose half of the products are priced below 200 yuan.
In 2024, 361 Degrees' revenue will exceed 10 billion yuan for the first time, with a year-on-year increase of 19.6%, surpassing Li Ning (2331.HK), Xtep (1368.HK), and Anta.
Most of Anta's main brand stores are located in second and third-tier cities or even lower-tier cities, which is a battlefield that cannot be lost.
From Anta's senior management perspective, with a scale exceeding 30 billion and more than 9,000 stores, Anta still has considerable potential for improvement.
According to Anta Brand CEO Xu Yang's statement during an interview in 2023, &#34;Previously, if an Anta store moved out and was replaced by another domestic brand, everyone would think that Anta hadn't moved out.&#34;
Anta Group Chairman Ding Shizhong recognized long ago that &#34;technology can surpass with time, but brands cannot.&#34;
For a long time, the successful operation of Anta's brands has been compounded by a series of external acquisitions.
FILA was born in Italy over a century ago, while Arc'teryx, Salomon, and Descente have long been entrenched in the professional outdoor sector, boasting a loyal following, which is the foundation for Anta to speak of brand premium domestically.
However, building the main brand is still a necessary path to join the ranks of global sports giants.
Looking at the leading sports brands in the global market, even though Adidas and Nike are not lacking in acquisition operations, their main brands always firmly occupy the dominant position.
Anta cannot always be in search of the next FILA.
<h2>How to Reshape</h2>
Anta's signals for reshaping the main brand have long been evident.
Two years ago, Xu Yang, who once led Arc'teryx in Greater China, returned to the Anta main brand.
Compared to his three predecessors Ding Shizhong, Zheng Jie, and Wu Yonghua, Xu Yang is the only CEO without a sales background, but he believes that &#34;today Anta (brand) needs someone with a marketing background.&#34;
Anta's brand positioning in the broad mass market cannot directly reuse the operational strategies of niche brands like Arc'teryx and Salomon.
Xu Yang's solution is to segment the Anta brand into &#34;smaller&#34; parts and implement differentiated strategies across different channels.
Offline stores are divided into five levels, decreasing in scale, matching different business districts and demographics.
ARENA Anta Arena's average monthly store efficiency exceeds 1 million yuan, more than three times that of traditional Anta stores; the average monthly store efficiency of Anta Champion stores also exceeds 500,000 yuan.
However, this is still quite far from the ultimate goal of an average annual store efficiency of 10 million yuan.
Inefficient stores may be further eliminated, with the total number of Anta brand stores expected to decrease by 135-235 by 2025.
&#34;Anta Champion&#34; and &#34;Super Anta&#34; will become the development focus for 2025.
&#34;Anta Champion&#34; stores focus on outdoor scenarios, while &#34;Super Anta&#34; emphasizes cost-performance, offering a full range of products for all seasons and age groups, with a visual appeal close to Uniqlo.
On the product side, it will draw on Arc'teryx's &#34;Four Temples, Four Buddhas&#34; product strategy, continuously launching multiple product IPs such as Anta Membrane, Storm Armor, and Air Armor.
With the implementation of a series of adjustments, Anta's net profit margin may continue to be under pressure.
In 2024, ANTA's e-commerce business overall growth reached 20.7%, significantly higher than the 7.3% growth in the DTC channel.
Due to online retail discounts being much higher than offline, the change in channel structure has somewhat dragged down profits, with ANTA's overall gross margin declining by 0.4 percentage points to 62.2%.
Combined with the increase in costs for e-commerce operations, promotional activities, and offline store upgrades, the operating profit margin fell by 1.2 percentage points to 23.4%.
This is the price required for brand rejuvenation.
For ANTA at present, scale growth and brand elevation are more important than short-term profits.
Ding Shizhong stated at the earnings conference, &#34;We will not require every brand to achieve profit growth; we will accept a temporary reduction in profit margins to make investments.&#34;
Puyin International analyst Lin Wenjia believes that although 2025 is not a major sports year, ANTA's market investment remains substantial.
In addition to store upgrades, new product launches, and event sponsorships, particular attention should be paid to investments in overseas markets.
ANTA has already begun to establish a presence in Europe, America, Southeast Asia, the Middle East, and Africa, aiming for overseas sales to account for 15% within five years.
Leveraging the popularity of the Irving series, ANTA became the first Chinese brand to enter the global largest sports retail channels such as Foot Locker and DSG, among 110 mainstream retail channels in Europe and America.
Some investments have indeed yielded returns.
For example, ANTA's ANTA KAI 1 and KAI 2 overseas sales sparked a buying frenzy.
The influence established overseas can also feed back into the domestic market, which is feasible. Uniqlo only shed its low-cost positioning in the domestic market after achieving success in the global market.
ANTA plans to achieve high single-digit growth for its main brand in 2025, mid-single-digit growth for FILA, and maintain over 30% growth for Descente and KOLON.
Whether this brand, which started from scratch, can rejuvenate will once again determine the future direction of this sports giant

02020

Short-term profits may come under pressure

- Anta's story enters a new phase as its revenue reaches a record high of 70.826 billion yuan in 2024, marking a 13.5% year-on-year growth.  
- However, the company faces challenges, including growth bottlenecks for its main brands, Anta and FILA, and increased competition in the sportswear market.  
- Anta's CEO aims to surpass Nike in China within three years, focusing on brand revitalization and strategic adjustments to enhance profitability and market presence.

Wallstreetcn

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