DAPHNE INT'L Posts Double-Digit Decline in H1 Performance as Asset-Light Model Enters Adjustment Phase

On the evening of August 18, DAPHNE INT'L disclosed its interim results for 2026.

In the first half of the year, the company reported revenue of approximately RMB 179 million, a 10% year-on-year decrease; operating profit amounted to RMB 59.87 million, down 15%; and net profit attributable to shareholders stood at RMB 49.35 million, a 24% decline.

After achieving full-year revenue and operating profit growth of 13% and 28%, respectively, in 2025, DAPHNE INT'L saw both revenue and profits turn to year-on-year declines in the first half of this year.

Compared to the same period last year, DAPHNE INT'L's revenue decreased by approximately RMB 19.1 million, operating profit fell by about RMB 10.6 million, and net profit attributable to shareholders dropped by roughly RMB 15.3 million.

Based on the disclosed figures, the operating profit margin declined from 35.6% to approximately 33.4%, while the net profit margin fell from 32.6% to around 27.5%. The gross profit margin was approximately 51.7%, a year-on-year decrease of 1.9 percentage points. This retreat in profitability is not solely due to the contraction in revenue scale.

However, DAPHNE INT'L's current business structure differs significantly from its previous phase of large-scale direct-operated store operations. The company is primarily engaged in brand licensing, distribution, and sales of footwear and accessories in mainland China.

In the first half of 2025, its royalty income was RMB 85.15 million, and product sales revenue was RMB 113 million. Within product sales, wholesale revenue amounted to RMB 103 million, while direct retail revenue was only RMB 10.4 million. Royalty fees and wholesale revenue from franchisees combined accounted for approximately 95% of total revenue.

This means that when evaluating DAPHNE INT'L's performance, the focus has shifted away from same-store sales of directly operated outlets to licensed product sales volume, franchisee orders, and online channel performance.

The asset-light model reduces fixed burdens such as store rents and inventory, but it also makes the company's revenue more dependent on the operational status of franchisees and a few key customers. In 2025, the top five customers contributed 73% of the company's revenue. Although this is lower than the 81% recorded in 2024, the concentration remains high.

Its gross profit margin must also be understood in the context of this model. In the first half of 2025, the company's overall gross profit margin was approximately 53.5%, but the gross profit margin for product sales was only 18.5%. The primary reason for this discrepancy is that royalty income does not correspond to the cost of goods sold.

Therefore, the decline in the overall gross profit margin to 51.7% this year cannot be simply equated to a drop in women's footwear retail gross margins. It requires an assessment combining changes in the proportion of royalty income and the gross margin on product sales.

Over the past two years, DAPHNE INT'L has expanded its online licensing network, establishing a presence on traditional e-commerce platforms and content-driven platforms. Simultaneously, it has covered different consumer groups with the dual brands "Daphne" and "Daphne Lab," extending its product range from women's shoes to children's shoes, bags, and other categories.

These adjustments drove revenue growth in 2024 and 2025. However, competition for e-commerce traffic, return rates, and price pressures continue to transmit through to franchisee orders and licensing revenue.

From a financial standpoint, as of the end of 2025, DAPHNE INT'L held cash and bank balances of RMB 569 million, maintaining a net cash position that provides a certain buffer for business adjustments. The company remained profitable in the first half of 2026, so the effectiveness of its previous transformation should not be negated by a single-period downturn.

Nevertheless, the shift to declining revenue, a larger percentage drop in profits compared to revenue, and the simultaneous decline in both gross and net profit margins indicate that the asset-light model is also facing growth pressure. Key factors to monitor going forward include whether royalty income can resume growth, whether wholesale orders can stabilize, and whether brand investments can translate into more stable terminal sales.