Daiwa: 361 Degrees 3Q26 performance more resilient vs. industry; 1H27 likely faster than industry as well

We think 361 is overly punished by its thin liquidity despite its better-than-industry performance. Its 3Q26 mid-single-digit% retail sales YoY growth is likely faster than that of Anta at ~ flattish / Fila at + low-single-digit% / Li Ning at - low single-digit%, despite a slowdown compared to 2Q26 (which also applies to all other players).

The discounting level in 3Q26 was slightly worse than in 2Q26 when a promotional e-com festival took place – different from previous years, indicating even more intense industry competition. But at merely 6x PER based on our 2026-27E EPS forecast (or 7x if assuming 0% net profit CAGR for 2025-27E in a bear-case scenario) and 6-7% yield, we think its business resilience from its value-for-money positioning in the current macro backdrop and its steady expansion into new channels (superstore) and new categories (like tennis) are underappreciated by the market. We reiterate our Outperform (2) rating.

Key takeaways from the conference call:

• 3Q26 operational updates: 361 Degrees reported 3Q26 operational updates before the market open on 14 October. Retail sales of the 361° core brand and Kids both grew by a mid-single-digit% YoY, and e-commerce was trending slightly faster at a mid-tohigh-single-digit% YoY. Channel inventory remained at 4.5–5.0 months, while the offline retail discount deepened slightly to 30% (vs. 29% off at 2Q26).

• 4QTD momentum: RSV remained positive during the Mid-Autumn Festival and Golden Week, in line with management’s expectations. As promotional events become increasingly frequent, management expects a more linear GMV trajectory for the upcoming Double 11 shopping festival. That said, the 2026 revenue growth guidance remains unchanged at 8-10% YoY.

• Trade fairs for 1Q & 2Q27 products: Management indicated that the trade fairs for 1Q27 and 2Q27 products met its internal expectations, although no specific order growth was shared (see below for more details).

• Retail sales performance by category: The running and basketball categories maintained their stable growth, though basketball faced intensified competition and deeper discounts from international brands. The 3Q26 launch of tennis footwear received positive feedback. It will continue developing niche categories such as pickleball and HYROX.

• Effective channel differentiation is supporting incremental customer acquisition. 361° uses online- and superstore-exclusive SKUs to appeal to different customer groups across channels. At superstores, attractive product assortment, livestreaming and digital coupons have supported customer acquisition (new customer acquisition rate rose to 75% vs. 65% previously) and transaction conversion (livestreaming contributing c.10% of superstore sales)

• Sustained overseas momentum: 3Q26 overseas performance was similar to that in 1H26 (retail sales and cross-border e-commerce GMV increased by c.80% and c.140% YoY, respectively).