Evaluation Report on the Effectiveness of HLA's Multi-Brand Strategic Transformation

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HLA officially launched its strategic transformation in 2020 after Zhou Lichen took over as Chairman. Learning from ANTA Sports’ multi-brand development model, it transformed from a single traditional men’s wear brand towards the direction of “multi-brand, multi-category, and group-oriented” development[1][2].

Stage	Key Initiatives	Core Brand/Business
2017-2020	Preliminary Exploration Phase	Acquired controlling stake in high-end children’s wear brand YEEHOO
2018-2020	Brand Extension	Launched women’s wear brand OVV and trendy men’s wear brand HLA JEANS (Heijing)
2021	Strategic Establishment	Officially established the “multi-brand, multi-category, group-oriented” strategy
2021-2022	Agency Cooperation	Secured the agency rights for Austrian sports brand HEAD’s China business
2022	Cooperation with Industry Giant	Established a joint venture with Shanghai Haixin Sports to exclusively operate the Adidas FCC project
2024	Channel Innovation	Reached a strategic cooperation with JD.com Group to jointly develop omnichannel outlet business

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Financial Indicator	2024	YoY Change	H1 2025	YoY Change
Operating Revenue	RMB 20.16 billion	-2.85%	RMB 11.24 billion	+3.01%
Net Profit	RMB 2.159 billion	-26.88%	RMB 1.58 billion	-3.42%
Net Profit Attributable to Shareholders (Excluding Non-recurring Items)	-	-	RMB 1.816 billion (First Three Quarters)	+3.86%

• In 2024, both operating revenue and net profit declined, putting significant pressure on profitability
• In the first three quarters of 2025, revenue growth turned positive to 2.23%, showing a moderate recovery trend[3]
• The decline in net profit was significantly larger than that of operating revenue, indicating cost-side pressures

Business Segment	2024 Revenue	Proportion	YoY Growth Rate	H1 2025 Revenue	Proportion	YoY Growth Rate
Core Brand	RMB 15.27 billion	75.7%	-7.22%	RMB 8.39 billion	74.6%	-5.86%
Other Brands	RMB 2.92 billion	14.5%	+32.38%	RMB 1.91 billion	17.0%	+65.57%
Group Purchase & Customization	RMB 1.98 billion	9.8%	+28.75%	RMB 0.94 billion	8.4%	-

1. Sluggish Growth of Core Brand
   : As the core revenue source, the core brand has seen continuous negative growth, and its “Wardrobe for Men” brand positioning faces the challenge of losing young consumers
2. High Growth of New Brands
   : The other brands segment has achieved remarkable growth (32%-65%), emerging as a new growth engine for the group[1][3]
3. Ongoing Structural Optimization
   : The revenue proportion of the core brand dropped from 75.7% to 74.6%, and the multi-brand strategy is reshaping the revenue structure

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Brand Type	Representative Brand	Positioning	Development Stage
Core Men’s Wear Brand	HLA	Mass-market Men’s Wear	Mature Stage (Slowing Growth)
Trendy Men’s Wear	HLA JEANS (Heijing)	Youth Trend	Growth Stage
High-end Children’s Wear	YEEHOO (Yingshi)	High-end Infant & Children’s Apparel	Growth Stage
Women’s Wear Brand	OVV	Stylish Professional Women’s Wear	Cultivation Stage
Sports Brand	HEAD (Agent)	Professional Sports Equipment	Cultivation Stage
International Cooperation	Adidas FCC (Co-operated Operation)	Sports Lifestyle	Rapid Expansion Stage
New Channel	JD.com Outlet	Cost-effective Consumption	Initial Stage

• Revenue Scale
  : Approximately RMB 15-18 billion per year
• Growth Status
  : Negative growth (-5%~-7%)
• Brand Challenges
  : Brand aging, effectiveness of youth-oriented transformation to be verified
• Spokesperson Strategy
  : Engaged spokespersons such as Lin Gengxin, Jay Chou, Zhang Songwen, Zeng Shunxi, and Pan Zhanle to strengthen the perception of fashion and youth orientation[1]

• Revenue Scale
  : Approximately RMB 1.9-2.9 billion per year
• Growth Status
  : High growth (+32%~+66%)
• Strategic Value
  : Has become the core growth driver of the group, but its scale proportion is still low (about 15-17%)

• Adidas FCC Project
  : Expected revenue of RMB 0.33 billion in 2024, projected to increase to RMB 1.29 billion in 2025, in a rapid growth stage[2]
• JD.com Outlet Project
  : In-depth cooperation with JD.com Group, expected to have 40-80 offline stores in 2025[2]

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Indicator	2023	H1 2025	Change
Total Number of Stores	5,976	5,723	-253
Directly-operated Stores	1,252	1,532	+280 (+22.4%)
Franchise Stores	4,724	4,191	-533 (-11.3%)
Proportion of Directly-operated Stores	21.0%	26.8%	+5.8 pct

• The company continues to promote the “franchise to direct operation” strategy to enhance channel control
• The increase in the proportion of directly-operated stores helps unify consumer experience and enhance brand image
• The decrease in total number of stores reflects channel optimization and closure of underperforming stores

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Time Horizon	Price Change
Past 1 Year	-15.72%
Past 6 Months	-13.73%
Past 3 Months	-4.31%
Since 2025	+2.64%

Indicator	Value	Industry Comparison
Price-to-Earnings Ratio (P/E)	14.14x	The average for the apparel industry is approximately 18-22x
Price-to-Book Ratio (P/B)	1.66x	-
Return on Equity (ROE)	11.96%	Above-average level

Indicator	Status	Interpretation
MACD	Bearish Crossover	Medium-term Weak
KDJ	K=22.9, D=32.3	Oversold Zone
RSI	Normal Range	-
Trend Judgment	Sideways Consolidation	Reference Range [$6.00, $6.16]

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Based on multi-dimensional analysis, a comprehensive score is given for the effectiveness of HLA’s multi-brand strategic transformation:

Evaluation Dimension	Score	Description
Richness of Brand Matrix	7.5/10	Has formed a multi-category layout covering men’s wear, women’s wear, children’s wear, sports, etc.
Growth of New Brands	8.0/10	The other brands segment has achieved outstanding performance with a growth rate of 32%-66%
Resilience of Core Brand	6.0/10	The core brand has seen continuous negative growth, facing the challenge of brand aging
Channel Optimization Capability	7.0/10	The direct operation transformation is progressing in an orderly manner, with enhanced channel control
Profitability	5.5/10	Net profit has dropped significantly, with high cost-side pressure
Overall Score	6.8/10	Transformation in progress, effectiveness to be verified

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1. New Growth Engine Has Formed
   • The revenue proportion of the other brands segment has increased to 17%, with growth rate maintaining above 30%
   • New businesses such as Adidas FCC and JD.com Outlet have entered the rapid expansion stage

2. Improved Channel Quality
   • The proportion of directly-operated stores increased from 21% to 27%, with significantly enhanced channel control
   • The total number of stores decreased, but single-store efficiency is expected to improve

3. Correct Strategic Direction
   • The multi-brand, multi-category layout aligns with the diversified development trend of the apparel industry
   • Cooperates with giants such as Adidas and JD.com to leverage their resources for development

1. Sluggish Growth of Core Brand
   • As the core business foundation, the core brand has seen continuous negative growth, and the brand perception of “Wardrobe for Men” has weakened
   • The effectiveness of the youth-oriented brand transformation lags behind competitors such as Bosideng and Li-Ning

2. Profitability Under Pressure
   • The decline in net profit (-27%) is significantly larger than that of operating revenue (-3%)
   • High investment in the cultivation stage of new brands puts temporary pressure on profit margins

3. Economies of Scale Not Yet Realized
   • The total revenue of new brands is only about RMB 3 billion, accounting for less than 20% of the total
   • The driving effect on overall performance is limited, and the effectiveness of the multi-brand strategy is still being verified

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Business Segment	Projected 2025 Revenue	Growth Driver
Core Brand	Approximately RMB 16.5 billion	Product innovation, channel optimization
JD.com Outlet	RMB 1-1.2 billion	Store expansion (expected to reach 40-80 stores)
Adidas FCC	RMB 1.2-1.3 billion	New store ramp-up + existing store growth
Other Brands	RMB 3.5-4 billion	Sustained high growth

According to analysts’ forecasts[2], HLA’s projections for 2025-2026 are as follows:

• 2025 Operating Revenue
  : RMB 24.13 billion (year-on-year growth of approximately 20%)
• 2025 Net Profit Attributable to Shareholders
  : RMB 2.64 billion (year-on-year growth of approximately 22%)
• Target Price
  : RMB 8.56 per share (Initial coverage with “Outperform” rating)

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[1] DoNews - HLA Transforms to a Multi-Brand, Diversified Strategy (https://www.donews.com/news/detail/4/6369421.html)
[2] Eastmoney - In-depth Report on HLA: Leading Position in Men’s Wear Remains Stable (https://pdf.dfcfw.com/pdf/H3_AP202501241642530455_1.pdf)
[3] Efu.com - Behind HLA’s Countercyclical Growth: What Business Secrets Hide in the Q3 2025 Financial Report (https://m.ef360.com/news/391262.html)
[4] Jinling API - Corporate Financial Data and Market Data

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: HLA’s multi-brand strategic transformation is , and the new brand segment has shown strong growth momentum, but the transformation effectiveness . The sluggish growth of the core brand remains the biggest shortcoming. It is necessary to continue to pay attention to the progress of the brand’s youth-oriented reform and the improvement of new business profitability. It is recommended that investors maintain their attention and wait for the opportunity of valuation reshaping after the economies of scale of new businesses are realized.