Is 361 Degrees' Kid Power Losing Momentum?

About this update from 361 Degrees International Ltd.

Key Takeaways:361 Degrees said its kids-branded products business rose by ‘mid-single-digits’ in its latest quarterly business update, down from earlier recent growth ratesRetail sales for the sportswear maker’s core brand grew 10% year-on-year in the three months to JuneBy Lau Chi HangAs one of China’s top four domestic sportswear brands, 361 Degrees International OTC:TSIOF, though far smaller than leaders Anta OTC:ANPDY and Li Ning OTC:LNNGY and even closer rival Xtep (1368.HK), has been on an impressive roll these last few years. Its strong performance owes to a two-tiered strategy of expanding into smaller third-tier cities, while also building up its children’s sportswear brand.But after a strong run in the kids space, growth for that area appears to be slowing, based on what 361 Degrees said in its latest operational update for the second quarter. In the update, it said sales for its core branded products rose about 10% year-on-year for the three months to June, while its e-commerce sales jumped 30% to 35%. But the company failed to disclose similar specific growth figures for its kids-branded products, saying only the category “recorded approximately mid-teens growth compared to the same period of 2023”.What Does Mid-Teens Mean?So, what exactly is mid-teens growth, and why did 361 Degrees use this relatively vague description rather than being more specific? Longtime company watchers many notice the company tends to become vaguer when certain businesses are losing momentum.That certainly seems to be the case here, since kids products have recorded year-on-year growth rates averaging in the 25% to 30% range during the past two years. So, the “mid-teens” growth from the latest quarter, or around 15%, would mark a significant slowdown from earlier rates.The company has been expanding into the kids market since 2009 by building its own brand to focus on demand for sporting goods and equipment from children and teenagers. That hard work hasn’t been wasted, as 361 Degrees turned the category into an important new revenue engine. Kids product sales more than doubled over just three years from 930 million yuan ($128 million) in 2020 to just shy of 2 billion yuan last year. It accomplished that feat through a big buildout of its kids specialty store network, which had 2,545 stores by the end of last year, up by 257 year-on-year.But the kid magic has begun s...

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