Pou Sheng's June revenue weakened again, with no structural improvement yet visible in Chinese sportswear demand

Overview

This report focuses on the June operating data of Pou Sheng, an important Chinese wholesale partner of Nike and adidas, and its parent company Yue Yuen. The key conclusion is that Chinese sportswear demand remains subdued: Pou Sheng's June sales fell 8.6% year over year, extending the negative growth seen in May and remaining below the pre-pandemic average; Yue Yuen's manufacturing revenue declined 11.8% year over year, indicating that orders and consumption momentum across the sports footwear and apparel industry chain remain unstable.

Core views

First, Pou Sheng's June performance provides further evidence that Chinese sportswear demand has not experienced structural improvement. Second, as one of the world's largest sportswear manufacturers, Yue Yuen's deteriorating revenue indicates that pressure on brand wholesale, retail end demand, and manufacturing has been transmitted across the industry chain. Third, tariffs, inflation, uncertainty surrounding the macroeconomic path, and disruptions in the Middle East may continue to affect consumer confidence, energy prices, transportation, and raw-material supply. Fourth, despite weak short-term operating data, Bernstein continues to rate Nike and adidas Outperform.

Analysis framework

The report combines channel-level and industry-chain readings: Pou Sheng's monthly retail sales are used to observe demand trends for Nike and adidas in China's wholesale and retail channels, while Yue Yuen's manufacturing revenue is used to assess global sports footwear and apparel orders and supply-chain conditions. Year-over-year changes, two-year stacked performance, pre-pandemic averages, and year-to-date results are combined to assess trend strength.

Methodology notes

• Channel trackingWholesale partner revenue reading

  Pou Sheng sales as a proxy for Nike and adidas demand in China

  Approximately 80% of Pou Sheng's sales in China come from Nike and adidas products, so its monthly sales changes provide a high-frequency window into wholesale and retail demand for the two brands in China.

• Trend analysisYear-over-year and two-year stacked growth

  Single-month year-over-year, cumulative quarterly, and two-year stacked measures

  The report compares not only June's year-over-year change but also second-quarter, year-to-date, and two-year stacked performance to distinguish short-term fluctuations from sustained weakness in demand.

• Industry-chain readingManufacturer revenue reading

  Yue Yuen manufacturing revenue as an indicator of the global sports footwear and apparel order environment

  Yue Yuen is an important sports footwear and apparel manufacturer serving Nike, adidas, and other Western brands. Its revenue changes can be used to assess brand orders, manufacturing demand, and supply-chain pressure.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Nike Inc (NKE)

  Covered company; Pou Sheng is one of its important wholesale partners in China, and Yue Yuen is one of its supply-chain manufacturing partners.

  Strengths

  Bernstein maintains an Outperform rating and a $72.00 target price, implying continued confidence in a medium-term recovery.

  Weaknesses

  A slow recovery in China, market-share pressure, discounts, and channel costs may affect revenue and margins.

  Comparison

  Compared with adidas, Nike's recovery pace in China is identified in the report as one of the more explicit downside risks.

  Risks

  Slower overall sportswear growth, a slow recovery in China, market-share losses in key markets such as North America, inflation and freight-cost pressure, and supplier-concentration risk.

• adidas AG (ADS.GR; ADDYY)

  Covered company; Pou Sheng's sales in China include a substantial amount of adidas products.

  Strengths

  Bernstein maintains an Outperform rating with target prices of €245.00 for ADS.GR and $132.50 for ADDYY.

  Weaknesses

  Weak readings from Chinese wholesale channels and slower overall sportswear industry growth may weigh on sales momentum.

  Comparison

  The report covers both Nike and adidas, and both are affected by weak Chinese demand and macroeconomic and trade uncertainties.

  Risks

  Slower sportswear growth, damage to brand momentum from excessive discounting or over-distribution, cost pressures, and supply-chain disruptions.

• Pou Sheng

  One of Nike and adidas's largest wholesale partners in China and the primary channel-observation subject of this report.

  Strengths

  Year-to-date sales declined 2.1% year over year. Although still negative, this was better than in the previous two years.

  Weaknesses

  June sales fell 8.6% year over year, two-year stacked sales declined 24.9%, and revenue remained below the pre-pandemic average.

  Comparison

  June was weaker than May and was the weakest month of the second quarter.

  Risks

  Persistently weak Chinese sportswear demand, insufficient consumer confidence, and inadequate brand sales momentum.

• Yue Yuen

  Parent company of Pou Sheng and an important global sports footwear and apparel manufacturer.

  Strengths

  Serves Nike, adidas, and other Western brands, giving it representative importance across the industry chain.

  Weaknesses

  June revenue declined 11.8% year over year and deteriorated from May, indicating volatility in manufacturing demand.

  Comparison

  The decline corroborates the weakness in Pou Sheng's channel sales, showing that pressure exists not only at the retail end but also has spread to manufacturing.

  Risks

  Tariffs, inflation, macroeconomic uncertainty, energy prices, transportation disruptions, and the stability of raw-material supplies.

Key data

• Pou Sheng June retail salesDown 8.6% year over yearApproximately 80% of sales in China come from Nike and adidas products.
• Pou Sheng second-quarter revenueDown 3.4% year over yearJune was the weakest month of the second quarter.
• Pou Sheng year-to-date growthDown 2.1% year over yearGrowth remained negative but was better than in the same periods of the previous two years.
• Pou Sheng two-year stacked revenueDown 24.9%Continued the overall negative trend of the past two years.
• Yue Yuen June revenueDown 11.8% year over yearDeteriorated further from May.
• adidas target pricesADS.GR €245.00; ADDYY $132.50Rated Outperform.
• Nike target priceNKE $72.00Rated Outperform.

Impact & implications

For investors, the report conveys a combination of still-positive ratings and weak short-term operating readings. Bernstein remains constructive on the long-term valuation and brand-recovery thesis for Nike and adidas, but Chinese channel data, volatility in manufacturing orders, and macroeconomic and trade uncertainties indicate that more monthly data is needed to validate the short-term fundamentals. If Chinese demand remains weak, it could weigh on brand sales, inventory clearance, discount levels, and the pace of margin recovery.

Risks

• Chinese sportswear demand may remain weak, with no structural improvement.
• Tariff and trade-policy uncertainty may suppress orders, employment, and consumer demand.
• Inflation, freight costs, channel costs, and other operating expenses may compress margins.
• Disruptions in the Middle East may push up energy prices and affect transportation and raw-material supplies.
• Nike's slow recovery in China, market-share losses in key markets, and supplier-concentration risk.
• adidas and Nike may damage brand momentum through excessive discounting or over-distribution.

What to watch

• Whether Pou Sheng's subsequent monthly year-over-year sales and two-year stacked trends improve.
• Whether Yue Yuen's manufacturing revenue recovers from the double-digit year-over-year decline recorded in June.
• Changes in Nike and adidas's inventory, discounts, channel replenishment, and market share in China.
• U.S. tariff policy and its impact on the margins of U.S. apparel, sportswear, and specialty retailers.
• The impact of Middle East disruptions on energy prices, shipping, and raw-material supplies.
• How Nike and adidas characterize Chinese demand and order trends in their next earnings guidance.