Topsports International, which claims to manage the biggest network of directly operated stores in the Chinese sports market, reported a 7.0 percent drop in revenues to 15.77 billion yuan renmimbi (€2.0bn-$2.4bn) for the first half of its fiscal year, ended on Aug. 31. The gross margin contracted by 2.1 percentage points to 41.6 percent, due to higher levels of discounting.

The company’s net attributable profit fell by 11.0 percent to RMB 1,309.1 million (€167.5m-$195.6m) in spite of government incentives and other income, offset by a RMB 24.3 million charge for bad debt, which generated extra earnings of RMB 181.1 million (€23.2m-$27.1m). On an adjusted basis, the operating margin declined by 0.6 percentage points to 12.7 percent and earnings fell by 14.6 percent.

The total number of stores declined to 8,156, down from 8,395 at the end of the previous fiscal year on Feb. 29, but the total gross selling area went up by 5.2 percent. Retail revenues represented 82.5 percent of the total turnover, with the balance coming from wholesale revenues. Nike and Adidas accounted for 87.9 percent of the total revenues, and a further 11.2 percent came from other brands including Puma, Converse, Vans, The North Face, Timberland, Reebok, Asics, Onitsuka Tiger and Skechers. The balance came from concession fees and the emerging e-sports business.

Reacting to the pandemic, Topsports launched a shopping app on Feb. 14, complementing its cooperation with WeChat and reaching out to a total of 1.1 million members by the end of August. Still, the members in its loyalty program grew from 27.1 million to 33.1 million during the six-month period, accounting for 97.3 percent of the sales in its stores.

The company continued to optimize its online operations to produce a seamless customer journey, notably by collecting data in the stores and analyzing them.

Separately, Belle Sports, the former Belle International that spun off Topsports through a public offering a year ago, said it would distribute its remaining 78.4 percent direct holding in the retailer to its own shareholders, in proportion to their shares in Belle, removing it in effect as the middleman, with no effect on Topsports’ operations. Hillhouse HHBH Holdings will get 44.5 percent of Belle’s shares, Widsom Man Ventures 46.4 percent and Superise Colorful Brands 9.1 percent.