Stella International (1836) Q2 2026 earnings summary

Executive summary

• 2026 marks a pivotal investment year under a new Three-Year Plan (2026–2028) focused on long-term growth and margin expansion, with major investments in new manufacturing facilities and R&D capabilities for both footwear and handbag businesses.

• Revenue for the first half of 2026 increased 1.5% year-over-year to US$786.7 million, with Q2 revenue up 1.2% to US$449.3 million.

• The group is expanding production capacity with three new factories in Indonesia, Bangladesh, and Vietnam, expected to add 20 million pairs of capacity over coming years.

• Despite economic and geopolitical headwinds, forward order visibility remains solid, and customer diversification supports top-line momentum.

• The company maintained its 70% dividend payout policy and announced an interim dividend of HK42 cents per share, with up to US$60 million to be returned to shareholders in 2026 via share repurchases and special dividends.

Financial highlights

• Consolidated revenue rose 1.5% year-over-year to US$786.7 million for the six months ended 30 June 2026; shipment volumes were flat at 27.5 million pairs.

• Gross profit fell 8.8% to US$159.8 million, with gross margin declining to 20.3% from 22.6% due to higher raw material and labor costs, and operating deleverage in PRC factories.

• Reported operating profit dropped 12.3% to US$74.3 million; operating margin was 9.4% (down from 10.9%).

• Adjusted net profit was US$64.2 million (down from US$77.9 million), with an adjusted net profit margin of 8.2% (down from 10.1%).

• Net cash position at 30 June 2026 was US$191.7 million, down from US$291.3 million a year earlier, reflecting higher capex and cash returns to shareholders.

Outlook and guidance

• Full-year shipment volumes expected to remain flat amid ongoing macro uncertainties; non-customer-exclusive facilities to operate near full utilization.

• Modest contribution from three new factories in 2026, with ramp-up risks mitigated by early onboarding of management teams.

• Handbag and accessories business expected to remain loss-making in 2026 as investments in capability and customer base continue.

• Commitment to return up to US$60 million to shareholders in 2026 is fully pre-funded.

• 2026 is positioned as an investment year, with profit growth from new strategies expected to materialize later in the 2026-2028 period.