Has Pathfinder returned from the bottom?
Zebra Consumer Fan Jian
After being away for too long, TOREAD has finally returned.
In the first half of 2024, the company's performance surged significantly, with net profit attributable to shareholders reaching 75 million to 95 million yuan, a year-on-year increase of 247.04% to 339.59%.
However, this has little to do with the company's core outdoor sports business. The main influencing factor is the chip business acquired through recent transformations.
As one of the veteran giants in the outdoor products industry and the first outdoor sports stock in China, TOREAD once embarked on an "ecosystem chain"-style diversification transformation based on its glorious performance. However, a round of capital operations directly ended the company's growth trend, plunging it into years of losses.
Even the return of Wang Jing, the soul of the company, a famous mountaineer and explorer, and the founder and chief product manager, failed to bring the company back to its peak. Disheartened, Sheng Faqiang and Wang Jing transferred control to Li Ming, who led the company on a new transformation path.
Significant Performance Growth
On July 24, TOREAD (300005.SZ) disclosed its 2024 semi-annual performance forecast, with net profit attributable to shareholders reaching 75 million to 95 million yuan, a year-on-year increase of 247.04% to 339.59%, and non-GAAP net profit reaching 71 million to 89 million yuan, a year-on-year increase of 449.94% to 589.36%.
It is worth noting that TOREAD was still in a state of business loss last year. In 2023, the company's revenue increased by 22.10% year-on-year to 1.391 billion yuan, while non-GAAP net profit was -55.0436 million yuan, a year-on-year decrease of 354.99%.
Regarding the significant improvement in performance from January to June 2024, TOREAD stated that outdoor business revenue and profits grew steadily, while the chip business achieved a substantial year-on-year increase in revenue and profits.
Since last year, the core factor behind TOREAD's significant performance fluctuations has been the chip business. Despite this, in the public's perception, it remains the top domestic brand in outdoor products.
As of the end of 2023, the company's own brands—TOREAD, TOREAD kids, and the trendy outdoor sub-brand TOREAD.X—had a total of 893 stores, with a net increase of 97 stores during the year. Compared to the 1,614 stores a decade ago, the difference is stark.
The Discovery Expedition brand, under the American Discovery Channel, was introduced to the Chinese market by TOREAD in 2013, with the number of stores once exceeding 150. During the contraction period of the main brand, this brand played a role in stabilizing the company's fundamentals. However, the brand licensing has now entered a transition period, and after a significant reduction in stores, the business from Discovery Expedition has become almost negligible.
In 2023, TOREAD's main revenue growth came from the chip business. That year, outdoor product revenue grew by 11.21%, while the chip business surged from a few million to 133 million yuan, directly boosting the company's revenue growth to 22.10%.
The two main chip business companies reported net profits of -96.426 million yuan and 29.4637 million yuan last year, dragging down the performance of the listed company.
In recent years, TOREAD's outdoor product business has seen limited growth, with gross margins showing a downward trend. The hope for performance growth now rests on the chip business. However, it remains to be seen whether this new business can help TOREAD enter a new cycle.
Over the past decade, the company has ridden the rollercoaster of performance several times. After its IPO in 2009, it surged for several years before entering a decline in 2015. Losses began in 2017, and the company stumbled through years of major losses and minor gains until gradually recovering in recent years.
Behind these ups and downs lies the company's arduous transformation journey.
Another Transformation
In 1999, Sheng Faqiang and Wang Jing co-founded TOREAD. In 2009, the company was among the first to list on the ChiNext board. With the boost of capital, the company grew into a leading enterprise in China's outdoor products industry.
The outdoor products industry gradually failed to satisfy TOREAD, as it was a relatively niche market at the time. Shortly after its IPO, the company encountered a downturn in the footwear and apparel market, and outdoor products were no exception. Based on internal and external factors, TOREAD embarked on a diversification transformation.
Under the leadership of then-Chairman and CEO Sheng Faqiang, the company divided its main outdoor products market business into three segments: the more professional outdoor sports market, the outdoor leisure products market, and the outdoor products e-commerce market.
In the following years, the company made strategic investments in companies like Lvye.com, Tuntu, Easy Travel, and Xingzhi Exploration through capital, and directly or indirectly invested in areas such as winter sports, event operations, sports media, and sports training.
TOREAD was no longer content with selling outdoor products but gradually built three major segments—outdoor products, travel services, and sports—forming what it called an "ecosystem."
In 2015, the company's revenue soared from the 1-billion-yuan level of previous years to over 3.8 billion yuan. It was also during this period that the company's performance began to decline, eventually leading to years of losses.
In a crisis, Wang Jing returned to take charge of TOREAD at the end of 2017, proposing a "return to the core outdoor products business" and a comprehensive contraction of operations.
In the outdoor products segment, the company focused on the TOREAD and Discovery Expedition brands, divesting new brands and business lines like Acne Studios. For the "ecosystem," the company took even bolder steps, exiting Tuntu, Easy Travel, and Lvye International Travel, and reorganizing related businesses like Lvye.com and Liuzhijiao.
After a series of adjustments, TOREAD stabilized but struggled to return to its peak. In 2020, external challenges emerged, and the company fell into losses again.
In 2021, TOREAD embarked on another transformation, spending 260 million yuan to acquire Beijing Chipone, a chip design company in the display field. In 2023, it invested another 378 million yuan to gradually gain control of G2 Touch, a touch chip design and R&D company, and Jiangsu Dingmao, a chip packaging and testing services company, forming a small-scale chip industry chain and establishing a dual-core business structure of outdoor products + chips.
Founders Let Go
The business transformations behind the performance fluctuations reflect the power shifts at TOREAD.
After TOREAD's IPO, co-founder Wang Jing withdrew from daily management, serving only as a director and product R&D technical advisor. The company was left entirely in the hands of her husband, Sheng Faqiang.
This female mountaineer and explorer had greater dreams of her own.
Wang Jing has successfully summited 8,000-meter peaks 10 times, including Mount Everest four times. In 2014, she completed the "Nine Poles of the Earth" project (the highest peaks on seven continents + hiking to the North and South Poles) in just 142 days, becoming the fastest person in the world to achieve this feat at the time.
"A man should do something adventurous in his life, and I think women can too." This is a line from the cover of Wang Jing's mountaineering documentary, Cloud Path.
As the founder and chief product manager of TOREAD, Wang Jing spent her years away from company management conquering world peaks, writing, and making documentaries, adding value to the brand in another way.
When Sheng Faqiang's outdoor "ecosystem" plunged TOREAD into crisis, Wang Jing had to set aside her dreams of gazing at the stars and return to company operations to save the day.
However, after years of maneuvering, while the company's listed status was preserved, TOREAD could never return to its former glory.
In 2020, Sheng Faqiang and Wang Jing decided to step down, transferring control of the listed company to Li Ming and resigning from their positions. This marked the beginning of the company's new transformation into the chip business.
Little did they know that in the years that followed, outdoor activities like camping, cycling, hiking, and mountaineering would become a lifestyle, with the outdoor sports industry riding a wave of growth. Yet TOREAD was not fully prepared, allowing supply chain players and new consumer brands to seize market opportunities.
In recent years, the financially free Wang Jing has returned to a "carefree" life. Her personal Weibo account, @飞雪静静， with millions of followers, often shares her visits to exhibitions and participation in entrepreneur events.
However, Wang Jing likely still harbors some regrets. Her Weibo bio still reads: Founder and Chairman of TOREAD.
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