Regina Miracle gets a profit uplift as Victoria’s Secret partner

The underwear maker defied a challenging market to post higher net profits, thanks to a tie-up with the U.S. underwear brand, but its overall business was under pressure

Key Takeaways:

• The firm’s annual revenue slipped and operating profit tumbled, as garment orders were hit by trade frictions and weakening consumer demand
• Victoria’s Secret China enjoyed rising sales, but the overall underwear segment was still sluggish

By Lee Shih Ta

Clothing manufacturers have been feeling the chill from economic headwinds, buffeted by the impact of trade tariffs and weak consumer confidence.

But a Chinese supplier of lingerie and sports bras has managed to increase its annual profits by more than 50%, outperforming other firms in the sector.

So what was the secret of its earnings success? It largely came down to being the sales outlet in China for the Victoria’s Secret brand of intimate apparel.

On the surface, business looks bright at Regina Miracle International (Holdings) Ltd. (2199.HK). Its annual results compared favorably with a 12% rise in net profit at clothing maker Crystal International (2232.HK) and a 6.7% decline at industry leader Shenzhou International (2313.HK).

But a deeper look into Regina Miracle’s annual earnings reveals a darker picture, with revenues and operating profit both falling.

Regina Miracle makes underwear for general and sports use, as well as bra pads, components for consumer electronics and various accessories for international brands. It prides itself on being involved in product design and development, not just taking orders as a contract manufacturer.

Still, revenue fell 1.6% to HK$7.72 billion ($984 million) in the year to the end of March, while gross profit dropped 5.1% to nearly HK$1.74 billion. Gross margin narrowed to 22.5% from 23.4%, while operating profit tumbled around 22% to HK$536 million, showing the strain on the garment manufacturing sector.

Weak market demand and tariff policies prompted some international customers to adjust their orders, the company said, adding that its Zhaoqing factory was still in the early stage of ramping up, weighing on gross margin.

Despite the pressures, net profit rose 53.9% to HK$283 million, boosted by a surge in sales at its joint venture with Victoria’s Secret, which handles the brand’s stores and online sales in China. Finance costs also fell to HK$255 million from HK$344 million, helping the bottom line.

Not so secret weapon

Victoria’s Secret China was the standout performer. The joint venture posted revenue of just under HK$2.8 billion in fiscal 2026, up 42.4% from the previous year, while net profit ballooned to HK$525 million from HK$85.6 million. Regina Miracle owns 49% of Victoria’s Secret China and recognized HK$237 million in associated profit in its income statement, equal to about 84% of its full-year net profit. Without that boost, the company’s earnings recovery would have looked far less convincing.

On the positive side, Victoria’s Secret China shows that premium brands and localized strategies can create earnings resilience, despite broader pressures on the apparel market. But questions remain over whether the performance can be sustained. The joint venture’s profits included HK$140 million in deferred tax assets related to tax losses from prior years, a non-recurring gain.

Intimate wear, which remains the company’s core business, lacks explosive growth potential. Revenue from the segment edged down 1.1% to just under HK$4.2 billion, accounting for 54.4% of total revenue. The company cited changes in client orders, offset in part by a stronger performance from core brands in the second half, pointing to some customer stickiness.

Sportswear could offer greater growth potential, having seen more dynamic consumption patterns in recent years. Regina Miracle’s revenue from sports products rose to HK$3.08 billion, accounting for 40% of total revenue and starting to close in on the scale of its intimate wear business. But gross margin for the segment slipped to 21.4% from 22.3%, reflecting ongoing shifts in product mix, costs and production efficiency.

As of the end of March, Regina Miracle carried net debt of HK$3.22 billion and a net gearing ratio of 103.8%, leaving it with a heavy interest burden. On the plus side, capital expenditure dropped to HK$273 million from HK$431 million, while the R&D department’s move from Shenzhen to Zhaoqing was largely completed. Still, related asset write-offs and compensation payments are not expected to wrap up until fiscal 2027, leaving lingering pressure from restructuring costs.

Investors were not overly impressed by the profit rise. Regina Miracle’s shares fell 1.7% on the first trading session after the results, closing at HK$1.73, and have declined 17.62% over the past year. The stock currently trades at about 8 times earnings, not far below the 8.9 times for Shenzhou International and 9.2 times for Crystal International.

Regina Miracle may have bottomed out but has not yet entered a clear upcycle. It cannot rely on Victoria’s Secret China to justify a higher valuation from here. Investors will be looking for proof that its expertise in high-end lingerie can translate into higher gross margins and a healthier balance sheet.

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