Low Birth Rate and Tariff Strikes, GOODBABY INTL is in Distress

The world's largest manufacturer of baby strollers and car seats, GOODBABY INTL, is facing a double blow from U.S. tariffs and a decline in China's birth rate.

Key Points:

• The company's revenue declined in the first nine months of this year, turning back to contraction after a slight growth in the first half of the year.
• Growth in the Asian and European markets is offsetting weak sales in the U.S. market.

Tan Ying

When GOODBABY INTERNATIONAL HOLDINGS LIMITED (1086.HK) launched its IPO in Hong Kong in 2010, it benefited from the demand of emerging middle-class parents eager to provide the best products for their children, and the company has been the leader in China's baby stroller market for 17 consecutive years. Subsequently, the company used the funds from its listing to pursue global acquisitions, ultimately becoming the largest supplier of baby strollers and child safety seats in the world.

In addition to dominating the domestic market in China, the company also became the largest supplier of baby strollers in the U.S. in 1996 and topped the European market seven years later, producing products for brands such as Quinny, Nike Kids, and Tommee Tippee.

However, the company's recent development has not been as strong due to several adverse factors, including a decline in China's birth rate, increasingly cautious domestic consumers, and U.S. President Trump's tariffs on Chinese goods this year. These setbacks were clearly reflected in the company's third-quarter results released this month, which showed a further deterioration in performance compared to the already weak results from the first half of the year.

According to the latest report, GOODBABY INTL's revenue in the first nine months of this year fell 1.1% year-on-year to HKD 6.42 billion, returning to contraction after recording a 2.7% revenue growth in the first half of 2025. Among them, the mainland gb brand performed the worst, with revenue plummeting 18.1%; the baby safety seat brand Evenflo declined by 10.9%; and the design consulting business Blue Chip saw revenue drop 19.9% year-on-year, reflecting the vulnerability of its clients amid U.S. tariff turmoil.

However, the aforementioned declines were partially offset by growth in the high-end stroller brand Cybex. This brand's revenue increased by 11.7% during the period and accounted for 57.5% of the group's total revenue, becoming a major source of support.

In the four trading days following the announcement, GOODBABY's stock price fell by 4.2%, but it later recovered some ground. However, the stock's latest closing price of HKD 1.19 is still only one-fifth of its listing price of HKD 4.90. This is clearly not a bright growth story for a company that once seemed to have unlimited potential.

GOODBABY did not disclose profit data in the latest report, providing only limited information. However, the interim results released in August showed that net profit in the first half of 2025 plummeted by 43.7% to HKD 105.5 million, with the net profit margin declining by 2 percentage points to 2.5%. Therefore, it can be reasonably inferred that the relevant profit indicators likely continued to deteriorate in the third quarter.

In a profit warning issued shortly before the interim results, the company attributed the profit decline to weak U.S. business, although operations in other regions improved somewhat, partially offsetting the related impact Other factors that weaken profitability include additional costs incurred to comply with new regulatory standards for child safety seats, as well as higher promotional and marketing expenses.

The early growth of GOODBABY largely reflects the rise of China's manufacturing industry after the reform and opening up in the 1980s, as well as the further expansion of the industry scale after joining the World Trade Organization in 2001.

The company was founded by 76-year-old Song Zhenghuan, who was a vice principal of a middle school and managed the school's affiliated factory from 1989 to 1993. Against the backdrop of the government encouraging entrepreneurship, he invented the "push-pull dual-use" baby stroller and launched it to the market under the "GOODBABY" brand, which eventually became a household name in China.

Global M&A Expansion

In 2014, the company successively acquired the German child safety seat brand Cybex, whose founder Martin Pos still serves as a board member of GOODBABY; in the same year, it also acquired the American company Evenflo, founded in 1920. Evenflo initially started by producing baby bottles and gradually expanded its product line to include child safety seats and baby strollers.

According to multiple media reports, after the U.S. imposed tariffs on baby products starting in April this year, the prices of major brands of baby strollers and child safety seats quickly increased, with strollers averaging a 25% price hike and child safety seats averaging a 20% increase. This may be one reason why GOODBABY's gross margin fell by 3 percentage points year-on-year to 49.6% in the first half of this year, indicating limited ability to pass on tariff costs, with some costs needing to be absorbed by the company.

Since the U.S. market accounts for about one-third of GOODBABY's sales in the first half of this year, the impact of these tariffs is clearly bad news. However, like other Chinese manufacturers that have established product dominance in the U.S. market, GOODBABY is also making adjustments, and the company's current price-to-earnings ratio is only about 7 times, making its valuation appear relatively low.

GOODBABY International's revenue share in the Americas has been surpassed by its European business, with the European segment's revenue share rising from 27% in 2019 to about 47% in the first half of this year, although this proportion also includes the Middle East and Africa markets.

Intensified competition in the mid-range market, lack of brand value, and cost pressures have weakened the U.S.-based Evenflo brand; in contrast, the higher-end Cybex baby stroller is favored in the European market and has become the main driver of GOODBABY's revenue growth. Despite the recent weak performance in the U.S. market, the biggest pressure on GOODBABY over the past few years still comes from the domestic Chinese market, where the revenue share from China has sharply decreased from 35% in 2019 to below 20% this year.

Although Beijing has vigorously promoted fertility policies in recent years, China's fertility rate remains only about 1.01, far below the 2.51 of 1990, meaning the number of newborns needing GOODBABY products has significantly decreased. To make matters worse, against the backdrop of a slowing macro economy, Chinese consumers have become more cautious and have reduced their spending on baby products Despite numerous challenges, the company has demonstrated its ability to adjust and adapt to market changes. After acquiring Cybex and Evenflo, its business has gradually transformed from primarily OEM for other brands to focusing on its own brands, resulting in higher gross margins. However, excluding the past 12 months ending in June this year, the company's revenue of HKD 8.9 billion is still far below the peak of HKD 9.7 billion reached in 2021.

Even in the face of political risks and a lack of obvious growth engines in revenue aside from Cybex, analysts still believe the company has the capability to address current issues. China International Capital Corporation (CICC) has lowered the company's earnings forecast for 2025 by 31% post-results, but at the same time raised the target price for 2026 by 23% to HKD 1.62. First Shanghai has given the company a higher target price of HKD 1.85 in its latest report and maintained a "Buy" rating