Outstanding Offline Sales Performance for Kappa, Apparel Business Achieved Turnaround in Operating Profit

Results Highlights

• Revenue amounted to RMB776 million, remained stable as compared with previous year;
• Gross profit amounted to RMB536 million, representing an increase of 10.7% YoY; Gross profit margin increased YoY by 6.7 percentage points to 69.1%;
• Operating profit excluding investment segment was RMB75 million, representing a strong growth as compared to operating loss of RMB24 million in the corresponding period;
• The Board of Directors has decided to distribute an interim special dividend of RMB0.71 cents per ordinary share for the 6 months ended 30 September 2023, accumulative payout ratio since listing is 72%;
• Net inventory value amounted to RMB358 million, a decrease of 19.9% YoY;
• Kappa recorded growth in overall turnover as well as same-store efficiency;
• Kappa will strive to improve efficiency of key stores and close stores with low efficiency to build high-quality stores across the country.

HONG KONG - Media OutReach - 22 November 2023 - China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Company", together with its subsidiaries, "the Group", HKEX stock code: 3818), the leading international sportswear brand enterprise in the PRC, announced its interim results for the 6 months ended 30 September 2023 (the "Reporting Period").
Financial Results
The Reporting Period saw increasingly austere conditions in the global macro-economic landscape. The Group implemented omni-channel as its strategic objective while optimising its business regime and strengthening business synergy through coordination of online and offline omni-channel operations to improve store efficiency and overall business performance.
During the Reporting Period, the Group registered a revenue of RMB776 million, remained stable as compared with the same period last year. Gross profit amounted to RMB536 million, representing a 10.7% YoY increase. Gross profit margin increased by 6.7 percentage points to 69.1%, mainly attributable to the higher proportion of new products sold and increase in terminal discount rates. The operating profit excluding investment segment was RMB75 million, representing remarkable growth as compared to the operating loss of RMB24 million during the corresponding period. The Board of Directors has decided to distribute an interim special dividend of RMB0.71 cents per ordinary share for the 6 months ended 30 September 2023. As at 30 September 2023, China Dongxiang's accumulative profit attributable to owners was RMB 10.9 billion, while the accumulative dividend totalled RMB7.8 billion, translating to an accumulative payout ratio of 72%.
Operational Highlights
Optimised distribution of offline sales channels with Kappa achieving outstanding offline sales performance
During the Reporting Period, the Group closely followed the core strategic principle of "efficiency enhancement, strong preparations and vigorous operation", and strictly monitored store efficiency by optimising the distribution of offline sales channels and strengthen business synergy. The Group's Kappa brand recorded satisfactory results for its sales performance. The Group established its proprietary quick-response model for Kappa to maintain inventory and increase turnover. During the Reporting Period, the Group actively raised the threshold for opening new stores, focused on improving store efficiency and closing stores with low efficiency to build high-quality stores across the country. Meanwhile, the Group strictly monitored product discounts and optimised the ratio of new to old products to facilitate growth in turnover and store efficiency. In future, the Group will deepen its omni-channel strategies and further enhance the effectiveness and efficiency of omni-channel, while reducing operating cost to improve its competitiveness.
As at 30 September 2023, the Group had a total of 1,002 Kappa stores (excluding Kappa Kid's stores), representing a net decrease of 21 stores as compared to that as at 31 March 2023.
Strengthened presence in China skiing, PHENIX's online channels rank top in the industry
As a high-end professional skiing equipment brand, the Group's PHENIX brand is highly popular among avid skiers. During the Reporting Period, PHENIX teamed up with THUSKI, the skiing team of Tsinghua University, to launch co-branded ski outfits, increasing the brand popularity and its exposure on social media. PHENIX brand also developed cooperation with Wanlong Ski Resort in a bid to facilitate the development of professional skiing industry in China.
In addition, the PHENIX brand delivered spectacular sales performance. During the Reporting Period, PHENIX's offline sales recorded an approximately 120% YoY increase in turnover while the GMV of Tmall business increased by over 30% YoY. PHENIX secured its market leading position in China's skiing industry. It tops the Tmall skiing brands in double-boards and ranked fourth among snowboard brands. Going forward, the Group will continue to unleash the brand potential and bring high-quality and fashionable sporting products to consumers.
Ms. Cherry Chen, Chief Executive Officer, President, Co-Chairman and Executive Director of China Dongxiang, said, "Looking ahead, China's sporting industry has entered into a new cycle of rapid development with the support of national policies. China Dongxiang is well positioned to accelerate high-quality development targeting favourable middle and high-end consumer groups through enhancing overall operation efficiency, with a view to further expansion. The Group will continue to capitalise on opportunities in China's consumer sector with an open-minded and sharing mentality in adherence to the Kappa brand spirit, focusing on the development of the sports fashion sector with the aim of generating stable and long-term return for shareholders."Hashtag: #ChinaDongXiang

The issuer is solely responsible for the content of this announcement.

About China Dongxiang (Group) Co., Ltd. (Stock code: 3818)

China Dongxiang (Group) Co., Ltd. is a leading international sportswear brand enterprise in China which has been listed on the Main Board of the Hong Kong Stock Exchange since 10 October 2007. The Group is primarily engaged in the design, development, marketing and wholesale of branded sportswear in China. Currently, China Dongxiang owns all rights to the internationally renowned Kappa brand in Mainland China and Macau. Since April 2008, the Group became the owner of the brand PHENIX. PHENIX is a well-known skiing brand in the international market.