Revenue of RMB1,093 Million and Net Profit of RMB269 Million Interim Dividends of HK17 Cents Per Share

HONG KONG, CHINA - Media OutReach - 19 August 2020 - China LilangLimited ("China Lilang" or the "Company", together with its subsidiaries,known as the "Group"; stock code: 1234) has today announced its 2020 Interimresults.

Results Highlights

• Revenue amounted to RMB1,093 million
• Net profit amounted to RMB269 million
• Earnings per share were RMB22.5 cents
• Total interim dividends of HK17 cents per share
• Total retail sales target for the second half of the year remains at no less than mid-single-digit growth

Mr. Wang Dong Xing, Chairman and Executive Directorof China Lilang, said:

"Asthe novel coronavirus pandemic (the "Pandemic") started to ease in March,apparel retail stores in China gradually resumed business. Noticing that consumersare paying more attention to the convenience and safety of shopping, the Group steppedup its efforts to promote e-commerce business, driving online retail sales to increasesubstantially for the period. The Group also continued to optimize its physicalretail store network and adhere to the strategy of providing products ofexcellent value-for-money to ensure that its product design and quality wouldgain the favor of customers."

For the six months ended 30 June2020, revenue of the Group amounted to RMB1,093 million, down by 29.0%. Profitfrom operations decreased by 34.0% to RMB307 million. Net profit was down by 30.8%to RMB269 million. Earnings per share were RMB22.5 cents, down by 30.8%.

The Group has maintained ahealthy financial position and expects that operating cash flows would beimproved in the second half of the year. The Board of Directors has resolved todistribute payment of an interim dividend of HK12 cents (2019 interim: HK18cents) per share and a special interim dividend of HK5 cents (2019 interim: HK8cents) per share, once again maintaining a relatively high payout ratio.

During the period under review,China Lilang adopted active measures against the challenges brought by the Pandemic.Although retail stores had gradually resumed business since March, it wouldtake some time for the traffic of physical stores to recover. To alleviate theimpact of the decline in consumer traffic of physical stores on retail salesand also the distributors, the Group stepped up its efforts to promotee-commerce business by increasing online advertising activities to boost e-commercetraffic and organizing online sales promotion, driving up online retail salesby more than 1.5 times as compared to the same period last year. Sales by thephysical stores to VIP customers via the customer relationship managementsystem on the WeChat platform also increased.

Meanwhile, China Lilang continuedto optimize its physical retail store network by closing some underperforming storesand opening stores in carefully selected high quality shopping malls toincrease store sales. During the period, the number of retail stores decreasedby 98 to 2,717. There were 768 stores in shopping malls, representing 28% of totalstore count and 31% total retail area. There were 268 stores for the smart casualcollection.

To ensure the channels healthy,the Group adopted active measures to support distributors in alleviatinginventory pressure. In addition to extending credit period granted todistributors, the Group cancelled some of the spring and summer orders andreduced products of the fall collection as planned to facilitate the destockingof the spring inventory in the second half of the year. The Group also strictlycontrolled the pre-order levels of the 2020 fall and winter trade fairs held inthe second quarter to reduce the risk of further inventory backlog.

For brand management andpromotion, the Group launched a number of IP crossover series and carried outpromotional campaigns to complement the launches in the 2020 spring and summerseason. In particular, to promote the launch of the LILANZ × CHINA DAILYcrossover products, the Group commissioned a number of influencers to showcasethe new products on various online platforms such as Tik Tok, Xiaohongshu.com,Weibo and Douyu.com, attracting market attention and enhancing brand value.

Looking forward, maintaining thechannels healthy and reducing inventory to a reasonable level will be a focusfor the second half of the year. In addition to clearing inventories via onlinestores and the outlet sales event held in the headquarters at year end, theGroup has reduced products for the 2020 fall collection to facilitate the destockingof the 2020 spring products in the second half of the year. It has also reducedthe pre-order levels of the 2020 fall and winter trade fairs and preparedsufficient production capacity to cope with additional orders, thus reducingthe risk of further backlog of inventory.   The Group willalso add stores in outlet malls toaccelerate inventory clearance.  Furthermore,the Group will continue to monitor the inventory level through the ERP system,and targets to reduce inventories to a more reasonable level through theaforementioned measures and organizing appropriate promotional and marketingevents when necessary.

The Group remains cautious inexpanding its store network in the second half of the year and expects that thetotal number of stores by the end of 2020 will be largely the same as that atthe end of 2019. In addition to opening stores in outlet malls as planned, theGroup will continue to encourage distributors to open more stores in premiumshopping malls. However, it is expected that some stores with low profitabilitywill be closed.

With respect to the smart casualcollection, as disclosed in the 2019 annual report, the Group would replace theconsignment model with a direct-retail model to strengthen inventory management,market expansion, brand marketing and training of retail personnel. On 1 July2020, 228 existing stores of the smart casual collection have been converted todirect-retail model. Other 40 stores will continue to be operated by distributors,and some of which are expected to be closed when the existing sales agreementsexpire.

Regarding the new retail andbrand promotion, the Group will continue to conduct brand advertising andpromotion on Baidu, Weibo, Tik Tok, and other portals and will organize variouspromotional sales events to attract more traffic to the online stores. TheGroup will launch a number of crossover collections in the second half of theyear, including crossover products with American graffiti artist Jean MichelBasquiat. The Group has also appointed a new brand ambassador and will start anew round of brand promotion in the fourth quarter. The store image upgrade forthe core collection will be undertaken in stages. In 2020, the plan for rollingout the seventh-generation store image to existing stores will be adjusted tocover 10 to 20 stores. Different decorative materials will be used subject todifferent market positions of the stores to achieve a better cost efficiency.

The renovation work of the newheadquarters in Fujian had been suspended early this year due to the Pandemic.The work has now been resumed. It is expected that the headquarters will beginoperation in the beginning of next year and hopefully the 2021 fall trade faircould be held there. Phase I of the new logistics park is still targeted foropening in late 2021.

Chairman Wang Dong Xing concluded:

"Sino-US trade issues remainunresolved while the Pandemic fluctuates, adding uncertainties to the globaleconomy. China's retail market will also be affected. As a well-establishedmenswear enterprise, China Lilang has distinctive advantages in areas such asproducts, retail management, cost control, and financial position. The Groupwill continue to improve operating efficiency, inventory management, e-commercebusiness and brand promotion, and is confident that it will continue tooutperform other industry peers. The target total retail sales growth of LILANZproducts for the second half of the year remains at no less thanmid-single-digit."

About China Lilang

China Lilang is one of the leading PRC menswearenterprises. As an integrated fashion enterprise, the Group designs, sourcesand manufactures high-quality business and casual apparel for men and sells underthe LILANZ brand across an extensive distribution network, covering 31provinces, autonomous regions and municipalities in the PRC.