China Dongxiang Announces Latest Operational Updates

Fully Support in Fighting Against the Novel Coronavirus Accelerate Online Business Development

 

HONG KONG, CHINA – Media OutReach
– 21 February 2020 – The leading international sportswear brand enterprise in
the PRC, China Dongxiang (Group) Co.,
Ltd. (“China Dongxiang” or “the Company”, together with
its subsidiaries, “the Group”, HKEx stock code: 3818), announces its latest
operational updates.

 

An outbreak of novel coronavirus (COVID-19) started in
China around the 2020 Chinese New Year (the ”Epidemic”). Given a grim
situation in the battle to contain the Epidemic, the Group has established a
crisis management team promptly for enhancing internal management, coordination
and arrangement on the control of the Epidemic. The Group has also actively
cooperated with local governments to take control measures against the
Epidemic, as well as taking contingency measures and conducting resources
deployment in relation to business affairs and customers. At present, no
confirmed or suspected cases of novel coronavirus infection found among the
employees of the Group and all of its subsidiaries.

 

The Group has determinedly borne its corporate social
responsibility and made a donation of RMB6 million to China Charity Federation
through the Group’s subsidiary, Shanghai Kappa Sporting Goods Co., Ltd.. The
donation will be used for, among others, taking infection prevention and
control measures, purchasing medical protection equipment, supporting frontline
hospitals and providing cash relief to healthcare workers.

 

For sales channels, 30% of the total number of offline
stores of the Group (excluding KAPPA kids’ apparel business) has resumed
operations as at 19 February 2020, while the remaining stores will resume
operations in stages. The Group will follow the requirements on infection
control and prevention by the respective local governments to the largest
extent, and resume full operations as soon as possible without compromising on
the safety of its employees and consumers. In spite of greater pressure on
offline retail stores in the short run, the Group will put in extra effort in
developing online business by integrating online and offline resources. Currently,
the KAPPA brand on Wechat Mall, an online platform, was completed within a
relatively short time-span. In
future, the Group will improve systems connection step by step, securing prompt
movement of products across all channels.

 

In terms of products supply, a majority of products for
online sale and the kids’ apparels stored in the warehouses located in Wuhan,
Hubei province, have been locked down, due to a number of factors, such as
extension of work resumption, logistic impediment and delayed customs
clearance. However, the Group has made provision of products for offline sale
according to the post-festival marketing strategy before Chinese New Year. In
addition, communications and coordination have been strengthened for reasonably
reallocating stock from offline channels to online channels. As the recovery of
road transportation will facilitate the stock replenishment for online sales
and kids’ apparels, severe stock shortage will not be expected.

 

In the view of the extension of work resumption as compared
with the previous year, short-term disruption of sales and services due to the
infection control and prevention, as well as various uncertainties, the
operating condition of the Group for the first half of 2020/2021 financial year
(April 2020 to September 2020), is expected to be affected to a certain extent,
if the Epidemic continues, subject to the effectiveness of infection control.
Based on the operation models of the Group and the current situation of the
Epidemic, the operation results of the sports apparels business of the Group
for the fourth quarter of the 2019/2020 financial year (January 2020 to March
2020), will be affected by the Epidemic to a larger extent, but the impact on
the overall performance of the Group, inclusive of its investment business, is
expected to be immaterial.

 

Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, “The Group has
called for concerted efforts from all people in China from various industries
to battle against the Epidemic. We will keep monitoring the emergence of the
Epidemic and its operation conditions by strengthening operation control and
management through reasonable assessment and judgement with an aim to secure
the value of the Group and shareholders’ interest. In the long run, the Group
has faith in the economy as well as sports apparels industry in China. Our
expectation on the steady growth in the Group’s performance remains unchanged.
We are confident in overcoming the short-term hurdles, achieving healthy and
steady growth in the business of the Group.”

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 China, Macau and Japan. On 1 May
2008, China Dongxiang completed the acquisition of PHENIX, a Japanese
sportswear enterprise. PHENIX is the most popular ski brand in Japan with the
largest market share, as well as a well-known brand in the international
market.