China Dongxiang Announces Operational Results for Q3 and the First Nine Months of FY2019/20

Accumulated Retail
Performance Recorded Sustained Growth

Implementation of
Direct-franchise Operation Model Achieved Initial Success

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HONG KONG, CHINA - Media OutReach - 17 January 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 the operational data for the three months ended 31
December 2019 (”FY2019/20 Q3”) and the nine months ended 31 December 2019 (”First
Nine Months of FY2019/20”).

 

For the
FY2019/20 Q3, the retail performance of Kappa stores (excluding Kappa kids’
apparel business and Japan business) for the overall platform registered a low-teen
growth on a year-on-year basis, of which the off-line business recorded a mid-single-digit
growth and the e-commerce business recorded a low-forties growth. The retail
performance of the overall platform for the First Nine Months of FY2019/20 registered
a low-teen growth on a year-on-year basis, of which the off-line business
recorded a mid-to-high single-digit growth and the e-commerce business recorded
a low-forties growth.

 

As for the same-store-sales (“SSS”), for the FY2019/20 Q3, in respect of
Kappa stores (excluding Kappa kids’ apparel business and Japan business) which
have been in operation since the beginning of the same quarter the previous year,
the SSS for the overall platform registered a mid-to-high single-digit increase
on a year-on-year basis, of which the off-line business recorded a mid-to-low
single-digit decrease while the e-commerce business registered a low-forties
growth. The SSS for the overall platform for the First Nine Months of FY2019/20 registered a mid-single-digit
increase on a year-on-year basis, of which the off-line business recorded a
mid-to-low single-digit decrease while the e-commerce business registered a
low-forties growth.

 

For
the third quarter ended 31 December 2019, the number of retail stores of the Group under the Kappa brand was
1,186 (excluding Kappa kids’ apparel business and Japan business), representing
a net decrease of 23 as compared with that as at 31 March 2019 (”the end of
FY2018/19”). The Group will further reduce the number of stores that recorded unsatisfactory
performance.

The performance of the Kappa business has successfully met the Group’s
expectations through reforms of sales channels, products and supply chain
management. At present, the principal driver of sales growth is the development
of channels. From the analysis by sales channels, business performance of
outlets and shopping centres demonstrated a steady growth. From the analysis by
business structure, the key performance indicators of e-commerce business and
certain major geographical segments have reached remarkable levels. Meanwhile,
a front-end and back-end structure has been completely set up for supporting
the ”direct-franchise” operation model, showing initial signs of improvement
in inventory management with a decrease in inventory level.

 

Mr. Zhang Zhiyong, CEO, President and Executive Director of China Dongxiang, said, “The Group insisted on the implementation of direct-franchise
operation model and paid more attention to those crucial and specific measures,
including performance enhancement by accelerating localisation of the sales
teams in certain regions, pushing through reform of products and sales teams
for speeding up inventory turnover of its omni-channel retail network and
further reducing inventory level, as well as establishing a competitive
complete system model by strengthening its product mix. Going forward, the
Group will keep on optimising and upgrading its products by implementing
comprehensive reforms.”

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.