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Source: Media Outreach

Reform of Direct-franchise Model Achieves Initial Success Core Team Optimisation Continues
HONG KONG, CHINA – Media OutReach – 17 April 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 March 2020 (”FY2019/20 Q4”) and the twelve months ended 31 March 2020 (”Twelve Months of FY2019/20”).

For the FY2019/20 Q4, the retail performance of Kappa stores (excluding Kappa kids’ apparel business and Japan business) for the overall platform registered a high-twenties decrease on a year-on-year basis, of which the off-line business recorded a low-to-mid-thirties decrease and the e-commerce business recorded a low-teen decrease. The retail performance of the overall platform for the Twelve Months of FY2019/20 registered a low-single-digit growth on a year-on-year basis, of which the off-line business recorded a mid-to-low single-digit decrease and the e-commerce business recorded a high-twenties growth.

As for the same-store-sales (“SSS”), for the FY2019/20 Q4, 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-low single-digit decrease on a year-on-year basis, of which the off-line business recorded a low single-digit decrease (excluding the store closure period due to the COVID-19, measurement of same-store growth remains the same as previous practice), while the e-commerce business registered a low-teen decrease. The SSS for the overall platform for the Twelve Months of FY2019/20 registered a mid-to-low single-digit growth on a year-on-year basis, of which the off-line business recorded a mid-to-low single-digit decrease (excluding the store closure period due to the COVID-19, measurement of same-store growth remains the same as previous practice), while the e-commerce business registered a high-twenties growth.

For the Q4 ended 31 March 2020, the number of retail stores of the Group under the Kappa brand was 1,129 (excluding Kappa kids’ apparel business and Japan business), representing a net decrease of 80 as compared with that as at 31 March 2019 (”the end of FY2018/19”). In the next step, the Group will continue to close down inefficient stores. As of 31 March 2020, 1,106 retail stores under the Kappa brand (excluding Kappa kids’ apparel business and Japan business) have resumed operations, accounting for 98% of the total.
 
2020 is the third year of full implementation of direct-franchise model by the Group as well as an important year for the Group to lay a concrete foundation for long-term development. With on-going reforms in sales channels, products and supply chain management, the Group’s Kappa brand has been making good progress with initial achievements.

During the period, the Group unleashed the power of the competitive advantages of sales teams established in various regions by improving and implementing localised strategies for sales teams, accelerating optimisation of incentive scheme to enhance overall motivation. Performance of offline business in Central China, West China and South China has achieved significant growth as well. The Group will further optimise the establishment of its product teams and improve the mechanism for internal synergy for increasing core competitiveness of its product teams, so as to provide strong protection for future brand development and long-term business growth.

Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, “The outbreak of the COVID-19 during Chinese New Year has brought adverse impact on the Group’s business. We will continue to closely monitor the pandemic and strengthen the supervision and control over the operations so as to minimise the negative impacts, protecting the value of the Group and our shareholders’ interests. Looking forward, the Group will adhere to implement its established strategies, pursuing the on-going enhancement of localised management of sales teams, deepening the reforms on product sales teams, further accelerating the merchandise turnover in omni-channel retailing, reducing the inventory level and optimising the establishment of product teams, in order to achieve product-market fit.”

– Published and distributed with permission of Media-Outreach.com.