Offline Retail Performance Starts Picking Up

E-commerce Sales Continues to Grow

HONG KONG, CHINA - Media OutReach - 17 July 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 operational results for the three months ended 30 June 2020 (''FY2020/21 Q1'').

For the FY2020/21 Q1, the retail performance of Kappa stores (excluding Kappa kids' apparel business and Japan business) for the overall platform registered a mid-to-low single-digit decrease on a year-on-year basis, of which the offline business recorded a low-teen decrease and the e-commerce business recorded a mid-to-low thirties growth. Offline retail performance in May 2020 recorded a low-single-digit growth as compared with that in April 2020 due to on-going market recovery. Retail discount has dropped by 4 percentage points as affected by the market, with discount rate still under the controllable range.

As for the same-store-sales ("SSS") during FY2020/21 Q1, 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-single-digit decrease on a year-on-year basis, of which the offline business recorded a mid-to-low-teen decrease, while the e-commerce business recorded a mid-to-low thirties growth.

For the first quarter ended 30 June 2020, the number of Kappa-branded stores of the Group was 1,147 (excluding Kappa kids' apparel business and Japan business), representing a net increase of 18 as compared with that as at 31 March 2020 (the end of FY2019/20). In the next step, the Group will continue to close inefficient stores.

Mr. Zhang Zhiyong, CEO, President and Executive Director of China Dongxiang, said, "Market competition has been intensified since the outbreak of COVID-19. We anticipate that there will be a year-on-year volume growth in sports apparel and equipment industry this year, though selling prices will be under pressure. Entering the third year of 'direct-franchise' model reform for Kappa brand, the Group's inventory level is expected to decline. By implementing such business reforms, the market share of Kappa brand has been maintained during the period. In addition, our management has improved and implemented localised strategies for the sales teams in an orderly manner, while driving reforms and construction of  the product team, with an aim to enhance core competitiveness of the brand. We will continue to closely monitor the changes of the pandemic, strengthening supervision and control over our operations, in order to minimise the negative impacts brought by the pandemic, protecting the Group's value and shareholders' interests."