HONG KONG SAR – Media Outreach – August 16, 2023 –
China Violet Limited (“China Lilang”, or the “Company”, together with its subsidiaries, the “Group”; stock code: 1234) today announced its interim results for the six months ended June 30, 2023.
Mr. Wang Dong Xing, Chairman and Executive Director of China Lilang, said:
“During the first half of the year, society in mainland China returned to normal and the economy gradually emerged from the impact of COVID-19, with physical stores resuming normal operations and the consumer goods retail market recovering. straightening. We also benefited from the lifting of containment and control measures and the resumption of social activities, and took the opportunity to evolve Lilang’s brand strategy. Renovation work on the store’s image, which had been delayed by the pandemic, continued. We hope to introduce a more fashionable and youthful brand image with a new store image, aiming to attract more attention and gain popularity among consumers. During the reporting period, total retail sales of the Group’s products maintained positive growth, reaching single-digit growth year-on-year.”
For the six months ended June 30, 2023, Group revenue increased 6.7% year-on-year to RMB 1,491 million. Operating profit increased by 3.9% to RMB 305 million. Gross profit margin was 51.8%, an increase of 3.1 percentage points year-on-year. The growth is mainly attributable to the easing of containment and control measures and the resumption of social activities. The smart casual business, which has higher gross profit margins, recorded significant growth and its proportion of sales also increased accordingly. At the same time last year, the Group cleared off-season stocks by lowering prices, following the decision to stop the development of professional sports shoes. Thus, the Group was able to achieve a healthier level of stocks of out-of-season products this year. This decrease in off-season inventories enabled the Group to recover part of its inventory provision. In addition, since the price increase started mainly in the second half of 2022, the unit selling price in the first half of 2023 was therefore higher than that of the same period last year. Net profit increased by 5.2% to RMB 270.5 million, while net profit margin decreased by 0.3 percentage point to 18.1%. Earnings per share were 22.6 RMB cents.
During the reporting period, the Group maintained a sound financial position with sufficient cash flow. The Board of Directors has decided to pay an interim dividend of HK cents 13 per share (2022 Interim: HK cents 13) and a special interim dividend of HK cents 5 per share (2022 Interim: HK cents 5), maintaining a stable payout ratio.
The Group has implemented four sales channels following a reform of sales channels, namely: distribution and consignment models for the basic collection, the retail model for the smart casual collection and the e- trade. The Group currently operates 2,394 core collection stores, 39% of which adopt the consignment operating model. During the year, the Group continued to support distributors by optimizing the distribution network. The Group has also optimized store locations and space utilization for its smart casual business, while store renovations in Jiangsu, Qingdao and Wuhan continue apace, significantly improving store efficiency. sales. The Group has a total of 2,646 retail stores nationwide, of which 252 are direct-selling stores, while 842 stores are located in shopping malls, representing approximately 31.8% of the total number of stores and approximately 34.3% of the total retail area. The Group also has 60 factory outlets. During the reporting period, the inventory balance and off-season inventory decreased, mainly due to the Group adding outlet stores and online retail channels. This, coupled with the start of logistics center operation, has increased inventory rotation efficiency, and the inventory of core collection stores and smart casual retail stores continues to improve.
New distribution remains one of the Group’s top priorities for business development, and the Group has actively promoted the business of its LILANZ core collection and its smart casual collection. These businesses are operated through the online-only sales model of its direct-to-retail online stores, as well as the online-order-while-collecting-offline model of WeChat Mall. During the reporting period, the Group conducted sales promotions through its direct retail online stores, and launched the hot products of ice-type polo shirts, during the 618 E-commerce Shopping Festival, increasing online store retail sales by approximately 24%. from year to year. In addition, the Group used its WeChat business platform to set up stores in WeChat Mall and provide customer relationship management services, leveraging the social platform’s interactive features to improve store efficiency. and eliminate off-season inventory. WeChat Mall business sales fell year-on-year due to slower off-season destocking. During the period under review, consolidated new retail sales increased by only 2.8%, but profit margins increased significantly.
In terms of brand management and promotion, the Group has focused on developing China Lilang’s “minimalist men’s fashion” brand concept, which combines fashion with culture and art, creating characteristics of distinctive products with original designs. The Group also developed quality iconic items to improve product quality and performance, optimized the store network and strengthened retail management, aiming to reveal the fashion aesthetic of Lilang and leading a new trend in simple menswear with a multi-pronged approach. . Regarding the promotion of smart casual business, the Group has appointed celebrities as spokespersons and conducted large-scale promotional campaigns, which have effectively enhanced brand awareness and reputation. In addition, the renovation work on the image of the seventh generation core collection stores has gradually been extended to existing stores, further strengthening the brand image and consumer shopping experience.
Looking to the second half of 2023, in light of multiple uncertainties – including a complex international environment, weakening export demand from the continent, a still sluggish real estate market, slowing economic growth and declining employment rates – the central government will vigorously stimulate economic growth and encourage consumption to support the retail market. Thus, the outlook for the retail market remains cautiously optimistic. The Group will also continue to adopt a flexible sales strategy, strive to improve its brand image, consolidate its store network, stimulate the development of new retail businesses, maintain healthy channels and reduce inventory risks, which will help the Group outperform its industry peers.
In the second half, the Group will remain cautious in opening new stores and will stick to its net increase target of 100 stores for the full year 2023. The target should be achieved in the second half. In addition to opening more stores in high-quality malls in provincial capitals and prefecture-level cities, some of the stores in existing malls will be moved to better locations or larger spaces in malls to improve store efficiency. Other factory outlets will also be opened as an inventory clearing channel. In addition, China Lilang will continue to make store-related adjustments in Jiangsu, Qingdao and Wuhan in the second half.
For new distribution, the Group will continue to promote e-commerce, using online stores as one of the main platforms for launching new products. In the second half of the year, online stores will launch more special-edition e-commerce products, while unique and iconic items will be launched online ahead of the Double 11 Shopping Festival to meet consumer demand for personalized clothing and better port experiences, and thus improve the gross margin and create new growth drivers for the annual results. The Group will also drive sales growth in different locations through live streaming on Douyin. These initiatives aim to build consumer loyalty and improve performance. In addition, the Group plans to invest in smart workshops in the second half of the year to further improve its ability to quickly replenish orders and implement product launches on e-commerce channels.
China Lilang will continue to take advantage of mutual inventory exchange and complementary advantages of WeChat Mall stores and physical stores to optimize channels, improve store network, and increase store efficiency and product selling rate. , to drive steady sales growth and achieve the goal of a total retail sales increase of 10% in 2023. In addition, its membership program will be enhanced by conducting more diverse membership activities, as well as than by offering exclusive offers and discounts. The group will also fully strengthen the retail information system, expand the retail space through WeChat mini-programs and other means, and connect online with offline platforms to speed up planning. products, innovative research and development, upgrading garment pattern technologies and product launches.
Mr. Wang Dong Xing, Chairman of China Purpleconcluded :
“In the face of multiple challenges, China Lilang will continue to react proactively, exercise cautious optimism, adopt a flexible sales strategy, consolidate its store network, accelerate the development of new retail businesses and to improve its brand image and commercial efficiency in order to maintain stable performance growth.”
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