XTEP'S First Half Year Revenue Rose Last Year

China's leading

Financial Review

Earnings and profits continued to rise

The group's revenue during the review period was about 2 billion 40 million 200 thousand yuan (2009: 1 billion 677 million 400 thousand yuan), an increase of 22% over the same period last year.

Shareholders should account for about 373 million 500 thousand yuan (306 million 500 thousand yuan in 2009): profits rose by 22%, while gross margins rose to 40.7% (2009: 38.6%).

Basic earnings per share increased by 22% to 17.18 yuan (2009: 14.1 yuan).

Due to the satisfactory performance and ample cash surplus, the board recommended an interim dividend of HK $10 per share (2009: HK $7 per share), an increase of [43]% over the same period last year, with a dividend payout ratio of about 51% (2009: 44%).

With the rebound and rebound of China's economy in the first half of 2010, coupled with XTEP's unique sports entertainment

In terms of gross margin, as the popularity of XTEP brand is increasing, the group has raised the retail price of products during the review period, plus effective cost control, so that the gross margin of XTEP brand clothing products increased by 2.5 percentage points to 40.7% (2009: 38.2%), and the gross margin of XTEP brand footwear products increased 1.4 percentage points to 40.3% (2009: 38.9%) because of the discount rate granted to agents.

The group has been implementing a rigorous capital management strategy. The total working capital turnover days in the review period have been significantly reduced to 27 days, representing a decrease of 14 days compared with the same period last year.

The group has a healthy financial position and maintains a net cash level during the period, providing strong support for future business development.

Business Review

Faced with the continuous improvement of major financial and operational indicators, Mr. Ding Shuibo, chairman and chief executive officer of XTEP, said: "the Chinese government's fiscal policy and revitalization of economic measures drive domestic consumption and consumer purchasing power to rise.

Coupled with the continuous development of urbanization and the warming of Chinese consumers' enthusiasm for sports, the market demand is keen, which brings good opportunities for the development of China's sporting goods industry.

In the face of this favorable business environment, XTEP, through innovative sports and entertainment marketing strategies, has sponsored a number of national and international events and effective media publicity to enhance brand image and value, and accelerate the expansion of the retail network. XTEP has achieved remarkable results in all aspects.

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Differentiated sports entertainment marketing strategy appropriate

As China's leading fashion sporting goods brand, XTEP brand is moving towards becoming a recognized world-class brand.

During the review period, the Group signed a sponsorship agreement with the Birmingham International Holdings Ltd for five years, and provided the professional "XTEP Bermingham" stylish jersey for the Premier League United Bermingham football team from August 2010 to the Premier League, becoming the first Chinese sports brand to appear in the Premier League.

In addition, the group also raised the brand exposure rate by sponsoring all the volunteers' costumes for the 2010 Shanghai World Expo volunteer chief partner.

Running is one of the main long-term strategies of the group. Therefore, in the review period, lots of resources have been invested to sponsor many outstanding events, including the 2010-2012 years' cooperation partners and exclusive sports wear sponsors of the International Association of athletics Diamond League, and the exclusive sports products partner of the Xiamen International Marathon for 2009-2013 years.

These events have been widely reported by the media, thus promoting XTEP's core value and market position.

In order to highlight the fashion elements of XTEP brand, the group has been famous celebrity idol as a brand spokesperson. In the meantime, it launched the two series of new advertisements, "I love X football" and "shared legend", with XTEP brand spokesperson Nicholas Tse, Jolin and Willber Pan as the call.

The advertisement has been broadcast in China's top viewing channel, including CCTV 1 and 5, Hunan satellite TV, Southeast TV and Anhui satellite TV, and attracted popular attention. It also greatly enhanced the popularity of XTEP brand.

In addition, XTEP is also aware of the enormous influence of the digital network, increasing the exposure of the brand on the Internet.

In addition to being a sports sponsor of the Sohu world cup station in China, the group has concluded a strategic partnership with Sohu for three years from 2010 to 2012 on brand development and internet promotion. It not only allows Sohu customers to preview XTEP's latest products online, but also promotes XTEP brand differentiation and positioning of fashion sports brands.

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Expand retail network and improve channel management

For many years, the group has been actively expanding its distribution and retail network across the country. The two or three line market is the focus of development, accounting for more than 90% of the group's retail network.

In June 30, 2010, the total number of XTEP brand retail stores reached 6579 (December 31, 2009: 6103), exceeding the target set by 6500 at the beginning of the year.

The group also opened up overseas markets during the period.

In June 2010, through the third party distributor, XTEP opened its first brand retail store in Taipei and moved towards Southeast Asia.

The group added 6 XTEP brand flagship stores during the review period. In June 30, 2010, the total number of XTEP flagship stores totaled 36.

To ensure that XTEP's image as a leading fashion sporting goods is implemented, the group regularly provides system training, including marketing, product display design and inventory management.

The group has also formulated a set of standard codes of conduct to ensure that all retail stores maintain consistent brand image.

The appearance and layout of the store will be updated every two years to provide customers with a refreshing shopping experience.

With fast and convenient online shopping becoming an increasingly popular consumption channel for young people, the group set up partnership with Taobao, China's largest online e-commerce market in May 2010, set up a flagship store on XTEP, and build an efficient online business platform to further expand XTEP's sales and distribution channels and cater to the needs of target customers.

innovative product

With its strong design and research team, the Group continues to launch innovative products incorporating fashion and sports elements.

During the review period, the group launched the six series of shoes, which are more than 1900 fashionable and fashionable shoes. They are mainly running shoes, antique shoes, casual shoes, basketball shoes, tennis shoes and children's shoes, with both fashionable and functional elements.

In addition, the group also launched a series of Marathon ultra light running shoes, using advanced technology to improve product shock absorption function, and using nano silver antibacterial chemicals to inhibit bacterial parasitism.

In terms of costumes, the group has launched four series of over 2600 sportswear designs in the period of review. They are soccer, comprehensive training, tennis and urban categories, showing XTEP's brand dynamic fashion.

In addition, a new series of "happy girl" campaign is launched to describe the winner's characteristics of the "happy girl" singing contest, which is praised by customers.

In addition, the Group continues to introduce cutting-edge technologies to enhance the functions of sportswear, emphasizing comfort and enhancing the characteristics of warmth and ventilation.

Strengthen design and R & D capability

In order to maintain product innovation and quality products, the group opened a new R & D center in Guangzhou in April 2010, mainly focusing on the development of new clothing series.

The centre occupies an area of 2500 square meters, equipped with advanced design facilities, and has a design team of international and domestic experience, leading the trend of rapid change.

In addition, the group has adopted the product lifecycle management system, which is a solution to manage the entire life cycle of products through the network, aiming at reducing product development time and improving product quality.

Future plan

In the face of the increasing competition between domestic and foreign businesses, XTEP is determined to enhance the sustainable development and potential of the brand portfolio and enhance the popularity of XTEP brand both at home and abroad.

The group will continue to focus on sponsoring international and national activities, such as the Premier League United Bermingham football team to provide professional "XTEP Bermingham" fashion Jersey.

In order to support the sixteenth Asian Conference, which will be held in Guangzhou this November, the group will increase its TV advertising and open flagship stores in Guangzhou to further establish XTEP's brand image.

In expanding the retail network, the group plans to open more flagship stores across the country and increase XTEP brand retail stores to 7000 by the end of the year.

In addition, we plan to expand the overseas sales network, focusing on the Southeast Asian countries such as Turkey, Saudi Arabia, Arabia and Egypt, as well as Indonesia and other Southeast Asian countries.

To support the sustained growth and expansion of business, the group will further elaborate internal management and intensify efforts to improve the efficiency of product design, R & D, finance and operation management. Through strict supervision and management of sales channel sales network, we will optimize the supply chain procedure and establish a flexible and effective business system.