powerpoint presentation · 2015. 4. 20. · 5 2014 2015 china dongxiang’s radical innovation a...
TRANSCRIPT
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2015Corporate Presentation
16 April 2015
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2
Disclaimer
Cautionary Statement Concerning Forward-Looking Statements
These forward-looking statements include, among others, statements relating to the future financial
performance, operating results and business prospects and strategy and other similar matters. These
forward looking statements are based on management‟s current expectations and assumptions about
future events, which are inherently subject to uncertainties, risks and changes in circumstances that are
difficult to predict. Statements that are not historical facts, including statements about HSBC‟s beliefs
and expectations, are forward-looking statements. Words such as „expects‟, „anticipates‟, „intends‟,
„plans‟, „believes‟, „seeks‟, „estimates‟, „potential‟ and „reasonably possible‟, variations of these words
and similar expressions are intended to identify forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. Readers are cautioned that a number of factors
could cause actual results to differ, in some instances materially, from those anticipated or implied in
any forward-looking statement. Forward-looking statements speak only as of the date they are made.
The Company makes no commitment to revise or update any forward-looking statements to reflect
events or circumstances occurring or existing after the date of any forward-looking statements. Market
trends and factors that are expected to affect the Company's results of operations are contained in the
“Industry Review and Prospects" and "Business Review and Prospects" and "Financial Review" and
other sections.
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Agenda
Industry Review and Prospect
Business Review and Prospect
Financial Review
Q&A
3
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Industry Review
and Prospect
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5
2014 2015
China Dongxiang’s Radical Innovation
A significant revival in the industry DX’s Radical Innovation
1. After going through twists and turns and surviving the
cold winter, the sportswear industry as a whole was
experiencing a more apparent recovery in 2014, with
sportswear brands generally reporting stable retail-end
sales and improved results, as the destocking stage was
nearing its end following a general restructuring of the
industry, while store closures also decelerated on the
back of gradual improvements in sales channel
distribution and management control.
2. The industry remained subject to the after-impact of
large-scale destocking and challenges arising from
corporate transformation and realignment. Meanwhile, the
ongoing expansion of foreign “fast fashion” brands and
the relentless expansion of the e-commerce market
continued to create increasing pressure of market erosion
upon offline physical outlets of brand companies.
Enhance brand value and proprietary products
Increase number of retail stores and improve
operating efficiency
Further implementation of retail efficiency
management
E-commerce transformation
Supply chain optimization
Improve and optimize internal structure and
operational flow
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6
E-Commerce Transformation
Retail Efficiency Management
Supply Chain OptimizationImprove and Optimize Internal Structure and
Operational Flow
Brand Value
Number of Stores and Operating Efficiency
New BusinessOperating
ModelManagement
Proprietary Products
Strengthen core competitiveness Create competitive advantages
China Dongxiang’s Radical Innovation
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Business Review
and Prospect
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Brand + Product
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Brand
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10
Brand Positioning
Rebellious and
high-profile
Full of passion
Back to Back
22-35 age group
1st and 2nd tier
cities
Fashionable
sports products
Fit, slim and 3D
cutting
High color
saturation
People who are socially active,revolutionary,avant garde andlive with passion
In-depth streamlining of its brand attributes to clarify its
brand positioning, brand image, target consumers and product design.
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11
Promotion channels: New media + Internet + Fashion media
Value-added series
In sync with conventional promotion
Online Promotion
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Upgrade retail store image
Retail Support – promotions and displays at store level
Roll out store promotion activities
Offline Promotion
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13
The Group continued to conduct its brand and event promotion through a combination of online and offline channels and
leveraged its vigorous cooperation with social media as well as fashion and sports media to publish product and brand
information, achieving notable results in terms of the enhancement of brand exposure and reputation.
Promotion Overview
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Product
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15
+ New Product Planning Model
Currently adopting the new roadmap for branding + retailOur new plan is to leverage our brand and stay close to our retail stores and market The development roadmap is transformed to “Regular development + Ongoing development”, which is faster and more efficient than the traditional way
Example: 14FW knitted trousers
Through speeding up ongoing development in later stage and putting it into
mass production in 14FW, we have seized more business opportunities; it is
the most efficient way to capture the market demand at the retail stores.
The product quantity under ongoing development accounted for 18% of
replenishment orders and 7% of total production. This practice brought us
more business opportunities and becomes an important component of our
business in the future.
Thinking roadmap : The New „Brand + Retail‟ Planning Model
Brand Retail
Total
Production
Quick
Replenishment
Rolling
Orders
Replenishment Volume(14FW VS 13FW knitted trousers) :171%
Percentage of Replenishment Order: 40%
Percentage of Rolling Order:7%
60%
Cycle:1
Cycle:1/6
Cycle:1/3
7%
33%
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16
13FW 14FW 15FW
15FW14FW13FW
ASP
Under the new
thinking roadmap, we
strive for better
product quality
instead of quantity. By
comparing 13FW,
14FW and 15FW, the
number of SKU has
decreased
significantly.
With the improved
quality and design of
products, the unit
price of products has
been raised
accordingly. We aim
at providing more
valuable and stylish
products to
consumers, as well
as bringing better
return for the
company.
13FW 14FW
GP margin (New Products)
Wholesale
Retail
Though the number of SKU decrease, the
gross margin for new products continued to
increase. The gross margin of the company
maintained a stable growth as we focused on
enhancing the quality and look of our
products, together with an increment in ASP.
Thinking roadmap : The New „Brand + Retail‟ Planning Model
Upgrade brand value and improve product quality
Number of SKU
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Product Core Competitiveness
Proprietary Products
Immerse and Upgrade of Signature Products
Differentiation Upgrade and
Development of Ongoing Products
Product
Look and Quality
Matching of fabric, craftsmanship and supplementary
fabric
Support and Matching Supply Chain Resources
Design Thinking Process
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18
702703701701601602
Immerse customers with our
signature products
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19
Immerse customers with our
signature products
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Brand + Retail
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Mid single digit net increase of store openings
Number of Stores
29%
68%
3%
分公司
迈盛悦合*
加盟
A
21
1. In 2014, the Group re-opened all its sales channels and had over 1,200 stores as of end of the year.
2. Certain numbers of low efficient stores were replaced in 2014, as a result the average store sales of new stores
opened compared to the stores closed was increased by 23%.
As of 31 December 2014
2014 Sales Channel Nature
Franchise
Max Sports
Subsidiaries
33%
27%
30%
10%
1级城市
2级城市
3级城市
4级城市
As of 31 December 2014
2014 Sales Channel
distribution
Cities
1st tier
2nd tier
3rd tier
4th tier
Brand + Retail- Channels
For the year ended 31 December
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Brand + Retail- Retail-end Operational Data
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1. Same store sales for 2013Q4 was a low single digit increase, and the same store sales in 2H2014 was a high
single digit.
2. There is also an improvement in terms of inventory over sales ratio and retail discount at the retail end.
B
High
Single
Digit
Mid-
Single
Digit
Low-
Single
Digit
Same Store Sales
Inventory/Sales Ratio
Retail Discount
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• Develop retail database for product management systems• Improve product turnover in retail stores
• Strengthen our controllability on the product management and operations
Light Assetwholesale
model
Old
DongXiang
Post-Reform
New
Dongxiang
Channels Management: Closely connected to
customers, by
targeting customers
from various regions
and channels, to
establish distributors
channels,
franchising and other
sales model;
Merchandise
Management:
Provide various data
analysis and control
for sales of products
(including production
pipeline, sales, sold-
out rate, inventory
etc.)
Sales Support
Management: By
targeting different
needs from various
terminals to
establish and
execute sales
training, store
displays and retail
promotion and etc.
Dealership+
Franchise chains
Self-owned subsidiaries
“Retail Management"
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Brand + Retail - Retail Management C
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Market Demand
量化产品Product
classification &
distribution
Ide
nti
fic
ati
on
of
reg
ion
li
fe c
yc
le
Adjustment of trade order, production &
delivery
Operation Model of Product
Management and ControlC1Brand + Retail -
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The Effective Combination of
Product and Sales Channel
Formulate a reasonable store classification standards in
order to align with product classification
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Channel
Class
Product
Class
A+ stores
A stores
B stores
C stores
Brand
Promotional
Class
C1Brand + Retail -
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Product Life Cycle of Knitted TrousersCentral
South
North
Northeast
2013
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8月 9月 国庆 10月 11月 12月 1月 2月 3月 4月 五一 5月 6月 7月 8月
240g以下销量 240-280g以下销量 280-320g以下销量 320g以上销量
针织下装52周销售曲线图--东北区
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8月 9月 国庆 10月 11月 12月 1月 2月 3月 4月 五一 5月 6月 7月 8月
240g以下销量 240-280g以下销量 280-320g以下销量 320g以上销量
针织下装52周销售曲线图--南区
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8月 9月 国庆 10月 11月 12月 1月 2月 3月 4月 五一 5月 6月 7月 8月
240g以下销量 240-280g以下销量 280-320g以下销量 320g以上销量
针织下装52周销售曲线图--北区
2013
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8月 9月 国庆 10月 11月 12月 1月 2月 3月 4月 五一 5月 6月 7月 8月
240g以下销量 240g以下销量 240-280g以下销量 280-320g以下销量
针织下装52周销售曲线图--中区
Central
Northern
Southern
Northeastern
The product seasonality cycleis first defined by fourdifferent seasons and thesuitable sales cycle of eachproduct in different region isidentify by the products’own life cycle in variousregions.
Product Life Cycle
Management ModelC1Brand + Retail -
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27
Store Replenishment Mechanism
Ongoing Replenishment
Orders
Ongoing productDevelopment
Store Replenishment Mechanism
is adopted by targeting Product
Management and Control
Ongoing replenishment orders
based on actual sales at retail-
end
Ongoing product development
based on actual sales trend and
feedback from retail-end
Important Adjustment Segments
in Product ManagementC1Brand + Retail -
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28
Brand + Retail – Replenishment Order Percentage
14SS 14FW 15SS
Pre-order Replenishment Order
14SS 14FW 15SS
Pre-order Replenishment Order
Replenishment Order Percentage for Apparel
Replenishment order for 14FW apparel accounts for 24%, 15SS accounts for 14%
Replenishment order for 14FW footwear accounts for 17%, 15SS accounts for 34%
7% 24%14%
1%17%
34%
Replenishment Order Percentage for Footwear
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29
Brand + Retail – Sales Trend at Retail-end
Knitted Trousers 13FW and 14FW Sales Trend at Retail-end
13FW
14FW
55%14SS
15SS
The retail-end sales for 14FW knitted trousers recorded 55% increase yoy
The retail-end aggregate sales for 14FW knitted trousers for week 1 to week 14 recorded 72% growth yoy
Knitted Trousers 14SS and 15SS Sales Trend at Retail-end
Aggregate Sales for week 1 to week 14 increased by 72% as compared to the same period last year
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30
1. Continuous growth for Kappa sales fair results
2. The total amount of Inventory level is decreasing – new products and last-season products are the key components
of the total inventory as of 2014.
Brand + Retail – Sales Fair Orders & Inventory Structure
Mediumdouble-digit
growthLow
double-digit growth
Order from Sales Fair YoY Growth Inventory Structure
New
products
Old
products
Last-
season
products
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原 来 模 式 现 有 模 式
Future products
delivery under
wholesale model
Fixed cycle of
mass distribution
Delivery of store
replenishment
products
Direct delivery
of replenishment
orders
Flexible delivery in small quantity but high frequency
Delivery from factories
Cross and connected multi-way delivery
Original model Current model
Brand + Retail – Effective upgrade of Supply Chain
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32
Sales via e-commerce accounts for approximately 15% of the Group‟s total
sales in China.
E-commerce channel has significantly adjusted and modified the sales
model from a brand retail perspectives. Through taking initiatives to adjust
the product structure and sales channels, the proportion of new product and
vintage product has been increased, as well as the sales via self-owned
retail. It has also enhanced our ability to identify and capture the consumers.
Sales from self-owned retail accounts for 40% of the total sales from E-
commerce, representing an increase of 19ppts from 21% in 2013. The sales
of future orders + vintage products + last-season products accounts for 81%
of the total sales of self-owned platform, representing an increase of 32% as
compared to 2013.
The retail discount for self-owned e-channel decreased from 58.4% to
56.9%, whereas the retail discount for wholesale e-channel decreased from
69.5% to 67.8%.
E-commerce channel has notably modified the efficiency of product and
self-owned retail stores, as well as enhanced the cooperation with different
platforms, leading to a breakthrough in the November 11th promotion day. It
also implies the greater influence and market share of e-commerce channel
in the future.
Sales of Kappa on Taobao and Tmall on Singles-
day in China
2015年
电商将继续延续2014年政策和方向,着重提升盈利能力
Year of 2015
To continue the e-commerce business
strategy established in 2014 with a focus on
profitability enhancement
Review of E-commerce Business in 2014
E-commerce Business
Sales from self-owned retail
accounts for 40% of the total
sales from E-commerce,
representing an increase of 19
ppts from 2013
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Financial Review
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For the year ended 31 December
2014 2013 Change
(RMB mn) (RMB mn) (%)
Revenue 1,262 1,414 -10.7%
Gross Profit* 640 681 -6.0%
Operating Profit 989 225 339.6%
OP Excluding One-off Gain 303 225 34.7%
Profit attributable to equity holders 915 210 335.7%
Gross Profit Margin* 50.7% 48.2% 2.5p.p
Operating Profit Margin 78.4% 15.9% 62.5p.p
OP Margin Excluding One-off Gain 24.0% 15.9% 8.1p.p
Net Profit Margin 72.5% 14.9% 57.6p.p
Basic earnings per share (RMB cents) 16.61 3.82 334.8%
Dividend Yield Ratio (Closing price as at 31 December) 9.9% 3.2% 6.7p.p
*before reversal of impairment losses of inventories
34
Financial Highlights
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35
904 828
510434
0
500
1000
1500
2013年 2014年
中国区 日本区
63.9%
JapanChina
2013 2014
RMBmn
1,2621,414
36.1%34.4%
65.6%
Footwear
25.6%
(23.1%)
Apparel
71.2%
(73.6%)
Accessories
3.2%
(3.3%)
2014735
529
169299
0
500
1000
2013年 2014年
批发 零售
RMB mn
18.7%
81.3%
828904
36.1%
63.9%
Sales by channel – Kappa ChinaSales by market and brand Sales by product – Kappa China
Remark: Comparable figures for 2013 are shown in brackets
• The sales of China segments in 2014 was stabilized, putting a stop to the sliding revenue for years in a row, which was attributable
to 1) the Group keenly transformed its philosophy of sales from being passive to being active. We identified terminal sales
performance of each products and demands of consumer by analyzing sales data of retail stores on a regular basis, with an aim to
respond forthwith, maintain rolling order for fast-moving products for ensuring adequate supply for consumers; 2) our capacity of
design, research and development has been enhanced so as to introduce a broad range of products for addressing the demands of
young consumers, as well as to eliminate slow-moving products in due course for minimizing loss; 3) the net increase in number of
Kappa brand retail stores was 27 in China in 2014;
• The decrease in sales of Japan segment was mainly due to the significant depreciation in Japanese Yen, slow sales in Japanese
market and increase in sales return as compared with last year;
• In 2014, sales of Kappa in China segments via retail channels developed smoothly, as at 31 December 2014, the number of self-
owned retail stores operated by our subsidiaries reached 350, the proportion of corresponding sales increased from 18.7% to 34.6.
Wholesale Retail
20142013
Sales by Market, Channel and Product
-
211 170
288325
54% 53%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
0
100
200
300
400
500
600
2013年 2014年
56%
64%
36
For the year ended 31 December
China Segment SalesGross profit and Gross margin –
China Segment Kappa brand
392323
512505
0
200
400
600
800
1000
2013年 2014年
2H
1H
828904499 495
RMBmn
RMBmn
20132013 2014
2014
For the year ended 31 December
The revenue of China segment for 2014 decreased by 8.4% YoY to RMB828 million, reflecting a 17.6% decrease
YoY for the 1H of the year. The sales level remained unchanged in the 2H as the Group succeeded in stabilizing
sales through a range of business control measures that proved to be effective.
Gross profit margin for the China region remained stable, with a greater increase in the 2H of the year due to bigger
proportion of self-owned retail outlets and new products
1H Gross
profit Margin*
2H Gross
profit Margin*
2H
1H
*before reversal of impairment losses of inventories
Financial Highlights – Kappa brand China segment
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37
Gross profit margin by market*Gross profit margin by product
– Kappa China*
58.9%
62.2%
50.7%
55.2%
63.1% 63.1%
57.2%
60.5%
50%
55%
60%
65%
2013 2014
Apparel Footwear
Accessories Kappa brand (Total)
55.2%
59.8%
35.7%33.4%
48.2%50.7%
30%
40%
50%
60%
2013 2014
China Japan Group
For the year ended 31 December
In 2014, gross profit margin of Kappa brand in China segment rose by 3.3 percentage points to 60.5%, which was mainly
attributable to higher profit margin of new products which are also taking up a higher proportion of total sales. This gross profit
margin increase was also due to the increased proportion of sales of subsidiaries of the Group;
In 2014, gross profit margin of Japan segment dropped by 2.3 percentage points, which was mainly due to increase in production
costs and increased discount offer for off-season inventory clearing.
*before reversal of impairment losses of inventories
For the year ended 31 December
Gross Profit Margin by Market and Product
-
For the year ended 31 December
2014 2013 Change
(RMB mn) (RMB mn) (%)
– Selling expenses* 153 112 36.6%
As a % of sales 12.1% 7.9% 4.2p.p
– Advertising and marketing expenses** 62 44 40.9%
As a % of sales 4.9% 3.1% 1.8p.p
– Employee salary and benefit expenses 143 153 -6.5%
As a % of sales 11.3% 10.8% 0.5p.p
– Product design and R&D expenses 45 48 -6.3%
As a % of sales 3.6% 3.4% 0.2p.p
* Selling expenses mainly include rental cost, management fee and trustee fee of self-owned retail stores, and all the costs directly related to terminal sales, including sales orders
cost, store POP design and production fee, as well as store promotions;
** Advertising and marketing expenses refer to expenses directly related to brand promotion, including all kinds of advertisement design, production and placement expenses, and
also sponsorship and brand promotion activities expenses.
Expenses Analysis
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39
Trade ReceivablesInventory Trade Payables
92 133
139
141
0
100
200
0
100
200
2013 2014
235 200
10396
0
100
200
0
100
200
300
2013 2014
5584
52
76
0
50
100
150
0
50
100
2013 2014
As of 2014, the value of inventory of the Group in China segment increased but the inventory structure has improved
in which there is an increase in proportion of new products.
As of 2014, the balance of trade receivables of the Group remained stable, a decreasing trend in trade receivables
turnover days was recorded
RMBmn
Turnover Days
RMBmn
Turnover Days
RMBmn
Turnover Days
For the year ended 31 December For the year ended 31 December For the year ended 31 December
Inventory, Trade Receivables and Trade Payables –
China Segment
-
40
For the year ended 31 December
2014 2014
(RMB mn) (RMB mn)
Cash and bank balance 2,546 1,097
Treasury products 2,080 3,551
Less: bank loans - -
Net cash and bank balance
and treasury products4,626 4,648
Maintain Solid Net Cash Position
-
41
As at 31 December 2014
Investment Date of Commitment Balance (RMB mn)
Yunfeng E-Commerce September 2011 3,229
CITIC Mezzanine September 2011 238
Yuanxin Dongchao September 2014 165
Shanghai Panxin September 2014 202
Others 746
Total 4,580
The Group has stably put forward different investment projects with well-established
investment team and investment risk management and control system for
maximizing profits and returns for our shareholders
Investments
-
42
RMB centsFor the year ended 31 December
2014 2013
Basic earnings per share 16.61 3.82
Interim dividend and
special dividend per share1.22 1.17
Final dividend and
special dividend per share10.35 1.49
Annual payout ratio 70% 70%
The Group has maintained high dividend payout ratio
for maximizing the benefit of shareholders
Dividends for 2014
-
Q&A
-
44
Email
Telephone
Fax
Website
AddressBuilding 21, No. 2 Jingyuanbei Street, Beijing Economic
and Technology Development Zone, Beijing, China
Investor Relations Contacts