annual results presentation · presentation 2020.6.17. contents financial review business review 1...

FY2019/20ANNUAL RESULTS

PRESENTATION

2020.6.17

Contents

Financial Review Business Review

1 2PART ONE PART TWO

3PART THREE

Outlook

2

Vincent Lyu

Executive Director and Chief Financial Officer

Financial Review

3

As at 31 March 2020 Unit：RMB million

*Before provision for/reversal of impairment losses of inventories**Data is 15 months.

Summary of Results

19/20 18/19 YOY Change

Revenue 1,841 1,635 +12.6%

Gross profit* 1,138 914 +24.5%

Operating profit 484 584 -17.1%

Operating profit excluding investment income-65 -61 -6.6%

Net profit attributable to equity owner of the of the Company

366 429 -14.7%

Gross profit margin* 61.8% 55.9% +5.9ppts

Operating profit margin 26.3% 35.7% -9.4ppts

Operating profit margin rate excluding excluding investment income

-3.5% -3.7% +0.2ppt

Net profit margin attributable to equity owner equity owner of the Company

19.9% 26.3% -6.4ppts

Basic earnings per share(RMB cents) 6.25 7.34 -14.9%

Interim dividend and interim special dividend dividend per share(RMB cents)

2.75 2.45** N.A.

4

1,301

1,540

334

301

0

400

800

1200

1600

2000

18/19财年 19/20财年

中国日本

19/20财年

YOY Change

-9.9%

+12.6%

+18.4%

1,635

1,841

China83.7%

（Last Year：79.5%）

Japan16.3%

（Last Year：20.5%）

SALES ANALYSISGroup’s Sales Analysis — By Markets % of Sales

FY19/20


FY18/19 FY19/20

China Japan

5

DO

522

DO

549

IDO

329

IDO

558

DO

184

DO

238

IDO 53

IDO 43

117

88

67

64

FY18/19 FY19/20

Offline

E-Com

1,301

1.540

Offline71.8%

(+4ppts)*

DO35.6%

IDO36.2%

FY19/20

DO 15.5%

IDO 2.8%

E-com18.3%

（0.1ppt)

Kid’s Wear5.7%

(-3.2ppts)

Others4.2%

(-0.9ppt)

-4.5%

+18.4%

-24.8%-18.9%

+29.3%

+69.6%

+5.2%

YOY change

Offline

E-com

SALES ANALYSISChina Sales Analysis — By Channels % of China Sales by Channels


*The YOY Change of the same period in brackets

Kid‘s wear

Others

Kid‘s wearOthers

6

DO: directly-operated

IDO: indirectly-operated

GROSS MARGIN ANALYSIS *

19/20 18/19 YOY

China 66.4% 60.6% +5.8ppts

Japan 38.2% 37.4% +0.8ppt

Group 61.8% 55.9% +5.9ppts

Apparel 71.9% 67.0% +4.9ppts

Footwear 59.4% 55.2% +4.2ppts

Accessories 80.4% 89.5% -9.1ppts

Gross margin of KAPPA Brand 69.6% 65.1% +4.5ppts

By regional market

As at 31 March 2020

China segmentBy products

*Before provision for/reversal of impairment losses of inventories7

EXPENSES ANALYSISYOY Advertising and

selling expensesSalaries and

benefit expensesDesign and

product development

China +29.3% +7.0% -17.2%

Japan -6.0% -21.2% +63.6%

Group +26.4% -0.5% +5.0%

%of Sales

Advertising and selling expenses

18/19 19/20 YOY

China 33.9% 39.1% 5.2ppts

Japan 3.0% 2.6% (0.4ppt)

Group 36.9% 41.7% 4.8ppts

557

720

50

47Group

607

Group767

141 151

52 41

Group192

Group193

29 24

11 18

Group42

18/19 19/20 18/19 19/20 18/19 19/20

Japan

China

Design and product development

18/19 19/20 YOY

1.8% 1.3% (0.5ppt)

0.7% 1.0% 0.3ppt

2.4% 2.3% (0.1ppt)

Salaries and benefit expenses

18/19 19/20 YOY

8.6% 8.2% (0.4ppt)

3.2% 2.2% (1ppt)

11.8% 10.4% 1.4ppts

As at 31 March 2020 Unit: RMB million

Group40

8

RMB MillionYOY Change over end

of Mar 2019

Net inventory 352 +0.6%

Balance of trade receivables 134 -12.7%

Balance of trade payables 121 +12.4%

Turnoverdays

YOY Change

Inventory 248 +40 days

Trade receivables 30 -11 days

Trade payables 91 +28 days

Cash conversion cycle 187 +1 day

China Segment – Operating Efficiency AnalysisAs at 31 March 2020

9

Analysis of Investment Income from China

19/20

Gains on disposal of financial assets 25.12

Financial asset investment income 93.23

Changes in fair value of financial instruments 378.03

Interest income from loan receivables 59.89

Net amount of others 10.70

Total 566.97


By categories

10

Summary of Investment & Funds

0

20

40

60

80

100

120

Market Value39

Cash & Investment103

Fixed income----------7%

Cash & cash equivalents----22%

Investments in financial assets--------48%

Quoted securities-----23%

As at 31 March 2020 HKD 100 Million

Partners: Yunfeng Funds, Fosun & CITIC PE Funds etc.Investing in advanced technologies, financial services, new energy, medicine and manufacturing, etc.

*As at 31 Mar 2020, exchange rate was HKD1.00 to RMB0.9137

11

Investment Portfolio

634MN

137MN

860MN其他

32MN

Investmentsin financial assets

4,497MN

132MN 337MN

1,001MN

1,364MN

Fixed incomeAverage annualised return

7%-8%

Investments in financial assetsHistorical average internal return

15%-20%

Cash & cash equivalentsAverage annualised return

1.5%-3.5%

As at 31 March 2020 RMB

2020/2021Estimated annualised returnon investment before tax

12

Recommended Final Dividend As at 31 March 2020

13

*YOY is 12 months

Basic earnings per share 6.25 7.34*

RMB Cent 2019/2020 2018/2019

Final dividend payout ratio 70%

Total dividend 4.36

Interim dividend per share and special interim dividend

1.61

Recommended final dividend per share and final special dividend

2.75

2019/2020

BUSINESS REVIEW

Johnathan Zhang

Executive Director, CEO and President

14

15

Offline E-commerce Offline+E-commerce

Growth in Overall Retail Performance and

Strong Growth in E-commerce Business

Offline E-commerce Offline+E-commerce

Low-single-digitgrowth

High-single-digitgrowth

Mid-single-digitgrowth

30% to 35%growth

50% to 60%mid-high growth

40% to 50%low growth

Mid-single-digitgrowth

10% to 20%mid-growth

10% to 20%low-growth

High-single-digitdecrease

Low-single-digitdecrease

Mid-low-single-digit decrease

30% to 35%growth

50% to 60%mid-high growth

40% to 50%low growth


Mid-high-singledigit growth

Mid-high-singledigit growth

Q4

Q3

YoY Change in Retail

Performance

YoY Change in Same

Store

FY

30% to 40%mid-low decrease

10% to 20%low decrease

20% to 30%high decrease

20% to 30%high growth


10% to 20%low decrease

Mid-low-singledigit decrease

Mid-low-singledigit growth


20% to 30%high growth


Low-single-digitgrowth

Q1

Q2

16

YOY Change in retail performance

1st to 22nd Jan 2020 23rd Jan to 31st Mar 2020

Offline 87% （70%）

E-commerce 45% （25%）

Retail Performance for Q4 Jan 2020 Feb 2020 Mar 2020

Offline 24% （92%）（48%）

E-commerce 45% （10%）（36%）

Before Epidemic After Epidemic

Online and Offline Retail Performance affected by COVID-19

17

% Retail of Performance

End of Mar 20

No. of Stores

231 289

910 794

6846

0

200

400

600

800

1,000

1,200

1,400

End Mar 2019 End Mar 2020

Mall Dep Stores & Sports Plaza Standalone stores

-32% 4%

-13% 70%

+25% 26%

YOY

-6%1,2091,129*

Dep Stores & Sports Plaza 68%

（-5ppts）

Mall(incl. special sale）*28%

（+7ppts）

Standalone stores

4%（-2ppts）

*The changes in the proportion of the same period in brackets

Head shops accounted for 4%, down 1ppt YOY

Outlets accounted for 12%, up 3ppts YOY

Sales Channel Analysis

• There are 1129 stores as at the end of FY2019 with new openings of 223, new renovation of 155 and closure of 303. The number of comparable newly-renovated stores are 149

• Average monthly performance of the 149 comparable newly-renovated stores is RMB164,300, a year-on-year growth of 15%, and average area of the stores increased by 9.2 square meter.

No of store

Proportion

*As of March 20

A level stores has 24, 41% YOY change, accounting for 2%

Outlets has 73, 23% YOY change, accounting for 6%

19

MarketingDec 2019

Kappa X R39, an e-sports brandINNERSECT

Jan 2020Kappa sponsors RNG DOTA 2

Jan 20208on8 x Kappa London

Fashion Week Men

Mar 2020 KAPPA. RNG DOTA 2

Mar 2020To Be aKappa Girl

Feb 2020Kappa special edition for Valentine’s Day

Mar 2020Kappa X Crayon Shin-chan

Oct 2019

Kappa X NPC

Shanghai Fashion Week

20

Anime Crossovers

2019.06 Kappa x Doraemon

2020.03 Kappax

Crayon Shin-chan

X

Coming Soon……Kappa x One Piece

21

K is for Kappa

Kappa BANDASeries

Kappa WMNSSeries

22

The “Streets and Alleys” Series – a New

Year Special

Claw cranes set up in stores for New Year

celebration

Online lucky draw for New Year

celebration

Kappa New Year Fortune Series

23

Excellent retail performance of special

Valentine’s Day edition vulcanized

shoes

Significant growth in sales of

accessories, such as handbags

Valentine’s Day series receive

numerous “likes” on social media

platforms

Valentine’s Day Series

24

Bulk Orders Management

Transfer to bulk orders model, build up bulk orders accounts.

Customer Transformation

Cloud logistics launched in Jan 2019.

No. of cloud stores increased from 154 in Mar 2019 to 465 in Mar 2020.

System Switching

From monthly settlement to daily real-time settlement.

Settlement Period

4 nationwide logistics and distribution centres: Wuhan, Chengdu, Xushui and Shenyang

Distribution rate increased by 95%.

Logistics Establishment

Establishment of incentive programme.

BU Incentive Implementation

25

Upgrades of sales channels

Product specialisation for each store in terms of

style, category and variety

Supply-demand structure

adjustmentMonthly adjustment on proportion of sub-categories of products subject to actual retail demand

Regional procurement

planGradual formationRight channels, right timing and right products

1 Bulk Orders Management 2

3 4Finalising procurement

plan before placing orders for

centralisation

Bulk Orders Management

Preparation

ProductPlanning

Design Development

Samplesadjustment

Order placement

meeting

Preparation For

product launch

Key Stages of Product Launch under Bulk Orders Model

26

Logistics optimisation

1. 4 distribution centres

Xushui

Wuhan

Chengdu

Shenyang

2. Efficiency enhancement

Significant time reduction for product returns

Distribution rate of 72 hours to stores

Increased efficiency in

orders handling in 48 hours3.Partnership

Increasing competitiveness and efficiency as well as controlling costs by introducing various operators;

Remarkably reducing unit cost

of packaging consumables;

Optimising distribution solutions

4. Cost optimisationLogistic costs for FY2019 was 3.1%

Logistic costs for the same period of FY2018 was 4.1%

1. Integration of retail finance and business

Achieving real-time updates between retail POS data and financial figures by integrating finance and business of retail

stores.

2. System implementation for bulk purchase

System switching for bulk purchase completed. The system covers 90% of the stores of bulk purchase customers.

3. Promotion of SCRM & omni-channel network

Ongoing facilitating and operating SCRM project for online inventory management through omni-channel network.

Backstage Support for Bulk Purchase Management

Upgrades of information

system

27

E-commerce BusinessAge18-24 Customers YOY growth over 50%

Consumption structure

0%

5%

10%

15%

20%

25%

30%

35%

40%

18-24 25-29 30-39 40-49 50+

2018 2019

28

618 shopping festival*↑70-80%

Double 11↑40-50%

Double 12↑60-70%

E-commerce Business

( searching products→products available for sale)

Digitalisation era

Products available for sale + brand asset customisation

Customer Appreciation

Original model – searching products

*618 Shopping Festival from 1st Jun to 20th Jun.

New flywheel effect

Data

Product Transformation

29

As offline stores affected by COVID-19,

they have increasingly

been supporting online sales

Tightened measures for

COVID-19 and caring for staff

Online sales underpinned byoffline diverse products

Launch of WXApp (WeChat shop)

On-time adjustment of orders

Measures implemented at back office;

No suspected or confirmed case of COVID-19 found in our Group

Sales channels COVID-19 Support - Voluntary actions

Donating medical

emergency supplies

29 January 2020:

• As said by Mr. Chen Yihong, the

chairman and an executive Director

of the Group, “it is our obligation and

responsibility to support the

nationwide prevention and control

measures of COVID-19”, and Kappa

brand and Phenix brand under the

Group has promptly donated RMB6

million in total through China Charity

Federation for supporting

nationwide prevention and control of

COVID-19

30 January 2020:

• As part of our corporate social

responsibility, the donation has

been announced via our WeChat

official account;

March 2020:

• China Dongxiang has donated

957 pairs of light -weight sport

shoes to Cabin Hospital in Wuhan

and Tianjin Medical Team

Measures in Response to COVID–19

Swift administrative response

OUTLOOK

Cherry Chen

Executive Director and Co-President

30

31

New retail planningOptimizing offline channels

Promoting Malls/Outlets

Over 150 new openings with

a focus on outlets operation

Enhancing store efficiency

Upgrading stores and

enhancing retail management

Promoting omni-channel

Integrating online and offline,

connecting market and sales

OthersFurther increasing efficiency to

improve inventory turnover

and liquidity

Setting up social customer relationshipmanagement

Setting up a new membership system

to increase members’ loyalty

and interaction

Improving cloud logistics

Ensuring effective sales support

to stores through effective control

over every part of cloud logistics

Opening WeChat Mall

No. of members

End of March, there were 860,000

members in total. Percentage of sales

revenue was 48% and repeat purchase

rate was 29%

Channel Strategy – Offline Optimisation and New Retail Planning

32

Brand Strategy

Deepening brand fashion positioning

Strengthening brand DNA, taking sports as the core,

leading the fashion

Guided by consumer demand, upgrading and

improving product line and wearing scenes

Strengthening communication and interaction with

consumers through IP/cross-border forms

33

Key Actions in Apparel Product Planning

Highlighting brand product features

Layout product lines with sports assets and brand DNA;

Significantly Improving quality to enhance products’

competitiveness;

Diversifying woman’s fashion in sports

Expanding women‘s fashion products；

Enhancing women's fashion

Diversifying product subgroups

Diversifying profitable product subgroups to identify new

business opportunities

Maximizing mix-and-match across product subgroups to

increase bundled sales of related products

34

Key Actions in Shoes Product Planning

Repositioning Vintage Series

Innovative works combined with brand DNA;

Material upgrades to improve texture and

wearing experience

Focusing on running shoes and vulcanized shoes

Focusing on running shoes and vulcanized

shoes

Reshaping Kolumn

Creating new shape of Kolumn on the basis of

its original form

Expanding woman’s fashion in sports,

strengthening sales opportunities with apparel

categories

35

IP Items

KAPPA XKazuki Kuraishi

KAPPA x JIEDA

KAPPA xSWAROVSKI

KAPPA x LEO

Brand

I P

Valentine’s Day EditionChristmas Edition

Limited

Edition

KAPPA x Doraemon

KAPPA x Modern Sky

KAPPA xCrayon Shin-chan

KAPPA xKeith Haring

KAPPA x One Piece

Anime

I P

The Spring Festival Edition

Supply chain reform

Strengthening product

innovation and development

Focusing on advancing the

flexible supply chain fast

reaction project

36

37

E-commerce Platforms

Key objectives in 2020

Targeting consumer groups of our brand and identifying mainstream platforms with an emphasis of

new consumption pattern of young consumers and sinking market as well as new consumption platforms

Live streamingApp

WeChat Group

Video clip

38

DisclaimerThis presentation contains certain forward-looking statements inrelation to the Company’s financial conditions, operating resultsand business. Such forward-looking statements represent theCompany’s expectations or beliefs regarding future events andare subject to known or unknown risks and uncertainties. Suchrisks and factors might result in significant difference betweenactual results, performances or events and the results,performances or events stated or implied in such statements.Certain statements, such as those including words andexpressions such as “potential,” “estimate,” “expect”,“anticipate,” “target”, “intend,” “plan,” “believe,” “project” andsimilar phrases expressed in different forms, can be regardedas “forward-looking statements.” Forward-looking statementsare subject to inherent risks and uncertainties. It should benoted that a number of factors might result in the actualoutcome deviating from conditions expected or implied in theforward-looking statements and such deviation might besignificant in some cases. The contents of the forward-lookingstatements are accurate as at the date on which such forward-looking statements are made, and should not be assumed tohave been revised or updated to reflect latest information orsubsequent events. Market trends and factors that are expectedto affect the operating results of the Company are set out in thesection headed “Financial Review” and other sections.

Website: http://www.dxspor t.co m Email: [email protected] Tel: +86 (10) 6783 6585 Fax: +86 (10) 6785 6606 Address: 21/F, 2 Jingyuan North Street, Beijing

Economic and Technological Development Zone, Beijing, China

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annual results presentation · presentation 2020.6.17. contents financial review business review 1...

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