Cosmo Lady Announces 2018 Interim Results; Net Profit Rose by 20.9% to Approximately RMB175 Million

During the period under review, China's economy, mainly driven by increase in consumption expenditure, extended its steady growth. Despite the downward pressure incurred by external uncertainties on global economic activities, the challenges brought by the highly fragmented market structure and the continuous structural adjustments in respect of sales channel diversification, product quality and mix of products, the Group actively responded by formulating various measures and has gradually achieved encouraging effect, with the operations of the Group showed further improvement during the period under review.

In the first half of 2018, the Group recorded a revenue of approximately RMB2,338,682,000 (first half of 2017: RMB2,079,229,000), representing a growth of approximately 12.5%. The Group's profit also saw an increase of approximately 20.9% to approximately RMB175,121,000 (first half of 2017: RMB144,887,000), indicating the continuous revival of the Group's operation.

During the period under review, the Group achieved satisfactory sales performance. The increase in sales to franchisees by approximately 21.6% was mainly attributable to the renovation of retail stores with upgraded image by franchisees as urged by the Group and the improvement in quality of products. E-commerce sales also increased by about 27.0%, reflecting the effectiveness of the Group's continuous investment of resources in the development of e-commerce channels. Meanwhile, the revenue for all types of product have increased, in which the revenue for sleepwear and loungewear products saw a growth of approximately 20.2% which was mainly attributable to the step up of promotion activities and improvement of product design and variety.

Under the influence of the keen competition in the e-commerce channel and the Group's step up of promotion efforts to sell aged inventories, the Group recorded a gross profit of RMB1,021,842,000 (first half of 2017: RMB937,195,000) and a slight decrease of gross profit margin to around 43.7% (first half of 2017: 45.1%). The Board of the Company has recommended the payment of interim dividend of HK2.73 cents per share (equivalent to RMB 2.40 cents per share, using the exchange rate quoted by the People's Bank of China on 17 August 2018) for the six months ended 30 June 2018 (six months ended 30 June 2017: HK2.58 cents per share).

Mr. Zheng Yaonan, Chairman and Chief Executive Officer of Cosmo Lady, said, "To meet the formidable internal and external challenges, the Group has formulated various measures and initiatives since 2017, including optimizing and further diversifying sales and distribution channels, tightening expenses control and cutting costs, establishing a new product management department and reforming supply chain management, enhancing efforts on market research and development of new products and technological innovation, and broadening the product range of the Group with other renowned players, thus successfully further improved the Group's operating performance and consolidated the Group's market leadership."

As for optimizing and further diversifying sales and distribution channels, the number of retail stores of the Group increased to 7,368 (31 December 2017: 7,181) as a result of the gradual recovery of the Group's business. During the period, the Group has renovated 98 self-managed retail stores and 634 franchised retail stores. By strategically opening stores with higher operating efficiency and larger scale, the total store area of the Group on 30 June 2018 saw a growth when compared to that of 30 June 2017.

The Group also reformed supply chain management and established a new product management department to strengthen the coordination and communication between sales department and supply chain department. In June 2018, Rowland Berger Strategy Consultants (Shanghai) Limited, a global leading consulting firm engaged by the Group, has made recommendations on the management, systems and procedures of the Group's supply chains department and product merchandising, which will be implemented in second half of this year to improve the efficiency in related areas.

In terms of product optimization, apart from constantly enhancing efforts on market research and development of new products and technological innovation, the Group also broadened the product range with other renowned players. In March 2018, the Group established a joint venture company with Shanghai Kappa Sportings Goods Co., Ltd. The JV Company is principally engaged in the on-line sales of men's intimate wear and ladies' sport underwear products in the PRC and has been granted the right to use the trademark "Kappa" on its products, favoring the diversified development and the exploration of income sources of the Group.

During the period under review, the Group also introduced JD.com, Inc., Tencent Holdings Limited and Vipshop Holdings Limited as its strategic shareholders. The transaction represents a valuable opportunity for the Company to raise additional funds and strengthen the capital base and the financial position of the Group, while also help the Group to develop its business on internet platforms and promote its brand equity.

Looking ahead, Mr. Zheng concluded, "The Group has formulated many new development projects for the second half of 2018, including the increase in input on designing, research and development, brand building, image updating, supply chain reforming and human resources construction, in order to further improve the Group's business and enhancing our core competitiveness. The Group will work with first-class interior design companies, reputable international advertising companies and IT retail store technology companies to set up new shopping mall retail stores based on the guidance of Ms. Sharen Turney, our chief strategic officer (shopping mall 2.0 development plan), while also cooperate with Tencent on smart retail store arrangement. Furthermore, we will develop the young brand "O+" derived from the original Ordifen brand, develop household retail stores (GIPO stores) and enter into strategic investment agreements with eleven intimate wear product and material suppliers in order to strengthen our supply chain management, shorten the development and manufacturing cycle of new materials and products, and raise self-sufficiency of premium products. Meanwhile, the Group will proactively seek suitable target companies for mergers, acquisitions, share subscriptions or cooperation. As a consequence, the Group is cautiously optimistic that our operating result will continue to improve in the future, which will help increase the Group's market penetration in the intimate wear industry in China and create maximum value for the interests of shareholders."

Topic: Press release summarySectors: Daily Finance, Daily News^[1][2] http://www.acnnewswire.com From the Asia Corporate News Network

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References

1. ^{^} Daily Finance (www.acnnewswire.com)
2. ^{^} Daily News (www.acnnewswire.com)