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Public company info - Xtep International Holdings Ltd. , 01368.HK

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Xtep International Holdings Ltd., 01368.HK - Company Profile
Chairman Ding Shui Po
Share Issued (share) 2,547,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Footwears
Corporate Profile Business Summary: The Company is principally engaged in the design, development, manufacturing and marketing of sportswear, including footwear, apparel and accessory products, sold mainly under the self-owned Xtep brand and fthe Group’s internationally acclaimed brands, namely K-Swiss, Palladium, Saucony and Merrell. Performance for the year: The Group’s total revenue for the year ended 31 December 2020 remained stable at around RMB8.2 billion (2019: RMB8.2 billion). For the year ended 31 December 2020, the profit attributable to ordinary equity holders was approximately RMB513.0 million (2019: RMB727.7 million), Business Review: Multi-Brand Business Model As Chinese consumers aspire to enhance wellness and achieve health goals, sports-inspired athleisure wear and fashion-infused sportswear have gained immense popularity and seen incremental demand among Chinese consumers. The Group’s multi-brand business model has boosted the Group’s flexibility to adjust to different market segments, namely mass market, professional sports and athleisure. Each of the Group’s unique market segments is designed to cater to the needs of a diversified customer base. The core Xtep brand provides the mass market with trendy and stylish sportswear of excellent value, while Saucony and Merrell offer high-quality professional sportswear to enhance athletes’ performance. Lastly, K-Swiss and Palladium which aim to tap into the prevailing athleisure trend will continue to introduce athleisure wear to the younger generation that speaks their personalities. The Group’s core Xtep brand secured its leading market position as the Chinese Runners’ Favorite Brand. In 2020, we ranked first among the domestic brands in international class marathon in Mainland China2 . Guided by the Group’s mission to provide consumers in the mass market with value-for-money professional and stylish sportswear products, we persisted in scaling up innovation and proactively collaborating with popular IPs. Products Signature running collection — “Ultra Fast” Since the launch of the Group’s signature running shoes “160X” in December 2019, we have celebrated 26 championships in marathons and running events with eight sponsored athletes who wore the 160X shoes. These outstanding records are persuasive testimonials of the Group’s state-of-the-art technology and dedicated efforts to facilitate professional athletes to break through previous speed. In addition to the “160X” model, the collection also features the “Ultra FastX” and “Ultra Fast” model to satisfy the needs of elite and recreational runners at different levels. Retail management and branding There were 6,021 Xtep branded stores mainly operated by authorized distributors of the Group in Mainland China and overseas as at 31 December 2020. In light of the COVID-19 pandemic, optimizing retail management as well as enhancing store productivity and customer experience became the Group’s key focuses Customer experience In November 2020, the first multi-brand collection store X-STREET was unveiled at SM City in Xiamen. Occupying an area of 1,500 square meters, the X-STREET store accommodates fthe Group’s major brands, including Xtep, Palladium, Saucony and Merrell. This signature store boasts a combination of industrial design style with the characteristics of southern Fujian culture that rhyme with the pursuit of young consumers for trendy shopping experience. With the appearance of the Group’s spokesperson, Nicholas Tse, at the grand opening, the event attracted thousands of people to join and celebrate together. The atmosphere of the scene was brought to its peak and impressive retail sales were recorded during the opening. The retail store format is constantly upgraded to deliver superior in-store experience. In 2020, a portion of the existing retail stores were revamped and upgraded to the ninth-generation retail store format. The ninth-generation retail stores were designed to offer the Group’s customers immersive retail experiences which encourage them to experience the breadth and depth of the core Xtep brand. With a larger gross floor area on average, the newly revamped stores are expected to uplift the store productivity and efficiency. E-commerce As the COVID-19 pandemic has reshaped the retail landscape and consumer behaviors, e-commerce has become a vital retail channel for us to reach out to the Group’s customers. Although lockdown measures were lifted gradually in the second half of 2020, consumers continued to increase their engagement in online shopping. The growth of the Group’s e-commerce business accelerated and it accounted for about a quarter of the Group’s revenue in 2020. The one-year restructuring of the Group’s e-commerce business came to an end in the first half of 2020. After a smooth integration of the Group’s supply chain operations with the Group’s offline business, the design and quality of the online exclusive products were vastly improved to align with that of the offline products. Consequently, we witnessed a speedier growth in the Group’s e-commerce in the second half of 2020. During the year, we continued to leverage private traffic such as WeChat Mini Programs and live streaming to boost the Group’s exposure online. 151 live streams were produced together with 135 influencers on various online platforms. These initiatives significantly contributed to an eye-catching growth in the Group’s online sales. During the Double 11 Global Shopping Festival, the Group’s online sales spiked by approximately 50% year on year to over RMB520 million, driven by a 40% year-on-year growth in Xtep’s Tmall flagship store. In the future, we will further integrate the Group’s online and offline business and increase the proportion of the Group’s O2O products to maximize the O2O synergies and achieve sustainable growth in the Group’s e-commerce business. Xtep Kids There were approximately 800 POS for Xtep Kids as at 31 December 2020. Despite the adverse impacts of the COVID-19 outbreaks in Mainland China, the retail sales of the Kids business remained stable in 2020. Online sales of the Group’s Kids business doubled during the Double 11 Global Shopping Festival. The strong performance was mainly attributable to higher brand awareness, enhanced product design and quality, and more refined retail management following the successful restructuring from 2015 to 2017. Considering the recurring coronavirus outbreaks and highly fragmented childrenswear market in Mainland China, we will continue to take a cautious approach when expanding the Group’s Kids business in the years ahead. Retail management The retail network of Saucony and Merrell was significantly expanded as we kick-started the store openings for both brands in Mainland China in May and April 2020, respectively. As at 31 December 2020, there were 32 and six self-operated stores for Saucony and Merrell in tier I and tier II cities in Mainland China, respectively. As a premium global sportswear brand which offers top-notch products with cutting-edge technology, Saucony has proved to be very well accepted by Chinese runners. In 2020, Saucony ranked 4th and 7th among international brands in Shanghai Marathon3 and Guangzhou Marathon4, respectively. Witnessing the Group’s initial success in Saucony’s self-operated retail stores, we will continue to unleash the potential of Saucony through more store openings in higher-tier cities in 2021. To further amplify the competitive advantage of Merrell as one of the best outdoor sportswear brands in the world, we will continue to ride on the growing popularity of urban outdoor activities and open more new stores for Merrell in 2021 in Mainland China. E-commerce Dedicated online marketing efforts were invested for Saucony and Merrell to spur their online sales during the year. For instance, we engaged premium influencers to attract attention to the Group’s products and raise awareness of the two brands on a wide range of social media platforms. During the Double 11 Global Shopping Festival 2020, Saucony achieved a threefold year-on-year increase in online sales, while Merrell’s online sales grew by 38% year on year Retail management The COVID-19 pandemic continued to impede the business operations of K-Swiss and Palladium in the Americas and Europe, it is expected that gradual recovery of the overseas business will require some time and patience. Meanwhile, we will shift the business focus of K-Swiss and Palladium to AsiaPacific. The strategic planning for K-Swiss’s brand revamp was set out with precision and its progress did not stagnate amid the pandemic. Its first self-operated store in a higher-tier city in Mainland China is expected to debut by early 2022. As at 31 December 2020, there were 43 self-operated stores for K-Swiss in Asia-Pacific. On the other hand, we successfully solidified Palladium’s brand awareness in Asia-Pacific by tapping into the burgeoning athleisure trend with new store openings. We will further accelerate Palladium’s business expansion by launching more self-operated stores in higher-tier cities in Mainland China. As at 31 December 2020, there were 54 and 3 self-operated stores for Palladium in Asia-Pacific and Europe, respectively, of which 21 stores were in Mainland China. E-commerce To mitigate the impact from the suspension of most of the Group’s operations in overseas markets since the first quarter in 2020, we employed extensive online marketing campaigns which encompassed social media marketing, email marketing and digital advertising for K-Swiss and Palladium. The Group’s outstanding digital marketing capabilities in global markets successfully led to magnificent results. Online retail sales in the Americas and EMEA registered robust year-on-year growth of 45% and 52%, respectively. Operations Management Supply chain management We remain fully committed to operating a seamless and vertically integrated business with the support of an efficiently managed supply chain. Apart from in-house production, we utilize outsourced suppliers to produce footwear and apparel products, and sourced materials for production collectively. Supplier management All of the outsourced suppliers were constantly monitored by the Group’s quality control team to uphold high quality standards. We perform thorough assessments regarding the capabilities and performance of new and existing suppliers before we engage them and continue the Group’s partnership. To ensure the suppliers’ Environment, Social and Governance performance is in alignment with the Group’s standards, all suppliers are required to comply with the Group’s Supplier Code of Conduct. The code covers aspects including product quality, environmental compliance, labor standards, employee welfare and human rights. Every six months, the Group’s supply chain management department would also perform assessments on the suppliers’ compliance with the code. Any violation of the code will be handled in accordance with the Group’s internal policies and guidelines, which may lead to warnings or fines for minor violations and disqualification of suppliers for major violations. Logistics park and in-house production facility The construction of the Group’s logistics park with a gross floor area of approximately 200,000 square meters in Jinjiang, Fujian Province, was in full swing. Upon completion, the automated park will ship products manufactured in the Group’s in-house factories directly to the Group’s branded retail stores in the five neighboring provinces of Fujian, greatly shortening the lead time and accelerating replenishment cycle process. To accommodate the Group’s growing business, we also kicked off the construction of the Group’s new in-house production facility with a gross floor area of approximately 85,000 square meters in Shishi, Fujian Province, in the second half of 2020. The facility will mainly be used to manufacture the Group’s footwear products. Human resources management Xtep regards its employees as the most valuable asset. During the year, we continued to assist the Group’s employees advance in their careers and achieve personal growth. The Group’s Xtep University which was established in 2014 offers comprehensive trainings to the Group’s employees, including ongoing training and development programs ranging from corporate culture, leadership, professional skill, e-commerce, retail to manufacturing. As of 31 December 2020, Xtep University provided over 420,000 hours of online and offline training to employees. In addition, a two-year XMBA program created in collaboration with Xiamen University also allowed 70 staff to sharpen their management skills. Prospects: Despite the devastating impact of the COVID-19 pandemic, we believe that the consumer sector will benefit from both the economic growth in Mainland China and the national policies that aim at boosting household incomes and consumptions in 2021. It is also expected that the increase in health awareness and participation in sports of the Chinese people will result in higher sportswear consumption post pandemic. The Group’s core Xtep brand will remain to be the stable growth driver of the Group. Looking ahead, we will continue to improve the Group’s brand awareness among the mass market and appeal to the younger generation, such as leveraging the crossover collaboration with Shaolin Temple to ride on the widespread China chic trend and closely partner with famous IPs. Furthermore, we will expand the Group’s investment in R&D and production innovation to upgrade the Group’s functional and sustainable products, as well as to strengthen the Group’s store productivity through uplifting store image and offering exceptional customer experience. The Group’s fthe Group’s brands in the professional and athleisure segments will become the sustainable growth drivers of the Group’s Group. For Saucony and Merrell, we will continue to offer comprehensive lines of professional sports products by increasing the proportion of apparel items and localized products to target to more sophisticated consumers. The stronger demand for professional and premium sportswear products in Mainland China has presented an enticing prospect for Saucony and Merrell, more store openings for the two brands are expected in 2021. We expect that the recovery of the overseas business of K-Swiss and Palladium will be a gradual process. We will closely monitor the development of the pandemic and geopolitical tensions and strive to get the Group’s business to return to normal. As part of the Group’s strategy, we will progressively shift the business focus of the two brands to Asia Pacific, especially Mainland China, to capture the enormous athleisure market. We will hasten the expansion of Palladium and expedite its store openings in Mainland China in 2021, while focusing on the brand makeover for K-Swiss and its store opening by early 2022. Although the COVID-19 pandemic brought upon short-term impacts to the Group, we remain optimistic about the future of the sportswear sector in Mainland China in the long run. The Group’s well-placed multi-brand portfolio has enhanced the Group’s capabilities to satisfy the demands of mass market consumers and more sophisticated consumers. Through strengthening the Group’s core competitiveness, accelerating growth and unlocking business efficiency, we are committed to bolstering the Group’s market share to take a favorable position in the intensified industry consolidation triggered by the pandemic.

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