Gross Profit Margin Rose to Approximately 44.4%;
Net Profit Amounted to RMB242 Million;
Striving to revitalize the business performance in 2017
HONG KONG — The largest branded intimate wear enterprise in China, Cosmo Lady (China) Holdings Company Limited (“Cosmo Lady” or the “Company”, together with its subsidiaries, the “Group”, stock code: 2298), today announced its annual results for the year ended 31 December 2016 (the “year under review”).
For the year ended 31 December 2016, the consuming sentiment became more cautious due to the slow development of China’s economy. Besides, structural adjustments started to turn out in the mainland China intimate wear industry in which there were further diversification of sales and distribution channels, and changes in the mix of products sold in the market. There were weaker sales performance for outlets located in the department stores and street outlets but generally better sales performance for outlets located in shopping malls and through the e-commerce channel. On the other hand, customers have higher requirements and opt for more comfortable products and those with health concepts and serving specific purposes.
Facing the above challenges, the Group recorded a revenue of approximately RMB4,512,385,000 (2015: RMB4,953,415,000), decreased by approximately 8.9% compared with last year. Gross profit was approximately RMB2,002,037,000 (2015: RMB2,114,794,000), decreased by around 5.3% compared with last year. Gross profit margin increased to approximately 44.4% (2015: 42.7%), mainly due to the continuous changes to sales channels and product portfolio, and the further integration of supply chain management.
On the other hand, more operating expenses have been incurred in 2016 for business development. In view of the adverse factors mentioned above and the fact that 2016 sales performance was not satisfactory, management have adopted a series of measures in the second half of 2016 to control the operating expenses of the Group. Nevertheless, it took time for these measures to be implement and operate effectively, hence the operating expenses still increased substantially in 2016, affecting the profitability of the Group. The positive impact of the cost control measures will be reflected in 2017. As such, profit attributable to equity holders of the Company decreased by about 55.2% during the year to approximately RMB241,961,000 (2015: RMB540,008,000) compared with last year. Earnings per share amounted to approximately RMB12.70 cents (2015: RMB28.33 cents). The Board recommends the payment of a final dividend of HK 6.21 cents per share (2015: HK11.00 cents) for the year ended 31 December 2016.
Mr. Zheng Yaonan, Chairman, Executive Director and Chief Executive Officer of Cosmo Lady, said, “In 2016, economic recovery in the US remained slow and Britain’s vote to leave the European Union increased uncertainties over the Eurozone economy. Meanwhile, China’s economic growth continued to decelerate and unavoidably, retail business was adversely affected. With a view to improve the operating results of the Group, we have formulated various measures, including improving the management of the Group, reforming the sales and distribution channels, enhancing efforts on market research and development to innovate products, tightening cost controls, and reforming supply chain management. Through our relentless efforts, we remain as the market leader of the China’s intimate wear industry.”
The Group enhanced its management by recruiting new key senior officers during the year and in the first quarter of 2017. In response to the structural adjustments of the market, the Group reformed the sales and distribution channels by closing the loss-making outlets which were mainly located in department stores and on streets, opening new outlets in selected shopping malls, social communities and third- and fourth-tier cities, stepping up effort in developing e-commerce channels, and accelerating the upgrade of outlets image to the 5th generation and renovation of existing outlets to stimulate consumers’ demand.
In order to broaden our customer base and clear aged stocks, the Group will negotiate to form strategic alliances with potential business partners to develop Southeast Asian markets, and open discount outlets in third- and fourth-tier areas in mainland China.
On the product front, the Group will enhance efforts on market research and development and introduce new products, such as new seamless and soft wire bras, upright cotton mold cups, tai chi stone cups, baby skin mold cups, etc., to target a wide range of consumers and promptly react to market changes and consumers’ new requirements.
In addition, the Group enhanced procurement flexibility and increased procurement frequency to timely respond to sales demand so as to optimize inventory control. The Group optimized efficiency and reduced wastage of resources by integration and consolidation of procurement, monitoring of product supply, inventory usage, raw material specification, quality control and resources allocation. The Group also purchased some raw materials for use by OEM suppliers for further monitoring of raw materials, enhancing quality of final products and enjoying benefits from bulk purchases.
Looking ahead, Mr. Zheng concluded, “In 2017, the Group will continue to face various challenges. We have already taken and will adopt various measures and initiatives to revitalize our business. Besides, the Group will proactively seek suitable merger, acquisition, share subscription and cooperation opportunities, amid industry adjustments, with a view to further develop the Group’s existing business. In addition, we will also strengthen our relationship with selected suppliers in order to further improve our supply chain and research and development management. We are cautiously optimistic that after the implementation of the above measures, our operating results will gradually be improved.”