Financial review

For the six months ended September 30, 2013, the Group’s revenue decreased by 8.8% year on year to approximately RMB 2,809.2 million. The decline was attributable to the shrinking purchasing power in the PRC and the Group’s efforts to assist distributors to clear inventory.

This led to a 4.7% year on year revenue decline in the down apparel business and an 18.1% year on year revenue decrease in the non-down apparel business. Moreover, certain OEM clients gradually shifted their outsourcing production orders to Southeast Asian countries due to rising production cost in China. As a result, revenue from the Group’s OEM management business dropped by 12.9% year on year.

Gross profit margin rose by 3.8 percentage points to 49.4% from 45.6% during the period. The increase was attributable to the higher proportion of the higher-margin self-operated business in overall sales, and the inventory write-back of approximately RMB58.6 million. However, the increase in the number of self-operated stores during the period caused the operating expenses to rise, thus squeezing the operating profit margin.

Nonetheless, Profit attributable to equity shareholders increased by 3.1% year on year to RMB326.1million due to effective cash management and the lower income tax rates enjoyed by one of the subsidiaries in the PRC. The board of directors has recommended the payment of an interim dividend of HK3.7 cents per ordinary share for the six months ended September 30, 2013.

Down Apparel Business

During the period under review, the revenue of the Group’s down apparel business decreased by 4.7% year on year to RMB1,756.3 million, and accounted for 62.5% of the Group’s total revenue. Sales volume of branded down apparel slightly increased by 0.4% year on year to 6.53 million units (including the non-seasonal products of the branded down apparel).

The Group’s brand separation strategy boosted the sales volume under the Bosideng brand by 12.6% year on year. As the first half of the year was the low season for down apparel sales, the Group increased off-season discounts to stimulate sales and made preparation work for the up-coming peak sales season.

As of September 30, 2013, the total number of stores (net) decreased by 344 to 12,665, and sales area slightly increased by 5.1%. The Group streamlined and adjusted its sales channels during the low season, and the number of third-party distributor stores (net) decreased by 1,042 to 8,870 during the period. The number of self-operated stores increased by 698 to 3,795, and accounted for 30.0% of the down apparel retail network.