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Shanghai La Chapelle Fashion Co., Ltd. Announces 2014 Annual Results

Actively Expanded Online and Offline Sales Networks To Achieve Sustainable Growth

HONG KONG, March 11, 2015 /PRNewswire/ -- Shanghai La Chapelle Fashion Co., Ltd. ("La Chapelle" or the "Company", together with its subsidiaries, the "Group", stock code: 6116.HK), one of the largest fashion apparel companies in the PRC, is pleased to announce the audited consolidated results for the year ended 31 December 2014 (the "Year").

Financial Highlights

For the Year Ended 31 December (RMB'Mn)

2014

2013

Changes (%)

Revenue

7,814.2

6,225.1

+25.5%

Gross profit

5,364.5

4,283.4

+25.2%

Gross profit margin

68.7%

68.8%

-0.1pts

Profit attributable to equity owners of the Company

503.5

407.3

+23.6%

Basic earnings per share

RMB1.27

RMB1.14

+11.4%

Proposed final dividend per share

RMB0.60

--

--

During the Year, the Group recorded outstanding results and achieved growths in both revenue and net profit. Benefited from the expansion of retail network and growth in same store sales, the Group's revenue recorded a substantial growth of 25.5% to approximately RMB7,814.2 million in 2014 (2013: approximately RMB6,225.1 million), while the gross profit up by 25.2% to approximately RMB5,364.5 million (2013: approximately RMB4,283.4 million). As at 31 December 2014, the number of retail points of the Group increased to 6,887 (2013: 5,384), situating at approximately 2,200 physical locations.

The gross profit of the Group in the Year was relatively stable, with a slight 0.1 percentage point decrease to 68.7% (2013: 68.8%), mainly attributable to a higher proportion of the sales of past season products in 2014 than that of 2013 and an increase in provisions for inventories. With the substantial increase in revenue and relatively stable gross profit margin, the profit attributable to equity owners of the Company increased by 23.6% to approximately RMB503.5 million in 2014 (2013: approximately RMB407.3 million). During the Year, the Group's basic and diluted earnings per share increased by 11.4% to RMB1.27 cents (2013: 1.14 cents).

The Board proposed a final dividend of RMB0.60 per ordinary share.

Mr. Wang Yong, Executive Vice President of La Chapelle, said, "The PRC's retail environment was adversely affected by the slowdown of GDP growth, persisting contraction in the spending momentum and structural change in the market. 2014 was a difficult year for many apparel enterprises in the industry. Nevertheless, through expanding our retail networks substantially, we achieved growths in both revenue and net profit."

Business review

During the Year, the Group's active expansion of retail network brought significant results growth, further consolidating La Chapelle's leading position leading position in the mass-market ladies' casualwear segment in the PRC. Meanwhile, the Group has adopted a series of strategies to further seize market opportunities and increase market share. For example, we continued to execute our multi-brand strategy, to optimize the retail channel management system, implemented a retail-oriented strategy, rolled out a number of new management information systems to further increase our operation efficiency, dedicated to the launch of O2O business and a partnership system. All above has paved a solid foundation for the Group's long-term strategic development.

During the Year, our retail network expanded considerably. Among the 6,887 retail points, 47.1% were located in first-tier cities and second-tier cities and the remaining 52.9% were located in third-tier cities and fourth-tier cities; with 72.0% of the total were located in concessionaire counters whereas 28.0% were standalone retail outlet. During the Year, the Group launched a partnership system for some of the stores in December 2014, under which the staff salary would be directly linked to their sales performance. This successfully incentivized the staff and boosted same stores sales. Besides, the Group launched an online flagship store on Tmall and Suning Yigou, the well-known business-to-customer online shopping platforms in the PRC, and established a corporate mobile application platform on WeChat, a well-known messenger and social network mobile application, in the Year. Benefited from the direct marketing and interaction with customers, the Group achieved approximately RMB37.6 million of sales through its O2O channel in 2014. As a further step to implement the O2O strategy, the Group made a strategic investment in February 2015 by acquiring a controlling interest of 54.04% in Hangzhou Anshe E-Commerce Co., Ltd (well known for its brand name "QiGeGe") to establish an operating platform, which focuses on brands and apparel products and covers both online and offline channels.

During the Year, the Group continued to execute the multi-brand strategy. The eight brands under the Group, namely La Chapelle, La Chapelle Sport, 7.Modifier, Candies, La Chapelle Homme, La Babité, La Chapelle Kids and Pote, cover ladies wear, menswear and children's wear, which have enabled the Group to access a wider customer base and diversify the sources of revenue. In 2014, 66.5% of the Group's revenue was generated from the sales of La Chapelle and La Chapelle Sport, mainly attributable to the longest brand history and the highest level of customer loyalty and recognition of these two brands. On the other hand, the other brands displayed a faster growth in comparison, in which their contribution of the Group's revenue increased from approximately 26.3% in 2013 to 33.5% in 2014. In addition, in collaboration with the Group's strategic partner Roland Berger Strategy Consultants, a new independent brand was launched based on the SPA (Specialty retailer of Private label Apparel) model. The new brand is expected to officially launch and open its first retail outlet in the first half of 2015, offering customers a wide range of apparel products including ladies wear, menswear and children's wear at reasonable prices.

The Group also dedicated to optimize the management information system and supply chain management system so as to further enhance the operation efficiency and management capabilities. During the Year, the Group rolled out a number of new systems to enhance the management of different stages of operation. For example, the Group introduced an Order Management System (OMS) to coordinate and allocate orders from online retail channels and retail points, and upgraded the existing SAP ERP system and installed a warehouse management system (WMS) in the newly-built warehouse and logistic center in Taicang, Jiangsu Province. Moreover, the Group is also constructing two additional warehouse and logistic centres in Tianjin and Chengdu. Upon completion of the construction, the Group will possess a nationwide distribution network, which enables the Group to be more effective and efficient in distribution, providing efficient services to retail points.

Prospects

As the PRC's economy is marching into the stage of steady and healthy development, individual consumption will continue its growing pace. Looking into the future, the Group will adopt the following strategies to enhance its overall competitiveness and to increase its market share, including: 1) Continue to strategically expand its retail network and increase its penetration into the existing markets. The Group plans to expand into tier 2 and 3 cities in the PRC with rising disposable income and substantial market potential, and open more retail outlets in shopping centres and multistory flagship stores to response to the changing shopping patterns and habit of the consumers in the PRC; 2) Focus on brand building by raising the Group's brand image and brand awareness and increasing customer's loyalty and recognition toward La Chapelle's brands; 3) Selectively search for acquisition and strategic alliance opportunities to complement the Group's existing business and further solidify its market position; 4) Further improve the information system, including an upgrade on the POS system and launch of a customer relationship management ("CRM") system for collecting and analyzing customer information in 2015; 5) Enhance O2O strategy by accelerating the establishment of online platform under its own brands, increasing its proportion of sales in order to achieve sustainable growth for the Group.

Mr. Wang Yong, Executive Vice President of La Chapelle, said, "In the future, we will focus on our products by strengthening product design and development capabilities. Moreover, we will further expand our retail network, improve supply chain management, enhance our warehousing and logistics infrastructure and optimize our information systems. After the strategic investment in QiGeGe, we will focus on building proprietary online and offline brand sales platform and strive to offer comprehensive shopping experience to customers so as to use the online platform to drive the same store sales growth in physical stores. Leveraging on our leading market position, strong product design capability, successful multi-brand strategy and independent direct sales model, La Chapelle will further expand its sales network in the PRC and increase its market share, maximizing returns for our shareholders."

About Shanghai La Chapelle Fashion Co. Ltd.

Founded in 2001, Shanghai La Chapelle Fashion Co. Ltd. is a fast-growing multi-brand fashion group in the PRC, which designs, markets and sells apparel products with a focus on mass-market ladies' casualwear. The Group strives to offer customers the latest fashions at competitive prices through a wide range of apparel products under 8 brands, namely La Chapelle, La Chapelle Sport, 7.Modifier, Candie's, La Babité, La Chapelle Homme, Pote and La Chapelle Kids. The Group directly controls and operates 100% of its nationwide sales network. As at 31 December 2014, the Group's extensive nationwide retail network comprised 6,887 retail points located in approximately 2,200 physical locations across all 31 provinces, autonomous regions and municipalities in the PRC. In August 2014, the Group launched its O2O strategy to integrate traditional physical stores with online channels.

Website: www.lachapelle.cn

Source: Shanghai La Chapelle Fashion Co., Ltd.
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