Shanghai La Chapelle Fashion Co., Ltd. Announces 2015 Interim Results

HONG KONG, Aug. 28, 2015 /PRNewswire/ --

Actively Expanded Online and Offline Sales Networks to Achieve Sustainable Growth

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, was pleased to announce its interim results for the period ended 30 June 2015 (the "Period").

During the Period, the Group's revenue recorded a stable and solid growth of 20.4% to approximately RMB4,225.6 million (1H2014: approximately RMB3,510.8 million), while the gross profit up by 18.6% to approximately RMB2,880.2 million (1H2014: approximately RMB2,428.0 million). As at 30 June 2015, the Group's retail points were situated at approximately 2,230 physical locations with the number of retail points increasing to 7,147 (30 June 2014: 5,671).

During the Period, the gross profit of the Group was 68.2% with 1.0 percentage point change (1H2014: 69.2%), mainly because the Group held more seasonal sales activities and the average selling price went downward. Profit attributable to equity owners of the Company increased by 22.1% to approximately RMB276.4 million (1H2014: approximately RMB226.3 million). The Group's basic and diluted earnings per share decreased by 11.3% to RMB0.55 cents (1H2014: RMB0.62 cents).

The Board proposed the distribution of interim dividend of RMB0.33 per ordinary share (include tax) for the six months ended 30 June 2015.

Mr. Wang Yong, Executive Vice President of La Chapelle, said, "In the first half year of 2015, the PRC's retail environment has been adversely affected by the slowdown of GDP growth and per capita disposable income of urban households decreased. Nevertheless, through the multi-brand and brand-differentiation strategies coupled with the online business operation improvement, we have achieved stable growth under such recession."

Business review

In the first half of 2015, the PRC economy started to show signs of stable growth amid a general slow-down in the growth rate. Sales in the apparel industry did not substantially improve due to the weak consumer market, and clothing enterprises continued to offer significant price discounts and consolidation of retail points were still common phenomena in the industry. The Group adopted proactive strategies in response to the headwind of consumer market. During the Period, the Group continued to carry out the multi-brand and brand-differentiation strategies by developing new brands and building the existing brands in order to improve the brand image and market recognition of the Group. Meanwhile, the Group continued to devote more efforts to inventory control and management to enhance supply chain management and shorten product life cycles. Besides, capitalizing on Qigege's strong marketing capability and effective management capability to improve online sales revenue, it was put in charge of the operation and management of the Group's online business. As a result, the Group's online business has achieved a substantial growth in the conversion rate per online store and customer flow rate per online store, while there is a considerable decrease in customer complaints.

During the Period, the Group's retail network increasingly expanded. Among the 7,147 retail points, 47.4% were located in first-tier cities and second-tier cities and the remaining 52.6% were located in third-tier cities and other cities; with 71.0% of the total were located in concessionaire counters whereas 29.0% were standalone retail outlet. During the Period, the Group established strategic cooperation with online business operators. In April 2015, the Group signed a comprehensive strategic cooperation agreement with Jingdong Group, and opened La Chapelle flagship stores in Jingdong flash sales platform, Jingdong's POP open platform. Apart from this, the Group also established cooperative relations with Tencent, and initiated the community micro-shop mode on the Wechat platform. The Group endeavored to provide more convenience for customers and seize the market opportunity.

During the Period, the Group continued to implement the multi-brand strategy. In addition to the wide range of apparel products under the existing eight brands of the Group, namely La Chapelle, Puella, 7.Modifier, Candies, Vougeek, La Babite, La Chapelle Kids and Pote, he Group launched new brand through the expansion of the Group's internal teams. The Group is also actively looking for opportunities to invest in quality apparel brands in domestic and overseas markets. In May 2015, the Group invested in a quality casual men's fashion company in the PRC – Jack Walk (Shanghai) Fashion Limited ("Jack Walk"), the Company directly held 69.12% of the shares of Jack Walk. Each of the key members of Jack Walk's management team has many years of working experience in fast-fashion apparel market, the Group could further strengthen its ability in designing and marketing of male apparel products and is well positioned to capture the growth potential in the PRC menswear market. In June 2015, the Group launched its first store for the new collection store brand UlifeStyle in Suzhou. The Group has also started renovation in various existing large collection stores in the retail network across the country. After the renovation, the Group plans to gradually introduce designer products developed by an independent designer team for UlifeStyle in this winter or next spring, thus making the UlifeStyle brand a real Speciality Retailer of Private Label Apparel.

In addition, in order to further enhance the reputation and characteristics of the brands, the Group initiated the brand differentiation strategy. In May 2015, the Group launched a brand upgrading initiative for the La Chapelle brand, which has the longest history amongst all of the brands in the Group. The upgrading initiative included the introduction of a new logo, new product designs and a novel decoration style to demonstrate the brand concept of "Elegant, Classic, and Romantic". The Group has also started to cooperate with new suppliers for the production. Currently, the brand upgrading initiative was being carried out throughout the retail network across the country by way of opening new retail outlets and renovating existing retail outlets. La Chapelle Sport, another major brand of the Group, changed its name into Puella in June this year, aiming to interpret the concept of "fashionable yet comfy wear". The Group plans to launch a series of theme campaigns for Puella throughout its over 1,800 stores nationwide and the online retail platforms, in order to become a hot topic for brand promotion in between consumers to increase sales opportunities and elevate brand recognition.

Two younger brands of the Group, namely La Babite and 7. Modifier, also initiated a series of promotion campaigns to improve publicity and boost sales. In March 2015, the Group signed a license agreement with Walt Disney (Shanghai) Co., Ltd. and obtained the image usage license for the Disney characters. The first batch of cartoon characters in use was including Cinderella, Frozen and Disney Princess series. Since the establishment of La Babite in 2012, the brand has endeavored to convey its brand image of "Innocence, Bravery, and Self-confidence" to its customers, which matches the image of Walt Disney characters. In July 2015, 7. Modifier invited Hong Kong actress Kelly Fu to be the image model for the brand to promote the brand recognition and reach more customers.

To support the Group's multi-brand strategy, the Group continuously improved the quick reaction capability of its supply chain. The quick reaction capability of the supply chain of the Group improved substantially in the first half of 2015, primarily due to effective supplier capacity planning and order matching, the launch of the supply chain management system and the implementation of the strategy for centralized procurement of conventional fabric and accessories last year. The Group expects that the quick reaction capability still has potential for further improvement with stronger management and control of supply and demand. In terms of warehouse and logistics centre, as of 30 June 2015, the construction of warehouse and logistic centres in Tianjin and Taicang Phase II has already commenced and are estimated to be completed and commence operation in 2016.

Prospects

As the macroeconomic condition has been changing, the PRC's economic restructuring will be continued. 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 Group's existing markets; 2) continue to execute its brand differentiation strategy by upgrading the La Chapelle brand retail points throughout the PRC and further raising the product positioning while improving the brand positioning of the current brands with more clarity, distinctiveness and individualization; 3) selectively pursue acquisition and strategic alliance opportunities to complement the Group's existing business and further solidify our market position; 4) further upgrade and construct management information system to support the refined operation of the retail business of the Group and the management of the supply chain; 5) continue to provide competitive incentive programme for the management team and dedicated employees.

Mr. Wang Yong, Executive Vice President of La Chapelle, said, "In the future, we will focus on multi-brand strategy, and ensure other parts of operation including product design, product development, supply chain, warehouse and logistics centre coordinate well. After Qigege was put in charge of the management and operation of online business, the Group will continue to explore diversified online business platforms, maximize the synergy between online and offline business and construct an integrated platform to further expand our sales network. Since the Group listed in Hong Kong Stock Exchange, we received comprehensive support from the market and investors. To reinforce the market and consumers' recognition and confidence, the Group will continue to prepare for the listing in the domestic A-share market, a listing application will be submitted to the CSRC in October this year. We believe that this will support the Group's long term development, maximizing returns for our shareholders."

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About Shanghai La Chapelle Fashion Co. Ltd.

Founded in 1998, 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 12 brands, namely La Chapelle, Puella 7.Modifier, Candie's, La Babite, Vougeek, Pote, La Chapelle Kids, and the brands the Group invested in, including Jack Walk, OtherMix, and OtherCrazy. The Group directly controls and operates 100% of its nationwide sales network. As at 30 June 2015, the Group's extensive nationwide retail network comprised 7,147 retail points located in approximately 2,230 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