Fully Support in Fighting Against the Novel Coronavirus Accelerate Online Business Development

HONG KONG, CHINA - Media OutReach - 21 February 2020 - The leading international sportswear brand enterprise in the PRC, China Dongxiang (Group) Co., Ltd. ("China Dongxiang" or "the Company", together with its subsidiaries, "the Group", HKEx stock code: 3818), announces its latest operational updates.

 

An outbreak of novel coronavirus (COVID-19) started in China around the 2020 Chinese New Year (the ''Epidemic''). Given a grim situation in the battle to contain the Epidemic, the Group has established a crisis management team promptly for enhancing internal management, coordination and arrangement on the control of the Epidemic. The Group has also actively cooperated with local governments to take control measures against the Epidemic, as well as taking contingency measures and conducting resources deployment in relation to business affairs and customers. At present, no confirmed or suspected cases of novel coronavirus infection found among the employees of the Group and all of its subsidiaries.

 

The Group has determinedly borne its corporate social responsibility and made a donation of RMB6 million to China Charity Federation through the Group's subsidiary, Shanghai Kappa Sporting Goods Co., Ltd.. The donation will be used for, among others, taking infection prevention and control measures, purchasing medical protection equipment, supporting frontline hospitals and providing cash relief to healthcare workers.

 

For sales channels, 30% of the total number of offline stores of the Group (excluding KAPPA kids' apparel business) has resumed operations as at 19 February 2020, while the remaining stores will resume operations in stages. The Group will follow the requirements on infection control and prevention by the respective local governments to the largest extent, and resume full operations as soon as possible without compromising on the safety of its employees and consumers. In spite of greater pressure on offline retail stores in the short run, the Group will put in extra effort in developing online business by integrating online and offline resources. Currently, the KAPPA brand on Wechat Mall, an online platform, was completed within a relatively short time-span. In future, the Group will improve systems connection step by step, securing prompt movement of products across all channels.

 

In terms of products supply, a majority of products for online sale and the kids' apparels stored in the warehouses located in Wuhan, Hubei province, have been locked down, due to a number of factors, such as extension of work resumption, logistic impediment and delayed customs clearance. However, the Group has made provision of products for offline sale according to the post-festival marketing strategy before Chinese New Year. In addition, communications and coordination have been strengthened for reasonably reallocating stock from offline channels to online channels. As the recovery of road transportation will facilitate the stock replenishment for online sales and kids' apparels, severe stock shortage will not be expected.

 

In the view of the extension of work resumption as compared with the previous year, short-term disruption of sales and services due to the infection control and prevention, as well as various uncertainties, the operating condition of the Group for the first half of 2020/2021 financial year (April 2020 to September 2020), is expected to be affected to a certain extent, if the Epidemic continues, subject to the effectiveness of infection control. Based on the operation models of the Group and the current situation of the Epidemic, the operation results of the sports apparels business of the Group for the fourth quarter of the 2019/2020 financial year (January 2020 to March 2020), will be affected by the Epidemic to a larger extent, but the impact on the overall performance of the Group, inclusive of its investment business, is expected to be immaterial.

 

Mr. Chen Yihong, Chairman and Executive Director of China Dongxiang, said, "The Group has called for concerted efforts from all people in China from various industries to battle against the Epidemic. We will keep monitoring the emergence of the Epidemic and its operation conditions by strengthening operation control and management through reasonable assessment and judgement with an aim to secure the value of the Group and shareholders' interest. In the long run, the Group has faith in the economy as well as sports apparels industry in China. Our expectation on the steady growth in the Group's performance remains unchanged. We are confident in overcoming the short-term hurdles, achieving healthy and steady growth in the business of the Group."

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