China Lilang (1234) H2 2024 earnings summary

Executive summary

• Revenue increased 3.0% year-over-year to RMB3,650 million, with profit attributable to equity shareholders at RMB461.1 million and gross profit margin at 47.7%.

• Smart casual collection revenue surged 27.2%, offsetting a 3.0% decline in the core collection due to DTC transition and distributor compensation.

• E-commerce and new retail sales grew 24%, driven by expansion on platforms like TikTok, Pinduoduo, and POIZON.

• Strategic transformation included buyback of distribution rights, DTC model implementation, and increased R&D and brand diversification.

• Board declared a final dividend of HK9 cents and special dividend of HK3 cents per share, maintaining a payout ratio of 73.1%.

Financial highlights

• Gross profit margin decreased by 0.5 percentage points year-over-year to 47.7%, mainly due to one-off distributor compensation and increased inventory provisions.

• Operating profit dropped 9.5% to RMB552.5 million; operating margin fell to 15.1%.

• Profit attributable to equity shareholders declined 13.1% to RMB461.1 million; net margin decreased to 12.6%.

• Average inventory turnover days increased to 183, impacted by higher direct retail/consignment sales and warm winter.

• Net cash generated from operating activities was RMB527.3 million; net cash position at year-end was RMB1.972 billion.

Outlook and guidance

• DTC model for core collection to be further leveraged, with expected positive sales impact from 2025.

• Smart casual collection to increase R&D investment, focusing on quality, design, and differentiation.

• Net increase of 100 stores planned for FY2025, including more outlet openings and performance enhancements.

• New retail business targets 15%+ growth in 2025, with 80% of online sales from new products and intensified online promotion.

• International expansion with first store in Malaysia and launch of MUNSINGWEAR brand.