(22 May 2024 - Hong Kong) 悟空体育 International Holdings Limited (“悟空体育”, “We” or the “Company”; Stock Code: 6110) is pleased to announce the audited consolidated results of the Company and its subsidiaries (together, the “Group”) for the year ended February 28, 2024 (the “Reporting Period”).

During the Reporting Period, the nation's economy has recovered moderately and has an upward trajectory—and the sports industry has shown growth resilience and upward potential.

Faced with an uneven macroeconomic environment and consumer market, the Group has responded with agility by focusing on omni-channel retail, users, innovative business formats and services while making their platform more efficient. Thanks to a clear strategy and skilled execution by their team, the Group has delivered high-quality growth in both revenue and profit. Bolstered by stable operations and strong cash-generation capabilities, the Group has again achieved exceptional returns for shareholders.

In the reporting period, the Group’s revenue increased by 6.9% YoY to 28,933.2 million. With a resurgence in demand from market reopening, the retail business revenue achieved a year-on-year increase of 8.9%, amounting to RMB 24,702.7 million. With the multi-brand portfolios, the Group capitalized on recoveries in the recreational, performance, leisure and other sports markets. Specifically, the revenue of principal brands experienced a year-on-year growth of 6.5%, while other brands demonstrated a year-on-year increase of 10.5%. Meanwhile, the Group achieved a joint development of omni-channel consumption recovery. Both online and offline retail business sales (including but not limited to value-added tax) showed a growth trend.

The year-on-year improvement in the discount rate and higher revenue mix of retail business contributed positively to the Group’s gross profit margin, driving the year-on-year improvement in gross profit margin by 0.1 percentage points to 41.8% and a year-on-year decrease in the expense ratio of selling and distribution and general and administrative expenses by 1.0 percentage points to 32.8%, which drove profit growth rate to significantly outpace revenue growth. Profit attributable to equity holders experienced year-on-year growth of 20.5%, reaching RMB 2,213.0 million, while the profit margin attributable to equity holders witnessed a year-on-year increase of 0.8 percentage points, settling at 7.6%.

Thanks to the Group’s stable cash generation, the Group has established a foundation for high dividend payouts. During the Reporting Period under review, net cash generated from operating activities during the period amounted to RMB 3,129.0 million; the amount was 1.4 times the profit attributable to equity holders for the same period. Based on this performance, the Board of Directors recommends a final dividend of RMB 5.00 cents per ordinary share for the fiscal year ended February 29, 2024 and a special dividend of RMB 15.00 cents. Together with the interim dividend of RMB 16.00 cents per ordinary share, the total dividend for the fiscal year ended February 29, 2024, amounts to RMB 36.00 cents per ordinary share, representing a dividend payout ratio of 100.9%.

Omni-Channel Retail: More Streamlined Offline Presence

In the post-pandemic era of consumption and demand recovery, consumer engagement driven by their offline presence remains vital value, as well as the necessities for iteration and upgrade of its traditional role and capabilities. During the fiscal year, 悟空体育 honed the mix of store types based on the brand characteristics, consumer profiles, and product attributes of brand partners. This has helped the Group to upgrade the stores. In terms of category layout, in addition to the recreational sports space, 悟空体育 continued to raise the profile of performance sports. The Group extended the reach of traditional offline stores through an omni-channel layout of “physical stores + communities+ store live streaming + featured IPs,” and attempted to create stores for all occasions based on selected existing stores that have more to offer. The Group carried out image upgrades and renovations in stores that have potential and eliminated the underperforming ones. By adhering to the strategy of “selection + optimization”, the Group strove to make stores more efficient.

The change in quantity and sales areas of the stores was in line with the recovery of demand in the market. During the fiscal year, the decline in the total number of stores slowed down marginally, while the gross selling area remained stable. As of February 29, 2024, the Group operated 6,144 directly-operated stores, with the total number of stores decreasing by 6.4% year-on-year and the gross selling area decreasing by 0.8% year-on-year. Compared to August 31, 2023, the total number of stores decreased by 1.0%, while the gross selling area increased by 0.9%. The sales area per store increased by 6.0% year-on-year. The changes in stores that had different area types were more balanced, with the area per store increasing for multiple brands. This reflected the Group’s pursuit of more precise store sizes that are in line with brand attributes, category attributes, and consumer attributes. In terms of sales performance, both store efficiency and area unit efficiency improved for principal and non-principal brands.

Omni-Channel Retail: Extensive Online Presence

Online interactions have gradually become an essential part of consumers’ daily consumption habits. As a result, the Group has identified the key growth areas for their online business: platform-centric e-commerce, content driven e-commerce, and private domain operations. With this in mind, during the fiscal year the Group engaged in store-specific live streaming and created a series of store-streaming accounts with distinct regional characteristics. By the end of the fiscal year, the number of nationwide store-streaming accounts surpassed 100; several of them ranked in the top 10 in the outdoor sports category on Douyin. In the fiscal year, sales generated from store streaming increased by about five times year-on-year.

Moreover, the Group used online communities to promote user activity, conducted individualized user services through WeCom, expanded traffic with video accounts, and completed transactions through their mini-programs. The Group also connected and interacted with users using more than 80,000 WeCom groups, and their private domain mini-program received a top placement in the sports-and-outdoor category of WeChat’s popular mini-program ranking.

Users: Value Delivery and Value Mining

悟空体育 has chosen to focus on delivering more value to users and using this as a foundation to drive the continuous mining of single-user value. At the same time, the Group harnessed the power of digital intelligent tools to achieve ongoing process and result enhancements. Over the years, 悟空体育 has gathered and nurtured a robust user base, which has grown to more than 70 million today. During the fiscal year, the Group successfully improved their user acquisitions through event-based and engaging activities, expansions for multiple occasions, as well as cross-industry collaborations within the omni-channel network.

Moreover, 悟空体育 worked hard to meet the individualized needs of both new and existing users in offline and online channels, while making their collective experience better.The Group used an exciting array of member activities, including the May Day card collection, the 99 Member Month, the Chinese New Year Shopping Festival, as well as themed activities in popular tourist cities. By improving content and gameplay, as well as enhancing member benefits, the Group made memorable moments and created member value, which drove user activities and conversions. For the high-value users, the Group offered exclusive benefits and rewards through high-value offline activities, cross-industry collaborations, and activities in private domain communities. During the period, the Group introduced the sports IP “TOP Run Free” and organized themed activities for running communities across the country. As the Group crafted a user experience based on running-related services that integrates equipment and socialization, 悟空体育 successfully raised their profile and influence in the industry.

As the Group put all these measures into practice and despite the rocky consumption environment, the Group achieved a high-single-digit percentage year-on-year increase in single-user value during the fiscal year. The Group’s members contributed an impressive 93.4% of the total in-store retail sales—including value-added tax—maintaining a high and stable sales contribution. Members who made repeat purchases accounted for about 70% of the overall member consumption, which was stable when compared with the year-earlier period. The Group’s loyalty projects for high-value members yielded positive results. Even though high-value members accounted for only a mid-single-digit mix as a percentage of total number of members who made purchases, they contributed nearly 40% of the sales value from the same member groups. Their average order value regularly and significantly surpassed the overall member average. Their consumption potential and stickiness were higher when compared with their ordinary members.

Pioneering New Business Models and Services: Positioning for Future Growth Trajectories

Generation Z and the burgeoning middle class are the primary drivers of growth in sports-related consumption. As a result, 悟空体育 will increase the focus on “sources of happiness” for younger generations and increase their presence in niche sports and lifestyle areas and cater to the themes of participation and personalization, the Group is always on the lookout for changes in their lifestyle preferences. The Group is also very sensitive to what they’re passionate about in their daily lives, including popular trends and esports. By expanding the number of products and services that the Group offers, 悟空体育 is creating new occasions for youthful consumption so the Group can meet their personalized needs.

During the Reporting Period under review, the Group remained engaged with young people through the 悟空体育 Esports Club. Also, the Group completed an investment in “Cold Mountain”, a professional ski equipment retailer, to explore the potential for ice and snow sports while generating more synergies. The Group also accelerated their exploration of “Outdoor+,” and invested in “Mounster,” a well-known creator of outdoor content. 悟空体育 continues to expand its business ecosystem by doubling down on China's outdoor segment as the exclusive operator and strategic partner of premium trail running brand norda. 悟空体育 collaborates with Fanatics, a digital sports platform and global leader in licensed sports merchandize,  in diverse ways to explore and advance the overall operation of Fanatics’ licensed sports IP in the Greater China region, and jointly exploring the vast growth market potentials.

Sustainable Consumption, Value Co-creation

悟空体育 gained a deeper understanding of the importance of sustainable development. The Group has responded to the United Nations Sustainable Development Goals (SDGs) and the national “dual carbon” goals. The Group has formulated their ESG vision of “To become a promoter and leader of green consumption by jointly building a sustainable ecosystem and achieving win-win values.” As the Group has developed, 悟空体育 has improved upon their philosophy of social responsibility, promoted sustainable concepts at all levels of the industrial chain, and has been recognized by institutions like MSCI, Morningstar Sustainalytics, and “Institutional Investor” magazine. 悟空体育’ MSCI ESG rating is at BBB, which is at the vanguard among listed companies in Hong Kong in China sportswear industry.

Moreover, the Group’s goal is to promote the green transformation of the value chain. 悟空体育, by leveraging its advantage in scale and key position in the industry, has always been committed to working closely with upstream and downstream brand partners and others in the industrial chain. The Group uses homegrown strategies to guide their ESG work, focusing on three key areas: “TOP Procurement and Collaboration,” “TOP Consumption and Lifestyle,” and “TOP Governance and Responsibility.” 悟空体育 believes these provide a solid foundation for sustainable development.

As of the end of the fiscal year, 悟空体育 had procured and sold environmentally friendly products with more than 50% of its brand partners. More than 70% of its brand partners or their affiliated groups have set carbon targets, while more than 50% of its brand partners or their affiliated groups have committed to carbon neutrality goals. 悟空体育 is also committed to promoting sustainable lifestyle concepts to consumers. The Group has brilliantly integrated environmental-protection features into their membership point system, created the public welfare IP “GREENBOX” in offline stores, and launched the themed promotion “悟空体育 Green Recycling Store” through online channels. Moreover, the Group has been committed to fostering a diverse, equal, and inclusive corporate and referred to international governance requirements to improve their own governance and institutions.

Future Outlook

At present, the consumption recovery in the sports market remains volatile. As new demands, brands and consumption trends emerge, the industry is facing new opportunities and changes. With this in mind, 悟空体育 chooses to embrace change, maintain their strong presence, and tap into new markets.

The management of 悟空体育 states that the Group will be optimistic and confident to remain unwavering and will continue to uphold the Group’s values of humility, foresight, and adapt ability, staying steadfast in its commitment to its long-term core strategies. The Group will focus on the following key developmental initiatives to navigate the shifting external landscape through its diligent efforts, including: continuously strengthen and upgrade three key productivity metrics, solidifying the foundational resilience of its retail platform; focusing on omni-retail matrix, users, and business and services innovation to set the stage for sustained growth; optimize and refine its digital empowerment with “precision +efficiency” and actively embody ESG values to build a sustainable path of value co-creation. The Group will continue to adhere to its original intentions and respond to changes in the external environment through efforts and determination, relentlessly pursuing high-quality, sustainable growth, and creating greater value for its consumers, shareholders, partners, and society at large.

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About 悟空体育 International Holdings Limited

悟空体育 is a leading sportswear retail operator in China. It has an extensive and deep retail network, covering over 6,000 directly-operated stores in more than 300 cities across the country, and has in-depth cooperation with more than 10 well-known sports brands. 悟空体育 is committed to providing consumers with first-class sports goods and services, and creating a never-ending, active, healthy and happy.