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August 2016
Interim Results Corporate Presentation
1
This presentation is prepared by Xtep International Holdings Limited (the “Company”) and is solely for the purpose
of corporate communication and general reference only. The presentation is not intended as an offer to sell, or to
solicit an offer to buy or form any basis of investment decision for any class of securities of the Company in any
jurisdiction. All such information should not be used or relied on without professional advice. The presentation is a
brief summary in nature and do not purport to be a complete description of Company, its business, its current or
historical operating results or its future prospects.
This presentation is provided without any warranty or representation of any kind, either expressed or implied.
The Company specifically disclaims all responsibilities in respect of any use or reliance of any information, whether
financial or otherwise, contained in this presentation.
This presentation contains certain forward-looking statements with respect to the financial condition, results of
operations and business of the Company. These forward-looking statements represent the Company’s
expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could
cause actual results, performance or events to differ materially from those expressed or implied in such statements.
Certain statements, such as those that include the words “potential”, “estimated”, “expect”, “anticipates”, “objective”,
“intends”, “plans”, “believes”, “estimates”, and similar expressions or variations on such expressions may be
considered “forward-looking statements”.
Forward-looking statements involve inherent risks and uncertainties. Readers should be cautioned that a number
of factors could cause actual results to differ in some instances materially, from those anticipated or implied in any
forward-looking statement. Forward-looking statements speak only as of the date they are made, and it should not
be assumed that they have been reviewed or updated in the light of new information or future events. Trends and
factors that are expected to affect the Company’s results of operations are described in the “Financial Analysis”,
“Business Review” and “Future Plans”.
Disclaimer
2
Operational Highlights Financial Highlights
Overview
Footwear revenue increased 16.2% and footwear gross profit margins
increased to 44.2% (1H 2015:43.5%) due to well acceptance of
XTEP’s professional running products
E-commerce revenue increased approx. 100% and accounted for
approx. 15% of overall revenue
Apparel revenue reduction was affected by the unusual weather
conditions in China this year, as well as a conscious adjustment of the
Group’s products to reduce sports lifestyle apparel products to
reinforce the professional sportswear image. Apparel gross profit
margin increased to 41.7% (1H 2015: 39.1%) from this effort due to
increase the proportion of functional apparel
Profit attributable to equity shareholders up by 10.6% YoY to RMB
380.1 million, net profit margin rose by 0.6 pp to reach 15.0%
Significant improvement on operating cashflow turning positive to
RMB353.3 million (1H 2015: cash outflow RMB6.4 million) as overall
working capital days reduced by 28 days to 57 days (1H 2015: 85
days)
Interim dividend per Share of HK10.5 cents, dividend payout ratio
increased to 52.4% (1H 2015: 52.0%)
XTEP brand continued to strengthen repositioning as a
professional sports brand with functional and stylish products
Branding: increased major marathon sponsorships to 12 (1H
2015: 5), continued to be sportswear sponsor of the most
number of marathons in China
Products: improved professional running series and introduced
first generation football products
Retail management: continued to flatten retail channels to
improve retail inventory management. Leading to reduction of
the Group’s inventory turnover days to 55 days (1H 2015: 72
days) and the amount of the Group’s inventory was reduced by
11% YoY
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Result Highlights
For the six months ended 30 June
(RMB mn) 2016 2015 Change
Revenue 2,534.6 2,390.6 6.0%
Gross Profit 1,098.5 999.4 9.9%
Profit Attributable to Equity Shareholders 380.1 343.5 10.6%
Basic Earnings per Share (RMB cents) 17.25 15.86 8.8%
Gross Profit Margin (%) 43.3 41.8 1.5 pp
Operating Profit Margin (%) 23.0 20.9 2.1 pp
Net Profit Margin (%) 15.0 14.4 0.6 pp
ROE (%) 15.3 14.4 0.9 pp
Interim Dividend (HK cents per Share) 10.5 10.0 5.0%
Interim Dividend Payout Ratio(%) 52.4 52.0 0.4 pp
5
Sustainable Revenue and Gross Profit Margin Growth
Revenue and Gross Profit Margin
Growth in overall performance due to:
1. Effective control to maintain healthy inventory level in retail channels
2. Successful repositioning of XTEP brand as a
professional sports brand which focuses on Running
3. Overall gross margin driven by increased proportion of
functional wear in product mix
4. Significant increase in revenue contribution from e-
commerce business
(RMB mn)
2,098.0 2,135.0
2,390.6
2,534.6
40.2% 40.4%
41.8%
43.3%
1H 2013 1H 2014 1H 2015 1H 2016
Revenue Gross Profit Margin
Growth in overall performance
Revenue (RMB mn)
Gross
Profit Margin
Footwear 1,738.3 16.2% 44.2% 0.7 pp
Apparel 736.3 12.8% 41.7% 2.6 pp
Accessories 60.0 16.7% 38.9% 2.6 pp
Total 2,534.6 6.0% 43.3% 1.5 pp
1.5 pp
6.0%
6
Revenue Breakdown & Product Analysis
Overall Revenue Mix
Stable overall revenue mix while footwear remains as the revenue driver
1H 2016
RMB2,534.6mn
68.6%
2.4%
Footwear
Apparel 29.0%
1H 2015
RMB2,390.6mn
62.5%
35.3%
2.2%
Accessories
7
Revenue Breakdown & Product Analysis(Con’t)
Footwear Products Driving Revenue Growth
(RMB mn)
1,495.0
1,738.3
43.5%
44.2%
1H 2015 1H 2016
Revenue Gross Profit Margin
0.7 pp
16.2%
Higher revenue and gross margin driven by professional running footwear with better quality and increased ASP
Professional footwear product sales remained strong despite weather and seasonality volatilities
3 professional running series upgraded and continued to be well-received by consumers:
“Dynamic Foam”
“Reactive Coil”
“Air Mega”
Co-developed SoftpadTM with the Dow Chemical Company for XTEP exclusive use
Introduced other new product features for added performance and comfort :
“Xtep-Aroma”
“Dow”
“X-Flex”
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Apparel Products’ Gross Profit Margin Improved
(RMB mn)
844.2
736.3
39.1%
41.7%
1H 2015 1H 2016
Revenue Gross Profit Margin
2.6 pp
12.8%
Higher margin driven by professional running
apparel with better quality and increased ASP
Retail sales were impacted by unusual weather
conditions, the Group exercised caution in
inventory management and adjusted product
delivery schedules accordingly
Intentionally decreased proportion of lifestyle
sports product offerings to align with brand
positioning toward professional sports brand
Upgraded running features well-received by
customers:
“Xtep Sports Elastic Technology” (X-S.E.T.)
“XTEP-FROZEN”
“XTEP-DRY”
Introduced other new product features:
DupontTM Sorona® cotton
Revenue Breakdown & Product Analysis(Con’t)
9
Profit Attributable to Shareholders
Strong Growth in Profit Attributable to Shareholders
(RMB mn)
340.9
284.2
343.5
380.1
16.2%
13.3% 14.4%
15.0%
1H 2013 1H 2014 1H 2015 1H 2016
Profit Attributable to Shareholders
Net Profit Margin
0.6 pp
10.6%
Profit attributable to shareholders
increased by 10.6% mainly due to visible
expansion in profit margins
The Group’s net profit margin increased by
0.6 pp to 15.0% (1H 2015: 14.4%)
10
Consistent High Dividend Payout Ratio
Stable Increase of Interim Dividend Payout Ratio
50.8
51.6
52.0
52.4
1H 2013 1H 2014 1H 2015 1H 2016
Payout ratio (%)
Dividend per Share
Interim: HK 10.5 cents
1H 2016
Payout Ratio
52.4%
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Advertising & Promotional Costs
Operating Expenses Analysis
13.4%
9.3%
1H 2015 1H 2016
4.1 pp
(As % of revenue)
Aligning with XTEP’s strategic change to
professional sports brand with functional and
stylish products, sports related sponsorship
spending increased while traditional entertainment
marketing spending decreased
Allocation of full year spending will skew toward
the second half due to major sporting events such
as EuroCup and Olympics
For the six months ended 30 Jun
(RMB mn) 2016 2015 Change
A&P cost 234.6 321.0 26.9%
12
Research & Development Costs
For the six months ended 30 Jun
(RMB mn) 2016 2015 Change
R&D cost 58.0 48.8 18.8%
2.0%
2.3%
1H 2015 1H 2016
0.3 pp
(As % of revenue)
Operating Expenses Analysis
International Design Team – Continued to hire
design talent from international brands to build
world class products
Running Research Center – Building China’s first
dedicated running research laboratory with global
leading technology and experienced researchers,
in order to develop the best fitting shoes for
Chinese runners
Research in Technical Material – Partnered with
major international fiber suppliers such as Toray
from Japan and the Dow Chemical Company from
the U.S. to co-develop industry leading materials
together for XTEP’s exclusive use
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Strong Cash Balance
(RMB mn) 30 Jun 2016 31 Dec 2015
Treasury Deposits and Bank Deposits 1,720.6 869.8
Cash and cash equivalent 2,720.3 3,607.0
Total cash and cash equivalent 4,440.9 4,476.8
Bank borrowings (1,554.5) (1,610.5)
Net cash and cash equivalent 2,886.4 2,866.3
Gearing ratio 18.9% 19.8%
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Cash from Operations
Strong improvement in operating
cashflow due to better working capital
management
6.4
353.3
(RMB mn)
Strong Operating Cashflow
1H 2015
1H 2016
Overall working capital turnover days
improved by 28 days to 57 days
(1H 2015: 85 days)
98
89
85
57
1H 2013 1H 2014 1H 2015 1H 2016
(Days)
Working Capital Turnover days
28 days
15
Inventory Turnover Days
Significant Reduction on Inventory Turnover
Improvements in inventory days
mainly due to:
Stringent stock control through prudent
products ordering instructions
Flattened distribution channels
Real-time retail inventory monitoring and
management
(days)
86
94
72
55
1H 2013 1H 2014 1H 2015 1H 2016
17 days
As at 30 June
(RMB mn) 2016 2015 Change
Inventory 463.1 520.2 11.0%
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Solid Balance Sheet
(RMB mn) 30 June 2016 31 Dec 2015 Change
Current Assets 7,140.2 7,050.8 1.3%
Current Liabilities 2,979.5 2,966.4 0.4%
Net Current Assets 4,160.7 4,084.4 1.9%
Current Asset Ratio (times) 2.4x 2.4x Same
Shareholders’ Equity 5,046.5 4,851.9 4.0%
Total Net Assets per Share RMB 2.31 RMB 2.22 3.9%
2016 CAPEX approx. RMB 100-150 mn
Sustainable growth supported by a solid and healthy balance sheet
17
Production Capacity Allocation
Footwear Production Apparel Production
85% 15% 44% 56%
Self produced Outsourced Self produced Outsourced
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XTEP Spokesperson
Xie Zhenye
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Business Review
A Year of Consolidating the Group’s Internal Resources Towards the Post-Change
Direction of Professional Sports Brand with Functional and Stylish Products
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XTEP Spokesperson
Andriy Shevchenko
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Running Remains the Core Sports Category Focus for the Group
Sports Marketing in 1H 2016
Wuhan Marathon (武漢馬拉松)
Nanjing International Women’s Half Marathon (南京國際女子半程馬拉松)
Beijing Half Marathon (北京半程馬拉松)
Yangzhou Jianzhen International Half Marathon (揚州鑒真國際半程馬拉松賽)
Cross-strait Ladies Half Marathon (海峽兩岸(廈門海滄)女子半程馬拉松賽)
Tianjin Wuqing Development Area Cup International Marathon (天津武清開發區杯國際馬拉松賽)
Please kindly provide the logo
Carried the No. 1 sportswear sponsor position into 2016 with 12 major marathons sponsored as at 30
June 2016 (increased from 5 in the same period of 2015) in the major cities below, and will be involved in
over 40 running events in 2016
Xtep Runner’s Club
Formed in Aug 2012, over 33,000 active runners were registered as members as at 30 June 2016
An important running community gathered around XTEP’s products and sponsored activities, and helps
the Group collected first hand feedback from the frequent runners to help improve XTEP’s products
Xiamen International Marathon (廈門國際馬拉松賽)
Standard Chartered Hong Kong Marathon (渣打香港馬拉松)
Hainan International Marathon (海南國際馬拉松)
Kunming Marathon (昆明馬拉松)
Chongqing International Marathon (重慶國際馬拉松賽)
China Zheng-kai International Marathon (中國鄭開國際馬拉松賽)
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Organized and Sponsored 12 Other Running Events
Sports Marketing in 1H 2016 (Con’t)
3.21 Running Festival (3·21跑步節 )
ILLUMI RUN (炫彩夜跑 ) (Beijing, Guangzhou)
5km night run that ends with a
concert event, perfectly
representing XTEP’s belief in
running as both a competitive
sport and a fun social event Running as another
method to socialize
and meet
Mr./Ms. right
Xtep Happy 10K (特步歡樂跑 – 中國10公里錦標賽)
(Shanghai, Guangzhou, Chongqing,
Changzhou, Suzhou)
China’s first 10km run championship
circuit
Find Mr. Right Love
Marathons
(北西愛情馬拉松)
(Hangzhou, Chengdu,
Guangzhou, Beijing )
Offline
• organized ten-cities running events
with the same start time
• In-store sales promotions and
limited edition products sold
Online
• launched a 100-cities “3.21 Real
Runner” online Marathon with
Joyrun
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Football – Blade Project
Comprehensive football strategy announced on 22 Apr 2016
Focuses on developing wide exposure for XTEP in the football field
Goal to serve 5 million Chinese youth football population in 5 years
Continued to sponsor XTEP China College Futsal League (“CCFL”), XTEP
China University Football League (“CUFL”), and ZSFL Xtep League
(浙江省中小學生校園足球聯賽)
Added sponsorship of China High School Football League, reaching over
20,000 players each year
Sports Marketing in 1H 2016 (Con’t)
Established partnerships with many Chinese youth football education and
training services providers, who will promote XTEP products through their events
Signed Mr. Andriy Shevchenko, former European Footballer of the Year and
current head coach of the Ukraine National Football Team, as XTEP football
spokesperson
Launched professional football products “Blade I” in stores in June 2016
Continue to sponsor football teams and clubs: China All Star Football Team
(中國明星足球隊), China Football Press United (中國足球記者聯隊), Hong Kong
Rangers FC (香港標準流浪足球會), Hong Kong All Star Sports Association
(香港明星足球隊), and La Liga, Villarreal C.F. (Spanish National League)
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Sports Celebrity Endorsement
Sports Marketing in 1H 2016 (Con’t)
Xie Zhenye 謝震業
Part of China’s 4x100m relay Olympic 2016 team and competed in the 100m dash individually
Made history with his 4x100m run teammates in Aug 2015, setting the best record by an Asian team, winning silver medal at the Beijing IAAF World Championships
Xie and his teammates also broke Asian records for 4x100m run in Oct 2014 at the Incheon Asian Games
Trentavis Friday
The 200m dash gold medal winner at the IAAF World Junior Championships in Athletics in Jul 2014
Currently ranked 1st in the world junior ranking in 200m run
Participated in 20km race walk in 2016 Olympic
First PRC gold medal winner of 2012 Olympic 20km race walk event
Andriy Shevchenko
Head coach of the Ukraine National Football Team
European Footballer of the Year in 2004
Second highest scorer in the history of the club, with 175 goals scored for A.C Milan
Record total 375 goals during his 18 years football career
Zhao Qinggang 趙慶剛
2014 Asia record holder for the javelin event
Chen Ding 陳定
Kazakhstan National Track and Field Team
Wears XTEP clothes during all world competitions, such as IAAF World Championships and Olympics
Olga Rypakova is one of the world’s leading triple jump athletes who won Gold Medal in the 2012 Olympics and Bronze Medal in the 2016 Olympics
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Celebrity Spokespersons
Entertainment Marketing in 1H 2016
謝霆鋒
Nicholas Tse 杜天皓 Calvin Tu
李易峰 Li Yifeng
林珍娜 Im Jin-ah,
aka “Nana”
UNIQ
26
Entertainment Marketing in 1H 2016 (Con’t)
Please confirm
XTEP’s brand image of professional sports brand with stylish and functional products was strengthened with overall focus on sports marketing,
while retaining some elements of traditional entertainment marketing
Category Partners TV Program Sponsorships
TV
Partners
Internet
Partners
Anhui Satellite TV
CCTV Kids Channel
“Run For Time”
(全員加速中)
“Let’s Go, Boys and Girls”
(男生女生向前衝)
“321 Go”
(321動起來)
“Big Hands with Small Hands”
(大手牽小手)
湖南娱乐 Hunan TV
Entertainment Channel
湖南卫视 Hunan Satellie TV
CCTV- 5 Sports Channel
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Upgraded Professional Quality of Functional Running Products
Incorporated more unique technologies to raise the functionality of the three core running
product lines
Running Footwear Products
SoftpadTM (柔軟墊), Xtep-Aroma (芳香科技),
Dow (仙護盾) , X-Flex (易彎折) New Features
Reactive Coil (減震旋) Dynamic Foam (動力巢) Air Mega (氣能環)
29
Upgraded Professional Quality of Functional Apparel Products
Apparel Products
Cooling nano-powder in
clothing fibers, which reflects
sunlight and absorbs heat
immediately when it comes into
contact with the skin thus
providing users with a feeling
of instant coolness
Transfer moisture from the skin
quickly to the surface of the
fabric through special
permutation and combination of
yarn, which is then transferred to
the air to achieve the effect of
instant absorption and
immediate dryness
New professional sportswear
fabric in the sportswear market,
the stretchable and elastic
recovery features allow athletes
and sports participants to
stretch freely during exercise
New Features DupontTM Sorona® cotton from U.S.
30
The Introduction of XTEP’s First Professional Football Product Series
Football Products
“Blade I” was launched in stores in Jun of 2016
European football cleats designed to fit Chinese football players’ feet and adapt to Chinese artificial grass football facilities.
Tested on and adjusted according to feedback of over 3,000 Chinese collegiate football players
Light weight and quick dry apparels, carried forth the Group’s expertise for providing maximum comfort for athletes
Further technical modification will be unveiled in new product generations in 2017
31 31
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Domestic Market
Refined and flattened distribution channel
Total number of XTEP retail stores: approx. 6,800
Total number of XTEP kids brand POS: approx. 600
Flattened distribution channels enhanced the
manageability of stores, adding transparency and
decreasing inventory risk
Total number of exclusive XTEP distributors: 40
Proportion of directly managed retail stores by
distributors is over 50%
Retail Channel Management
Oversea Market
Enhances XTEP’s global exposure, brand value,
and broadens revenue streams
33
Real-time Monitoring and Internal APP for Rapid Response and Unified Image
Retail Channel Management (Con’t)
Bi-directional communication via Super Shopping Guide APP allowed quick response to customer
retail behavior anywhere and anytime based on data provided from real-time DRP system
Centralized real-time DRP system covered over 90% of XTEP retail stores as at 30 Jun 2016,
providing insights into customer preference, which allowed for accurate product pricing and product
mix strategies and controlled retail inventory within healthy levels
Unified XTEP’s professional sports image by introducing the “7th generation” retail store layout with
upgraded sportive store display, and monthly new product shipment cycle ensures same products
were sold in all stores at the same time
Universal pricing by adopting the same retail sticker price throughout the nation and setting the
discount range for each tier of store
34
E-Commerce
E-commerce Business Complements Offline Retail
Ranked as the Top selling sports footwear brand on
Tmall.com and No. 1 sportswear brand on JD.com in
terms of volume sold
Products sold through Tmall.com, JD.com, XTEP
official website (www.xtep.com.cn), and other well-
established online shopping platforms.
5
4
3 3
1 1 1
2Q14 3Q14 4Q14 1Q15 2Q15 4Q15 2Q16
Xtep’s Ranking on Satisfaction Rating on
Introduction of O2O Model
First sportswear company to start using O2O (“Online-to-Offline”) model with distributors, resulting in increased profit for both the Group and distributors
O2O model currently rolled out to 200-300 stores and expected to reach 1,000 stores by end of 2016
Created a win-win situation where:
XTEP products were aligned and popular items in offline stores also generated top sales online
Exponential effect from branding and promotional efforts
Inventory levels were better controlled
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Future Prospects
“Products+” – XTEP as the Runners’ Brand of Choice
Footwear Products
Continue to launch new generation products of the three core running series: “Dynamic Foam”, “Reactive Coil” and “Air Mega”
Air Mega 2.0 to launch in 2H 2016: combining Air Mega and Dynamic Foam materials in shoe sole
“XTEP Motion” to be launched in Q3 2016: the smart running shoes that can accurately monitor and record running history with internal memory, detect running postures and suggest running plans based on user’s data
Introduce a new XTEP “Comfycubes” series that aims for more comfortable and flexible walking with new SoftpadTM technology
Apparel Products
Continue to launch new professional running apparel products with improved functionality and stylish appearance
Introduce the heating technology “X-warm” by creating internal heat circulation between clothing layers in Q4 2016
Launch the 2nd generation of “Xtep-Dry” in 2017 with added functions of being wind resistant and water-proof
37
“Products+” – New Product Categories
Future Prospects (Con’t)
New Sports Product Categories
New product categories take XTEP’s organic growth to 2H 2017 and beyond
New Celebrity Product Line
Announced cooperation with Mr. Nicholas Tse to develop a line of related
products under XTEP brand
Mr. Tse will be involved in the designing and promotion of his related product
line
May continue to cooperate with third parties to develop new product lines
that can enhance brand image and increase profitability
38
“Sports+” – A Running Ecosystem under XTEP Brand
Future Prospects (Con’t)
The Group envisions being part of and operating a running ecosystem beyond products and sponsorships
Continue to host running events such as “3.21 Running Festival” (321跑步節) which offers multifaceted approach to running, such as:
Celebrity-lead marathons
Online running rewards
Shopping discounts and in-store promotions
Limited edition products
Runner clinics
Xtep Motion Tracker APP will enable a closer bond to form between the Group and runners, and provide tailor-made offerings to individuals based on user data
39
“Internet+” – Build a New Era of Seamless Multi-Channel Marketing and Sales
Future Prospects (Con’t)
Harness the power of digital technology for big data gathering, omni-channel sales,
O2O community building and precise marketing
Pilot the smart retail model in 50 stores using technology such as automatic Traffic
counter (客流計數器), e-payment, iBeacon (比肯), Foot scanner (足型掃描器) and
3D e-Fitting system (3D智能試衣系统) to provide more precise services to consumers
Technology can help record customer data for analysis and leads to improvements in
retail efficiency, product design and targeted promotion
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Contacts
41
Tel : (852) 2152 0333 Email : ir@xtep.com.hk
Xtep Investor Relations Department
Tel : (852) 2864 4817 Email : sprg_xtep@sprg.com.hk
Strategic Financial Relations Limited
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