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March 2016
2015 Annual 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
Agenda
2
Overview
Financial Analysis
Business Review
Products
Q&A
Retail Channel Management
Future Plans
Brand Promotion
3
Operational Highlights Financial Highlights
Overview
Total revenue increased by 10.8% YoY to
RMB 5,295.1 million
Overall gross profit margin rose by 1.4 pp to
42.2% YoY
Profit attributable to ordinary equity Shareholders
was up 30.3% YoY, amounted to RMB 622.6 million
Operating cash inflow surged to RMB 786.5 million
Declared final dividend HK7.0 cents and special
dividend HK3.5 cents per share, hence increased
payout by 31.3% and annual payout ratio is 60%
Repositioned from a fashion sportswear brand to a
sports brand with stylish and functional products
Well acceptance of functional running products
(both footwear and apparel)
E-commerce business had stellar performance,
ranked 1st in terms of volume sold on Tmall sports
footwear brand. Revenue accounted for low double
digit (2014: single digit) of the total revenue
Overall working capital turnover days reduced to
60 days (2014: 77 days)
4
Financial Analysis
4
5
Result Highlights
For the year ended 31 December
(RMB mn) 2015 2014 Change
Revenue 5,295.1 4,777.6 10.8%
Gross profit 2,236.7 1,946.9 14.9%
Profit attributable to equity Shareholders 622.6 478.0 30.3%
Basic earnings per Share (RMB cents) 28.97 21.95 32.0%
Gross profit margin (%) 42.2 40.8 1.4 pp
Operating profit margin (%) 17.4 16.9 0.5 pp
Net profit margin (%) 11.8 10.0 1.8 pp
ROE (%) 13.0 10.4 2.6 pp
Final and Special dividend (HK cents per Share) 10.5 8.0 31.3%
Annual dividend payout ratio(%) 60 60 Same
6
Sustainable Revenue and Gross Profit Margin Growth
Revenue and Gross Profit Margin
(RMB mn)
1.4 pp
4,343.1
4,777.6
5,295.1 40.2% 40.8%
42.2%
2013 2014 2015
Revenue Gross Profit Margin
0.6 pp
10.0%
10.8%
Growth in all categories
Revenue (RMB bn)
Gross
Profit Margin
Footwear 3.26 7.1% 43.8% 1.7 pp
Apparel 1.93 14.2% 39.7% 1.2 pp
Accessories 0.11 133.9% 39.7% 2.8 pp
Total 5.30 10.8% 42.2% 1.4 pp
Growth in all categories due to:
1. Successful repositioning XTEP as professional sports
brand which focus on Running
2. Regain growth in apparel after successful destocking
3. Significant increase in revenue from e-commerce
7
Revenue Breakdown & Product Analysis
Overall Revenue Mix
Footwear
Apparel
Accessories
2015
RMB5,295.1mn
61.5%
36.4%
2.1%
Overall revenue mix remains stable.
While footwear still remains the revenue driver, apparel contribution to
sales increased with introduction of more functional running products
2014
RMB4,777.6mn
63.7%
35.3%
1.0%
8
Revenue Breakdown & Product Analysis (Con’t)
Footwear Driving Revenue Growth
Higher margin driven by professional
running products with higher quality and
increased ASP
Introduced 3 professional running series
well-received by consumers:
“Dynamic Foam”
“Reactive Coil”
“Air Mega”
Introduced other new product features
for added performance and comfort :
“Softpad”
“Xtep-Aroma”
“Silvadur”
“Xtep-Cool”
1.7 pp
3,042.9
3,258.1
42.1%
43.8%
2014 2015
Revenue Gross Profit Margin
(RMB mn)
7.1%
9
Apparel Driving Revenue Growth
Revenue Breakdown & Product Analysis (Con’t)
Higher margin driven by professional
running products with higher quality and
increased ASP
Introduced new 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 from U.S.
1.2 pp
(RMB mn)
1,687.5
1,926.6
38.5%
39.7%
2014 2015
Revenue Gross Profit Margin
14.2%
10
Significant Growth in Profit Attributable to Shareholders
Profit Attributable to Shareholders
478.0
622.6 10.0%
11.8%
2014 2015
Profit Attributable to Shareholders
Net Profit Margin
Profit attributable to shareholders
increased by 30.3% mainly due to
an increase in the Group’s revenue and
gross profit contribution as a result of
higher contribution to sales from
professional sportswear
The Group’s net profit margin also
increased to 11.8% (2014: 10.0%)
30.3%
1.8 pp
(RMB mn)
11
Final and Special Dividend: 31.3%
Consistent High Dividend Payout Ratio
Total Dividend (HK cents)
10.0 8.5
10.0
8.0
5.0
7.0
3.0
3.5
2013 2014 2015
Special dividend
16.5
20.5
31.3%
Dividend per Share
2015 annual
payout ratio
60.0%
Dividend
18.0
Final dividend Interim dividend
12
Operating Expenses Analysis
(As % of revenue)
13.1%
14.7%
2014 2015
(As % of revenue)
Mainly due to increase in:
Sponsorships of marathon and running events
Sponsorships of sports and entertainment TV programs
Sponsorship of sports spokesperson
Upgrade 7th generation store with running image
Mainly due to:
R&D technical designer – Hired more domestic and
overseas technical sports product designers with extensive
international sports brand experience
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
Advertising & Promotional Costs Research & Development Costs
1.6 pp
For the year ended 31 Dec
(RMB mn) 2014 2015 Change
A&P cost 623.7 780.5 25.1%
For the year ended 31 Dec
(RMB mn) 2014 2015 Change
R&D cost 107.5 121.3 12.8%
2.2%
2.3%
2014 2015
0.1 pp
13
Cash from Operating Activities
Strong improvement in operating cashflow
due to:
1. Improvement of reduced inventory level
2. Improvement of cash inflow from
account receivables in 2H 2015
94.6
786.5
2014 2015
(RMB mn)
Significant Improvement in Operating Cashflow
14
Improvement on Overall Working Capital Cycle
Overall Working Capital Turnover Days Continue to Improve
94 days
77 days
60 days
2013 2014 2015
17 days
17 days
(days)
The turnover days of overall working capital improved by 17 days
due to significant reduction of inventory level and improvement of cash inflow
from account receivable in 2H 2015
15
Inventory Working Capital Days
Improvement on Inventory
Improvement on Inventory
mainly due to:
Flattening distribution channels
Number of distributors increased to 38
Reduced multi-layer of authorized
retailers
(days)
79 days
71 days
58 days
2013 2014 2015
13 days
8 days
As at 31 December
(RMB mn) 2015 2014 Change
Inventory 398.4 569.0 30.0%
16
Account Receivable Working Capital Days
Improvement on Account Receivable
Improvement on Account Receivable
mainly due to:
Well accepted functional products
improve profitability of distributors and
authorized retailers
Seasonality of better recovery of
account receivable in 2H compared to 1H
(days)
91 days
104 days
98 days
2014 1H 2015 2015
6 days 13 days
17
Lowering Effective Tax Rate
For the year ended 31 December
2015 2014
Effective tax rate from operation (1) 27.8% 32.6%
Under provision in prior years 0.6% 1.5%
Withholding tax (2) 0.3% 2.8%
Overall effective tax rate 28.7% 36.9%
Notes:
(1) 2015 has less expenses and provision that are not tax deductible compared to 2014
(2) Review of past dividend payment pattern show less withholding tax provision is required in 2015
18
Strong Cash Balance
(RMB mn) 31 Dec 2015 31 Dec 2014
Treasury deposits 100.0 450.0
Bank deposits 769.8 856.1
Cash and cash equivalent 3,607.0 3,137.1
Total cash and cash equivalent 4,476.8 4,443.2
Bank borrowings (1,610.5) (1,839.0)
Net cash and cash equivalent 2,866.3
10.1%
2,604.2
Gearing ratio 19.8%
3.6 pp
23.4%
19
Solid Balance Sheet
Sustainable growth supported by a solid and healthy balance sheet
As at 31 December
(RMB mn) 2015 2014 Change
Current Assets 7,050.8 6,947.1 1.5%
Current Liabilities 2,966.4 2,350.3 26.2%
Net Current Assets 4,084.4 4,596.8 (11.1)%
Current Asset Ratio (times) 2.4x 3.0x (0.6x)
Shareholders’ Equity 4,851.9 4,700.5 3.2%
Total Net Assets per Share RMB2.22 RMB2.16 2.8%
Capital Expenditures 58.7 135.1 (56.6)%
2016 CAPEX approx. RMB 100-150 mn
20
Production Capacity Allocation
Apparel Production Footwear Production
86% 14% 43% 57%
Self produced Outsourced Self produced Outsourced
21
Business Review
21
22
Business Review
CHANGE: from fashion sportswear to sports brand with stylish and
functional and products
Product change to
emphasize running and
sports performance
23 23
Brand Promotion Dual-Marketing Strategy Incorporating
Sports and Entertainment
24
17 Internationally Renowned Marathons
Running
Sports Marketing in 2015
Xiamen International Marathon (廈門國際馬拉松賽)
Standard Chartered Hong Kong International Marathon (渣打香港國際馬拉松)
Chongqing International Marathon (重慶國際馬拉松賽)
Zheng-kai International Marathon (中國鄭開國際馬拉松賽)
Yangzhou Jianzhen International Half Marathon (中國揚州國際半程馬拉松賽)
Taiyuan International Marathon (太原國際馬拉松賽)
Tianjin Marathon (武清開發區杯天津國際馬拉松賽)
Shenyang Marathon (沈陽馬拉松)
Kunming Plateau Half Marathon (昆明高原國際半程馬拉松賽)
Chongming Half Marathon (崇明森林國際半程馬拉松)
Changsha International Marathon (長沙國際馬拉松賽)
Nanjing International Marathon (南京國際馬拉松賽)
Hangzhou Marathon (杭州國際馬拉松)
Hefei International Marathon (合肥國際馬拉松賽)
Shanghai Pudong International (上海浦東國際女子半程馬拉松)
Women’s Half Marathon
Guangzhou Marathon (廣州馬拉松)
Fuzhou International Marathon (福州國際馬拉松賽)
25
4 Xtep ILLUMI RUNs in Major Cities of the PRC
Running
Xtep ILLUMI RUN Beijing
(特步炫彩夜跑 - 北京)
Xtep ILLUMI RUN Xiamen
(特步炫彩夜跑 - 夏門)
Xtep ILLUMI RUN Guangzhou
(特步炫彩夜跑 - 廣州)
Xtep ILLUMI RUN Shenzhen
(特步炫彩夜跑 - 深圳)
Sports Marketing in 2015
26
Running – Sports Spokespersons and Brand Opinion Leaders
Sports Marketing in 2015
Xie Zhenye 謝震業
Made history with his 4x100m run teammates on 8 August 2015, setting the best record by an Asian team, winning silver medal at the Beijing IAAF World Championships in Beijing
Xie and his teammates also broke Asian records for 4x100m run on 2 October 2014 at the Incheon Asian Games
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
Trentavis Friday
Chen Ding 陳定 Wang Xiaogang
王曉剛
Bai Bin
白斌
Sun Dongxu
孫東旭
Huang Lisheng
黃力生
Guo Hongjun
郭紅軍
Brand Opinion Leaders Spokespersons
Zhao Qinggang 趙慶剛
2014 Asia record holder for javelin event First PRC gold medal
winner of 2012 Olympics 20km race walk event
27
Xtep Runners Club
Social Marketing in 2015
An important running community gathered around Xtep brand products
and our sponsored activities
Formed in Aug 2012, over 25,000 active runners were registered as
members as at 31 Dec 2015
Organized regular running events, training programs and helped elite
members register to participate in marathons sponsored by the Group
Provided participants Xtep brand professional running sportswear
Collected first hand feedback from the regular runners to
help improve our product and stay ahead of peers on
product design
28
Football Events Sponsorship Football Clubs Sponsorship
Football
Sports Marketing in 2015
Xtep China University Football League
(Xtep CUFL) (特步中國大學生足球聯賽)
Xtep China College Futsal League
(Xtep CCFL)
(特步中國大學生五人制足球聯賽)
ZSFL Xtep League
(浙江省中小學生校園足球聯賽)
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)
La Liga, Villarreal C.F.
(Spanish National League)
*Currently ranked 4th in La Liga
29
National Sports Event
Sports Marketing in 2015
1st Youth Game of the PRC
Sole sports brand sponsor
Provided sportswear in all competitions and award ceremonies
for 3 teams: Hong Kong, Fuzhou and Xiamen teams
Provided sportswear to all officials, referees and volunteers
Attracted wide national media coverage reaching millions
of audience in the PRC
30
Entertainment Marketing in 2015
Unique brand positioning and differentiated marketing strategy
to strengthen XTEP’s brand image
Category Partners Campaigns
Programme
Sponsorship
“Running Man” (奔跑吧！兄弟),
“X-Warrior” (極限勇士),
“Let’s Go, Boys and Girls” (男生女生向前衝),
“Yes! Coach” (報告！教練)
Title sponsored talk show
“Day Day Up” (天天向上),
“Big Hands With Small Hands” (大手牽小手)
Strategic partner Joint production of
“Dream Corps” (夢想總動員)
TV
Partnership
Running Highlights Program
title sponsorship during
Beijing IAAF World Champion Game
11-11 Tmall Gala – Hunan Satellite TV
Internet
Broadcasting of Xtep micro-film
“Love in Numbers”《數字戀愛》,
“The Lost Tomb”《盜墓筆記》
and Xtep Kids micro-film
“Temporary Dad” (臨時爸爸)
CCTV Kids Channel
Guangdong TV Sports Channel
CCTV-5 Sports Channel
Zhejiang
Satellite Channel
Anhui Satellite TV
Hunan Satellite TV
Dragon TV
CCTV-14 Children Channel
Jiangsu Satellite Channel
Hunan Satellite TV
31
Entertainment Marketing in 2015
Celebrity Spokespersons
Nicholas Tse
(謝霆鋒) Li Yifeng
(李易峰)
Im Jin-ah
(林珍娜, aka “Nana”)
Calvin Tu
(杜天皓)
UNIQ
32
Products
32
33
Comprehensively Upgraded Product’s Professional Functionality
Footwear and Apparel Products
Reactive Coil (減震旋) Dynamic Foam (動力巢) Air Mega (氣能環)
A professional sports brand with expert functionality and quality emphasizing on comfort and
protection
Footwear products:
New features: Softpad (柔軟墊), Xtep-Aroma (芳香科技), Xtep-Cool (特步冰爽科技)
New features: DupontTMSorona® cotton from U.S.
Apparel products: X-S.E.T. (特步運動彈性科技) / XTEP-FROZEN(冰纖科技) / XTEP-DRY (酷乾科技)
34
Products Technology
Comprehensively Upgraded Product’s Professional Functionality
Xtep-cool is used at shoe-pad and tongue. It has the dual effect of high heat
conductivity and high heat absorption efficiency which brings cooling sensation
Using high performance material with a resistance of low temperature and hydrolysis,
it can quickly absorb the impact and turn it into resilience, improving the performance
Release silver ion which can effectively restrain odor and pathogenic microorganisms,
and also makes it washable for many times
Light soft phylon middle sole along with easy on-off structure makes it easy to put on
and walk healthily, comfortable and light
Regular cutting grooves on the sole guarantee its flexibility and the stability of foot,
which offers the comfort to the barefoot. Phylon middle sole has excellent cushioning
effect and gives reliable protection to the feet, extraordinary sustenance and stability
New memory material, slow rebound and extremely soft, perfectly fits the feet
Shoe pads are designed according to human body kinematics,
improve the comfortableness of inner space of the shoe
35
Kids Products
Established the first “Chinese Children's Foot Health Research Center” in 2014 to study
the foot growth of Chinese children
Jointly developed children’s smart shoes with Qihoo 360.
The first product, children's “smart tracking shoes” with
geo-positioning function is launched in stores in 1Q 2016
Jointly produced an animation cartoon series “Dream Corps”
with Quanzhou Kungfu Animation and launched the Kids product
series based on “Dream Corps” resulting in satisfactory
increase in the revenue of Xtep kids brand products
36
Retail Channel
Management
36
37
Distribution Channel
Refined and flattened distribution channel
Total number of distributors increased to 38 with a target to continue gradually add-on more,
reduced multi-layers sales to two layers, achieved high transparency of retail inventory and quick
response to the market
Increased the proportion of directly managed retail stores by distributors to over 50%
Increased coverage of DRP system to over 85% of total retail stores, enabling the Group to provide
distributors and franchisees with clear ordering guidelines and pricing policies
Utilized big data to collect customer preference, used to guide distributor ordering, and improve
product designs
Recorded a consistent level of retail channel inventory to sales at 4 to 5 months in the past few
quarters
Retail Channel Management
38
Retail Channel Management
Retail Channel Management (Con’t)
Provided retail stores with updated market information to improve operation
efficiency and enhance profitability
Introduced the “7th Generation” design, to bring out
Xtep brand’s strong core focus on running and
strictly controlled the layout of each store
Offered standardized retail staff training
program for retail staff
Total Number of Xtep retail stores:
approx. 7,000 (31 Dec 2014: 7,110)
Products under Xtep kids series available
through approximately 600 POS
(31 Dec 2014: 500)
39
Strong Performance of E-commerce Business
E-Commerce
The revenue contribution of e-commerce business improved significantly, accounting for low
double digit of the Group’s total revenue for the Year compare to only single digit of the Group’s
total revenue in 2014
Official website: www.xtep.com.cn is well-established for online shopping
Xtep’s Ranking on Satisfaction Rating on
4.5
4.8 4.8
Jan Jun Dec
5
4
3 3
1 1
2Q14 3Q14 4Q14 1Q15 2Q15 4Q15
Built strong e-commerce partnerships
with Tmall, JD, Taobao and Dangdang
Ranked as the top selling sports footwear
brand by volume sold on
Tmall and recorded the
highest customer
satisfaction points
(4.80/5.00)
One day sales on
“singles day” 11-11-2015
recorded over RMB100million
40
Partnerships with Giants
Signed an exclusive strategic collaboration agreement with
Tmall in Aug 2015
Tmall will provide the Group with “Potential Client Campaign
(潛客計劃)”, where Tmall will share with Xtep targeted
customer data from its approximately 350 million customer
database for more accurate and efficient promotion,
increasing customer conversion rate
Furthers partnership on various aspects such as new product
launches, O2O development, digital operation, celebrity
endorsement, brand promotion and service innovation
Signed a strategic memorandum with the leading internet
logistics provider S.F. Express in Jul 2015
S.F. Express became the exclusive delivery partner for Xtep’s
official e-commerce sales
Ensures high e-commerce customer satisfaction by providing
smooth and speedy delivery and to gain access to S.F. Express
PRC’s nation-wide warehouse capacity of over 1,000,000 sq.m.
in PRC
E-Commerce (Con’t)
41 41
Future Plans Products
+ Internet
+ Sports
+
42
Future Plans
Reinforcing the brand identity as a professional sports brand and
capturing new opportunities from high potential categories
Boosted by supportive
government policies, double-digit
growth is a solid indicator of recovery
and the better industry prospects
High potential categories, such as running,
soccer, indoor training, outdoor, female and
smart products have been recognized as
significant future growth areas
Aligning the business to those high growth areas,
while continuing to emphasize brand oriented
sales with detailed retail channel management
Continue to implement the revolutionary
“3+” business strategy along with
the dual-marketing strategy
incorporating sports
and entertainment
43
Future Plans
Continue to upgrade the 3 professional running footwear product
series: “Dynamic Foam”, “Reactive Coil”, “Air Mega” and functional
apparel series such as “Xtep-Dry” and “Xtep-Frozen”
Improve on quality and design while incorporating new features
such as “smart” functions that are integrated with Xtep APP
Continue to work with international material suppliers such as:
Dow Chemical Company from the U.S. and Toray from Japan to
co-develop industry leading fabric for exclusive use for functionality
upgrade
Launch co-branding football series with CCFL and CUFL
Add new categories, such as indoor training, outdoor and female
to diversify growth engines, leveraging on the success of running
series
“Products+” – Xtep as the runners’ brand of choice
44
Future Plans
“Sports+” – A running ecosystem under Xtep brand
Host “3.21 Running Festival” (321跑步節)
to strengthen the identification of Xtep brand
with running, and link online and offline
channels for omni-channel sales and promotion
Involve in the upstream and downstream parts
of the running ecosystem by providing sports
services such as training, sports education,
medical treatment and rehabilitation
Sponsor more professional and social
running events to solidify the Group’s
running brand image
Develop events linked products for sale
at stores
45
“Internet+” – Omni-channel sales and promotion
Future Plans
Launch Xtep brand’s own mobile application to connect online and offline
businesses, along with creating a runners community facilitating communications
and participation in sporting events to build stronger brand loyalty
Harness the power of internet for big data gathering, omni-channel sales,
O2O community building and precise marketing
Continue the long-term partnership with Tmall to provide
differentiated products and enhance customer shopping
experience with strong support for logistic delivery services
from S.F. Express
Sell Xtep Kids brand products on the e-commerce platform
in order to extend customers’ flexibility of access and
variety of choice
Extend the e-commerce platform to include overseas sales
46 46
Q & A
47
Contacts
Strategic Financial Relations Limited Xtep Investor Relations Department
Tel : (852) 2152 0333
Email : [email protected]
Tel : (852) 2864 4817
Email : [email protected]
