Core Viewpoint - The article highlights the investment opportunities arising from the intersection of AI technology and consumer sectors, particularly focusing on the "AI+" concept in the context of the retail industry, exemplified by the performance of GXG under the parent company, Moshang Group [1]. Financial Performance - In 2024, Moshang Group achieved a revenue of 2.27 billion RMB, showing a slight year-on-year decline but maintaining profitability, with a gross margin of 52.8% [2]. - GXG generated a revenue of 2.08 billion RMB, a 3.0% increase year-on-year, with a gross profit of 1.11 billion RMB, reflecting a 2.1% growth and a gross margin of 53.6% [2][3]. - The Mode Commuter brand also demonstrated strong growth, with sales revenue and gross profit increasing by 11.0% and 16.8%, respectively [3]. Market Position and Trends - Moshang Group's store count reached 996 by the end of 2024, with a net decrease of 26 stores, while GXG's store count increased by 24 to 927, indicating improved single-store efficiency [4]. - The men's footwear and apparel market is projected to grow steadily, with Moshang Group maintaining its market position to benefit from industry growth and concentration [5][6]. - Moshang Group remains among the top 15 companies in the men's apparel industry, capitalizing on the trend of quality-price ratio in consumer preferences [8]. Brand Strategy and Innovation - GXG is focusing on product innovation and has launched a series of high-quality, aesthetically pleasing products, such as the "Zero Pressure" series, to meet the evolving consumer demands [8][9]. - The brand's recent fashion show emphasized a connection with younger consumers through themes of relaxation and cultural integration, enhancing its brand value [9]. Digital Transformation and AI Integration - Moshang Group has been proactive in digital transformation, having established a comprehensive digital ecosystem that integrates data across various business functions [12][13]. - The company is exploring AI applications to enhance product development processes, aiming to reduce development time and costs significantly [14][15]. - The integration of AI is expected to drive efficiency and reshape the competitive landscape for Moshang Group, positioning it for future growth [15][16]. Growth Outlook - Moshang Group is building a growth model centered on demand insights, commuting positioning, and technology empowerment, which is anticipated to attract more market attention and drive value re-evaluation [17].

Financial Performance - For the year ended December 31, 2024, the gross profit margin increased to 52.8% from 52.0% for the year ended December 31, 2023, due to optimized product mix and improved operational efficiency[4] - The main brand GXG achieved sales revenue of RMB 615 million, a year-on-year increase of 3.0% compared to RMB 2,017 million for the year ended December 31, 2023[4] - The net profit for the year ended December 31, 2024, was RMB 30.925 million, down from RMB 37.245 million for the year ended December 31, 2023, representing a decrease of 17.5%[5] - The total revenue for the year ended December 31, 2024, was RMB 2,269.76 million, compared to RMB 2,329.049 million for the previous year, reflecting a decline of 2.5%[5] - The company reported a basic and diluted earnings per share of RMB 3.39 for the year ended December 31, 2024, down from RMB 4.34 for the previous year[5] - The total comprehensive income for the year ended December 31, 2024, was RMB 24.514 million, compared to RMB 23.094 million for the previous year, indicating an increase of 6.1%[6] - Total revenue for the year ended December 31, 2024, was RMB 2,269,760,000, a decrease of 2.55% from RMB 2,329,049,000 in 2023[16] - The gross profit for the apparel segment was RMB 1,198,950,000, compared to RMB 1,212,183,000 in the previous year, reflecting a slight decline[14] - The group's pre-tax profit for 2024 was RMB 49,078 thousand, down from RMB 51,809 thousand in 2023, a decrease of 5.3%[27] - Basic earnings per share for 2024 were RMB 30,954 thousand, compared to RMB 39,567 thousand in 2023, indicating a decline of 21.8%[30] - Profit before tax was RMB 49.1 million, a decrease of 5.2% from RMB 51.8 million in 2023, mainly attributed to a reduction in gross profit[57] - Net profit for the period was RMB 30.9 million, down 16.9% from RMB 37.2 million in 2023[59] Assets and Liabilities - The company’s non-current assets totaled RMB 892.793 million as of December 31, 2024, down from RMB 1,224.634 million in the previous year[7] - The total liabilities decreased from RMB 1,775.864 million in 2023 to RMB 1,745.959 million in 2024, a reduction of 1.7%[8] - The company’s total equity increased to RMB 735.486 million as of December 31, 2024, compared to RMB 711.572 million in the previous year, reflecting a growth of 3.3%[8] - Trade receivables decreased to RMB 653,854 thousand in 2024 from RMB 726,788 thousand in 2023, a reduction of 10%[30] - Total bank loans and other borrowings due within one year amounted to RMB 903.5 million, up from RMB 887.5 million in 2023, representing an increase of 1.2%[35] - Total bank and other borrowings decreased to RMB 903.5 million from RMB 1,329.8 million in 2023, resulting in a debt-to-asset ratio of 34.6% compared to 44.1% in 2023[62][63] Revenue Sources - Revenue from offline channels was RMB 1,441,185,000, while online channels generated RMB 819,633,000 for 2024[14] - The revenue from external customers in mainland China decreased to RMB 2,269,760,000 in 2024 from RMB 2,329,049,000 in 2023, indicating a decline of 2.55%[16] - Self-operated store sales decreased by 1.6% or RMB 14.9 million to RMB 912.5 million, primarily due to macroeconomic factors[41] - Partner store sales decreased by 41.3% or RMB 55.4 million to RMB 78.7 million, mainly due to the termination of the gxg.kids business and a reduction in the number of partner stores[41] - Online channel sales decreased by 1.8% or RMB 14.7 million to RMB 819.6 million, attributed to product structure adjustments and a focus on maintaining brand pricing strategies[41] Expenses - The company’s total sales and distribution expenses were RMB 934,095,000 for 2024, compared to RMB 920,769,000 in 2023[14] - The company’s administrative expenses were RMB 210,457,000 in 2024, slightly up from RMB 207,434,000 in 2023[14] - Selling and distribution expenses increased by 1.4% or RMB 13.3 million to RMB 934.1 million, with the percentage of total revenue rising from 39.5% in 2023 to 41.2% in 2024[51] - Administrative expenses increased by 1.5% or RMB 3.1 million to RMB 210.5 million, primarily due to increased R&D spending and one-time costs related to warehouse relocation[52] - Total employee costs were RMB 84.9 million, down from RMB 100.0 million in 2023, representing 3.7% of total revenue compared to 4.3% in 2023[71] Strategic Initiatives - The company plans to enhance product development by introducing a professional design team to capture market trends and improve product quality[4] - The company plans to enhance product design and brand promotion to improve brand awareness and influence[37] - The company aims to strengthen supply chain management to ensure quality control from design to production[37] Cash Flow and Investments - Operating cash inflow was RMB 171.7 million, a decrease of RMB 126.1 million from RMB 297.8 million in 2023, with inventory turnover days improving by 7 days[60] - Capital expenditures increased by 54.8% to RMB 132.8 million from RMB 85.8 million in 2023, mainly due to increased construction and renovation costs of the headquarters[61] - No significant investments or acquisitions were made during the period, and the company continues to seek new business development opportunities[66] Dividend and Shareholder Information - The company did not recommend any final dividend for the year, consistent with 2023[28] - The company did not recommend any final dividend for the year ending December 31, 2024[72] - The annual report for the year ending December 31, 2024, will be sent to shareholders and published on the stock exchange and the company's website[79] Audit and Compliance - The audit committee, consisting of three independent non-executive directors, oversees the company's financial reporting and internal control systems[77] - The financial information for the year ending December 31, 2024, has been reviewed by the audit committee and complies with applicable accounting principles and regulations[78]

[Corporate Introduction](index=2&type=section&id=Corporate%20Introduction) MuShang Group Holding Co., Ltd. is a leading Chinese fashion menswear company, also covering unisex fashion, with brands like GXG, gxg jeans, and MODE COMMUTER - MuShang Group Holding Co., Ltd. is a leading fashion menswear company based in China, also covering unisex fashion, with distinct design images for its brands including GXG, gxg jeans, and MODE COMMUTER[2](index=2&type=chunk)[4](index=4&type=chunk) - The company adopts an integrated omni-channel business model, combining online and offline advantages to offer unified products, prices, and shared inventory, and optimizes inventory and supply chain management through big data analysis, positioning itself as a leader in China's new retail integration[3](index=3&type=chunk)[4](index=4&type=chunk) [Corporate Information](index=3&type=section&id=Corporate%20Information) This section provides core corporate information including board members, committee structures, principal offices, share registrars, and main banks - The report lists core company information such as board members, committee composition, principal office addresses, share registrars, principal banks, and the company website[5](index=5&type=chunk)[6](index=6&type=chunk) Key Corporate Personnel | Role | Name/Institution | | :--- | :--- | | **Chairman** | Mr. Deng Shunlin | | **Chief Executive Officer** | Mr. Yu Yong | | **Auditor** | Ernst & Young | | **Stock Code** | 1817 | [Management Discussion and Analysis](index=5&type=section&id=Management%20Discussion%20and%20Analysis) This section provides a detailed analysis of the group's financial performance, operational highlights, and strategic outlook for the reporting period [BUSINESS OVERVIEW AND OUTLOOK](index=6&type=section&id=BUSINESS%20OVERVIEW%20AND%20OUTLOOK) During the reporting period, the group's total revenue was RMB 1.088 billion, a slight increase of 0.3% year-on-year, primarily driven by the successful promotion of its main brand GXG Total Sales Revenue | Indicator | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | | **Total Sales Revenue** | 1,088.4 RMB million | 1,085.3 RMB million | +0.3% | - The group plans to focus on three key strategies: 1) leading brand positioning to explore potential consumer groups; 2) reforming organizational structure and deepening omni-channel integration to enhance operational efficiency; and 3) continuous investment in R&D to improve products and consumer experience[8](index=8&type=chunk) [REVENUE](index=6&type=section&id=REVENUE) The group's total revenue slightly increased by 0.3% year-on-year, primarily driven by a 6.2% revenue growth from its main brand GXG, while gxg jeans and gxg.kids saw declines due to strategic adjustments and business termination [Revenue by brand](index=7&type=section&id=Revenue%20by%20brand) The main brand GXG's revenue grew by 6.2% to RMB 979 million, becoming the core driver of growth, while gxg jeans revenue decreased by 8.7% and gxg.kids revenue sharply declined by 86.9% due to business termination Revenue by Brand | Brand | H1 2024 Revenue (RMB thousand) | H1 2023 Revenue (RMB thousand) | YoY Change | | :--- | :--- | :--- | :--- | | **GXG** | 978,670 | 921,898 | +6.2% | | **gxg jeans** | 79,025 | 86,532 | -8.7% | | **gxg.kids** | 7,414 | 56,343 | -86.9% | | **Mode Commuter** | 20,479 | 18,526 | +10.8% | | **Total** | 1,088,424 | 1,085,343 | +0.3% | - gxg.kids business was strategically terminated, with its significant revenue decline attributed to brand positioning adjustments and clearance of old inventory[10](index=10&type=chunk)[11](index=11&type=chunk) [Revenue by sales channel](index=8&type=section&id=Revenue%20by%20sales%20channel) Offline channels, specifically self-operated and distribution stores, saw revenue growth of 2.9% and 11.2% respectively, while partner stores experienced a significant 40.1% decline due to the termination of the gxg.kids business Revenue by Sales Channel | Sales Channel | H1 2024 Revenue (RMB thousand) | H1 2023 Revenue (RMB thousand) | YoY Change | | :--- | :--- | :--- | :--- | | **Self-operated Stores** | 456,549 | 443,558 | +2.9% | | **Partner Stores** | 47,929 | 79,918 | -40.1% | | **Distribution Stores** | 146,393 | 131,650 | +11.2% | | **Online Channels** | 434,004 | 426,767 | +1.7% | [Number of stores](index=9&type=section&id=Number%20of%20stores) The group adjusted its store network to enhance efficiency, reducing the total number of offline stores from 1,022 at the end of 2023 to 958, with all gxg.kids stores closed and their business authorized to third parties Number of Stores | Sales Channel | Number of Stores as of June 30, 2024 | Number of Stores as of Dec 31, 2023 | Change in Number | | :--- | :--- | :--- | :--- | | **Self-operated Stores** | 373 | 380 | -7 | | **Partner Stores** | 61 | 139 | -78 | | **Distribution Stores** | 524 | 503 | +21 | | **Total** | 958 | 1,022 | -64 | - The group terminated the gxg.kids business and licensed it to an independent third party, leading to the closure of all its offline stores[15](index=15&type=chunk)[16](index=16&type=chunk) [GROSS PROFIT AND GROSS PROFIT MARGIN](index=10&type=section&id=GROSS%20PROFIT%20AND%20GROSS%20PROFIT%20MARGIN) The group's overall gross profit slightly increased by 1.0% to RMB 583 million, with the gross profit margin improving from 53.2% to 53.6%, primarily due to controlled product retail discounts [Gross profit and gross profit margin by brand](index=10&type=section&id=Gross%20profit%20and%20gross%20profit%20margin%20by%20brand) GXG brand's gross profit increased by 2.4%, but its gross profit margin slightly decreased by 2.0 percentage points due to clearing old inventory for new warehouse relocation, while gxg jeans and Mode Commuter saw margin improvements Gross Profit and Gross Profit Margin by Brand | Brand | H1 2024 Gross Profit (RMB thousand) | H1 2024 Gross Profit Margin | H1 2023 Gross Profit (RMB thousand) | H1 2023 Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | | **GXG** | 533,557 | 54.5% | 520,955 | 56.5% | | **gxg jeans** | 37,179 | 47.0% | 40,177 | 46.4% | | **gxg.kids** | 787 | 10.6% | 6,132 | 10.9% | | **Mode Commuter** | 11,460 | 56.0% | 9,963 | 53.8% | | **Total** | 583,317 | 53.6% | 577,711 | 53.2% | [Gross profit and gross profit margin by sales channel](index=11&type=section&id=Gross%20profit%20and%20gross%20profit%20margin%20by%20sales%20channel) Self-operated and online channels maintained stable gross profit margins, while partner stores' gross profit margin significantly increased from 29.8% to 43.0% due to the termination of the low-margin gxg.kids business Gross Profit and Gross Profit Margin by Sales Channel | Sales Channel | H1 2024 Gross Profit (RMB thousand) | H1 2024 Gross Profit Margin | H1 2023 Gross Profit (RMB thousand) | H1 2023 Gross Profit Margin | | :--- | :--- | :--- | :--- | :--- | | **Self-operated Stores** | 329,061 | 72.1% | 325,478 | 73.4% | | **Partner Stores** | 20,611 | 43.0% | 23,781 | 29.8% | | **Distribution Stores** | 74,610 | 51.0% | 70,938 | 53.9% | | **Online Channels** | 158,383 | 36.5% | 156,670 | 36.7% | [Operating Expenses and Profitability](index=12&type=section&id=Operating%20Expenses%20and%20Profitability) During the period, selling and distribution expenses increased by 2.7% due to higher advertising investment, and administrative expenses rose by 5.3% due to increased depreciation of the headquarters building, leading to a significant 75.2% drop in profit before tax Financial Performance Indicators | Financial Indicator | H1 2024 (RMB million) | H1 2023 (RMB million) | YoY Change | | :--- | :--- | :--- | :--- | | **Other Income and Gains** | 19.9 | 41.3 | -51.8% | | **Selling and Distribution Expenses** | 451.2 | 439.3 | +2.7% | | **Administrative Expenses** | 112.0 | 106.4 | +5.3% | | **Other Expenses** | 1.7 | 6.1 | -72.1% | | **Finance Costs** | 29.8 | 31.7 | -6.0% | | **Profit Before Tax** | 7.6 | 30.6 | -75.2% | | **Profit for the Period** | 6.8 | 27.7 | -75.5% | - The significant decrease in profit before tax was primarily due to reduced foreign exchange gains and increased depreciation of the group's headquarters office building[32](index=32&type=chunk)[34](index=34&type=chunk) [Cash Flows and Capital Expenditures](index=14&type=section&id=Cash%20Flows%20and%20Capital%20Expenditures) Net cash outflow from operating activities increased to RMB 60.4 million, primarily due to higher advertising expenses and rental payments, while capital expenditures rose by 18.0% to RMB 69.6 million, mainly for the headquarters building construction Cash Flow and Capital Expenditure Summary | Indicator | H1 2024 (RMB million) | H1 2023 (RMB million) | Change | | :--- | :--- | :--- | :--- | | **Net Cash Flows from Operating Activities** | (60.4) | (33.3) | Outflow increased by 27.1 | | **Capital Expenditures** | 69.6 | 59.0 | +18.0% | [FINANCIAL POSITION](index=15&type=section&id=FINANCIAL%20POSITION) As of June 30, 2024, the group's gearing ratio increased to 54.7% from 44.1% at the beginning of the year, mainly due to increased seasonal borrowings for winter goods procurement, with total borrowings at RMB 1.698 billion and cash and equivalents at RMB 1.297 billion Financial Position Summary | Indicator | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Bank and Other Borrowings** | 1,697.7 RMB million | 827.8 RMB million | | **Cash and Cash Equivalents and Pledged Deposits** | 1,297.4 RMB million | 1,035.4 RMB million | | **Gearing Ratio** | 54.7% | 44.1% | - The increase in the gearing ratio was primarily due to increased seasonal borrowings for prepayment of winter goods procurement[38](index=38&type=chunk) - As of June 30, 2024, the group's pledged deposits secured bank loans of **RMB 624 million**, discounted letters of credit of **RMB 33 million**, and discounted notes receivable of **RMB 472 million**[41](index=41&type=chunk)[46](index=46&type=chunk) [HUMAN RESOURCES](index=17&type=section&id=HUMAN%20RESOURCES) As of June 30, 2024, the group's employee count was 500, a slight decrease from the beginning of the year, with total staff costs decreasing by 19.3% to RMB 49.6 million due to strategic personnel restructuring Employee Count | Indicator | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Number of Employees** | 500 | 508 | Staff Costs | Indicator | H1 2024 | H1 2023 | | :--- | :--- | :--- | | **Total Staff Costs** | 49.6 RMB million | 61.5 RMB million | | **Staff Costs as % of Revenue** | 4.6% | 5.7% | [Other Information](index=17&type=section&id=Other%20Information) This section covers additional disclosures including directors' and substantial shareholders' interests, restricted share unit schemes, and global offering proceeds utilization [DIRECTORS'%20AND%20CHIEF%20EXECUTIVE'S%20INTERESTS](index=18&type=section&id=DIRECTORS%27%20AND%20CHIEF%20EXECUTIVE%27S%20INTERESTS) The report discloses the interests of the company's directors and chief executive in the company's shares as of June 30, 2024, with Executive Director and CEO Mr. Yu Yong holding 215,750,000 shares (22.71%) and Non-executive Director Mr. Yang Herong holding 213,750,000 shares (22.50%) Directors' and Chief Executive's Interests | Director Name | Nature of Interest | Number of Shares | Approximate % of Interest | | :--- | :--- | :--- | :--- | | **Mr. Yu Yong** | Controlled Corporation Interest & Beneficial Owner | 215,750,000 (L) | 22.71% | | **Mr. Yang Herong** | Controlled Corporation Interest | 213,750,000 (L) | 22.50% | [SUBSTANTIAL%20SHAREHOLDERS'%20INTERESTS](index=20&type=section&id=SUBSTANTIAL%20SHAREHOLDERS%27%20INTERESTS) As of June 30, 2024, major shareholders include Great World Glory Pte. Ltd. holding 363,579,785 shares (38.27%), Crescent Glory Singapore Pte. Ltd. holding 134,474,715 shares (14.15%), and GXG Trading Limited holding 213,750,000 shares (22.50%) Substantial Shareholders' Interests | Shareholder Name | Number of Shares | Approximate % of Interest | | :--- | :--- | :--- | | **Great World Glory Pte. Ltd.** | 363,579,785 (L) | 38.27% | | **Crescent Glory Singapore Pte. Ltd.** | 134,474,715 (L) | 14.15% | | **GXG Trading Limited** | 213,750,000 (L) | 22.50% | [RESTRICTED%20SHARE%20UNIT%20SCHEME](index=23&type=section&id=RESTRICTED%20SHARE%20UNIT%20SCHEME) The company adopted an RSU scheme in 2019 with a ten-year validity, under which 26,100,000 shares are held by the trustee for granting, and 10,500,000 RSUs have been granted to 10 participants, representing 1.1% of issued shares as of the reporting date - As of June 30, 2024, a total of **10,500,000** RSUs had been granted but not yet exercised, including **2,000,000** shares granted to Executive Director Mr. Yu Yong[66](index=66&type=chunk) - There were no changes (no new grants, exercises, cancellations, or forfeitures) in the RSU scheme during the reporting period[66](index=66&type=chunk) [USE%20OF%20PROCEEDS%20FROM%20THE%20GLOBAL%20OFFERING](index=26&type=section&id=USE%20OF%20PROCEEDS%20FROM%20THE%20GLOBAL%20OFFERING) The company's net proceeds of approximately RMB 705 million from its 2019 listing have been fully utilized as of June 30, 2024, for debt repayment, brand expansion, smart store upgrades, warehouse upgrades, and working capital - As of June 30, 2024, the net proceeds of approximately **RMB 705 million** from the global offering have been fully utilized[69](index=69&type=chunk)[71](index=71&type=chunk)[73](index=73&type=chunk) [INTERIM%20DIVIDEND](index=27&type=section&id=INTERIM%20DIVIDEND) The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for 2024[74](index=74&type=chunk)[76](index=76&type=chunk) [Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=28&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This statement presents the group's financial performance, including revenue, gross profit, and net profit, for the interim period Interim Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income | Indicator (RMB thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | YoY Change | | :--- | :--- | :--- | :--- | | **Revenue** | 1,088,424 | 1,085,343 | +0.3% | | **Gross Profit** | 583,317 | 577,711 | +1.0% | | **Profit Before Tax** | 7,575 | 30,569 | -75.2% | | **Profit for the Period** | 6,791 | 27,665 | -75.5% | | **Profit Attributable to Owners of the Parent** | 6,820 | 29,899 | -77.2% | | **Basic EPS** | RMB 0.75 cents | RMB 3.28 cents | -77.1% | | **Total Comprehensive Income for the Period** | 4,206 | 2,824 | +49.0% | [Interim Condensed Consolidated Statement of Financial Position](index=30&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Financial%20Position) This statement provides a snapshot of the group's assets, liabilities, and equity at the end of the reporting period Interim Condensed Consolidated Statement of Financial Position | Assets (RMB thousand) | June 30, 2024 (Unaudited) | Dec 31, 2023 (Audited) | | :--- | :--- | :--- | | **Total Non-current Assets** | 974,431 | 1,224,634 | | **Total Current Assets** | 2,129,401 | 1,789,634 | | **Total Assets** | **3,103,832** | **3,014,268** | | **Liabilities and Equity (RMB thousand)** | | | | **Total Current Liabilities** | 2,102,747 | 1,775,864 | | **Total Non-current Liabilities** | 285,307 | 526,832 | | **Total Liabilities** | **2,388,054** | **2,302,696** | | **Total Equity** | 715,778 | 711,572 | | **Total Liabilities and Equity** | **3,103,832** | **3,014,268** | [Interim Condensed Consolidated Statement of Changes in Equity](index=32&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Changes%20in%20Equity) This statement details the changes in the group's equity over the interim period, reflecting profit, other comprehensive income, and transactions with owners - As of June 30, 2024, total equity attributable to owners of the parent was **RMB 715 million**, a slight increase from **RMB 711 million** at the end of 2023, primarily due to profit contribution partially offset by losses from exchange rate fluctuations[90](index=90&type=chunk) [Interim Condensed Consolidated Statement of Cash Flows](index=34&type=section&id=Interim%20Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) This statement summarizes the cash inflows and outflows from operating, investing, and financing activities during the interim period Interim Condensed Consolidated Statement of Cash Flows | Cash Flow (RMB thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | (60,375) | (33,282) | | **Net Cash Used in Investing Activities** | (42,373) | (58,209) | | **Net Cash From Financing Activities** | 109,924 | 59,909 | | **Net Increase in Cash and Cash Equivalents** | 7,176 | (31,582) | | **Cash and Cash Equivalents at End of Period** | 196,530 | 220,912 | [Notes to Interim Condensed Consolidated Financial Information](index=36&type=section&id=Notes%20to%20Interim%20Condensed%20Consolidated%20Financial%20Information) This section provides detailed explanatory notes to the interim condensed consolidated financial statements, offering further insights into specific accounts and transactions [Note%204%20OPERATING%20SEGMENT%20INFORMATION](index=40&type=section&id=Note%204%20OPERATING%20SEGMENT%20INFORMATION) The group's business is divided into two operating segments by sales channel: offline and online, with all revenue in H1 2024 derived from mainland China Operating Segment Information | Operating Segment | H1 2024 Revenue (RMB thousand) | H1 2024 Segment Results (Gross Profit) (RMB thousand) | | :--- | :--- | :--- | | **Offline Channels** | 650,871 | 424,282 | | **Online Channels** | 434,004 | 158,383 | | **Other** | 3,549 | 652 | [Note%2014%20TRADE%20AND%20NOTES%20RECEIVABLES](index=50&type=section&id=Note%2014%20TRADE%20AND%20NOTES%20RECEIVABLES) As of June 30, 2024, the net book value of trade and notes receivables was RMB 186 million, a significant decrease from RMB 335 million at the end of 2023, with RMB 90.46 million of trade receivables net due within 3 months Trade and Notes Receivables | Indicator (RMB thousand) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Net Trade and Notes Receivables** | 186,063 | 334,525 | [Note%2019%20INTEREST-BEARING%20BANK%20AND%20OTHER%20BORROWINGS](index=56&type=section&id=Note%2019%20INTEREST-BEARING%20BANK%20AND%20OTHER%20BORROWINGS) As of June 30, 2024, the group's total interest-bearing borrowings significantly increased to RMB 1.698 billion from RMB 1.330 billion at the end of 2023, primarily to support operations and inventory procurement Interest-Bearing Bank and Other Borrowings | Borrowing Category (RMB thousand) | June 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | **Current Borrowings** | 1,496,842 | 887,459 | | **Non-current Borrowings** | 200,881 | 442,352 | | **Total** | 1,697,723 | 1,329,811 | [Note%2021%20RELATED%20PARTY%20TRANSACTIONS](index=59&type=section&id=Note%2021%20RELATED%20PARTY%20TRANSACTIONS) During the reporting period, the group engaged in several related party transactions, including product purchases of RMB 21.72 million from Zhongzhe Apparel and office rental payments of RMB 2.515 million to Songhe Garment, with total remuneration for key management personnel at RMB 6.558 million - Total product purchases from related parties amounted to **RMB 21.716 million**[163](index=163&type=chunk) - Total remuneration paid to key management personnel was **RMB 6.558 million**, a slight increase from **RMB 6.345 million** in the prior period[165](index=165&type=chunk)

Financial Performance - Total revenue for the six months ended June 30, 2024, was RMB 1,088.4 million, a slight increase of 0.3% or RMB 3.1 million compared to RMB 1,085.3 million for the same period in 2023[1] - Gross profit for the same period was RMB 583.3 million, up 1.0% or RMB 5.6 million from RMB 577.7 million in 2023, with a gross margin increase to 53.6% from 53.2%[1] - Profit before tax decreased to RMB 7.6 million from RMB 30.6 million in the same period last year[2] - Net profit for the period was RMB 6.8 million, down from RMB 27.7 million in 2023[2] - Basic and diluted earnings per share were RMB 0.75, compared to RMB 3.28 in the previous year[2] - Other income and gains totaled RMB 19,898 thousand, significantly down from RMB 41,266 thousand in the previous year, a decrease of about 51.8%[16] - The pre-tax profit for the period was RMB 7.6 million, a decrease of RMB 23.0 million compared to RMB 30.6 million in the same period of 2023[45] Revenue Breakdown - Sales revenue growth of the main brand GXG was RMB 56.8 million, representing a 6.2% increase, contributing to overall revenue and gross profit growth[1] - Total revenue for the six months ended June 30, 2024, reached RMB 1,088,424 thousand, with offline channel sales contributing RMB 650,871 thousand and online channel sales contributing RMB 434,004 thousand[14] - Online channel sales of apparel products reached RMB 434,004 thousand, up from RMB 426,767 thousand in the previous year, indicating a growth of about 1.4%[17] - Offline channel sales from self-operated stores amounted to RMB 456,549 thousand, compared to RMB 443,558 thousand in the prior year, reflecting an increase of approximately 2.9%[17] - The sales revenue from the gxg.kids brand decreased by 86.9% or RMB 48.9 million, primarily due to the strategic decision to terminate the gxg.kids business[33] - The Mode Commuter brand's sales revenue increased by 10.8% or RMB 2.0 million, attributed to an increase in the number of offline stores[33] Expenses and Costs - The cost of goods sold for the period was RMB 524,162 thousand, compared to RMB 516,382 thousand in the same period of 2023, indicating an increase of approximately 1.5%[19] - Selling and distribution expenses increased by 2.7% or RMB 11.9 million to RMB 451.2 million, accounting for 41.5% of total revenue, up from 40.5% in 2023[42] - The company incurred administrative expenses of RMB 112,024 thousand during the reporting period[14] - The group reported a total of RMB 29,803 thousand in finance costs for the six months ended June 30, 2024, down from RMB 31,675 thousand in the previous year, a decrease of about 5.9%[19] Assets and Liabilities - Total assets less current liabilities as of June 30, 2024, were RMB 1,001.1 million, down from RMB 1,238.4 million at the end of 2023[5] - Non-current liabilities decreased to RMB 285.3 million from RMB 526.8 million at the end of 2023[5] - Cash and cash equivalents at the end of June 30, 2024, totaled RMB 196,530 thousand, down from RMB 220,912 thousand at the end of 2023[7] - The total liabilities as of June 30, 2024, amount to RMB 1,697,723,000, up from RMB 1,329,811,000 as of December 31, 2023, indicating an increase of about 27.7%[29] - The total amount of bank loans and other borrowings due within one year is RMB 1,496,842,000 as of June 30, 2024, compared to RMB 887,459,000 as of December 31, 2023, representing an increase of approximately 68.8%[29] - The debt-to-asset ratio increased to 54.7% as of June 30, 2024, compared to 44.1% at the end of 2023, primarily due to seasonal borrowing[48] Cash Flow - Cash flow from operating activities showed a net outflow of RMB 60.4 million, compared to an outflow of RMB 33.3 million in the same period last year[6] - The company reported a net cash outflow from investing activities of RMB 42,373 thousand for the six months ended June 30, 2024, compared to RMB 58,209 thousand in the same period of 2023[7] - Net cash flow from financing activities for the six months ended June 30, 2024, was RMB 109,924 thousand, a significant increase from RMB 59,909 thousand in the same period of 2023[7] Strategic Initiatives - The company successfully implemented brand promotion initiatives and enhanced product R&D to improve consumer experience[1] - The company has no supplier financing arrangements, which indicates no impact from the recent amendments to the International Financial Reporting Standards on its financial statements[12] - The company did not engage in any significant investments or acquisitions during the period and continues to seek new business development opportunities[50] Employee and Operational Metrics - As of June 30, 2024, the total number of employees in the group was 500, down from 508 as of December 31, 2023[54] - Total employee costs for the period amounted to RMB 49.6 million, compared to RMB 61.5 million in the same period of 2023, representing a decrease from 5.7% to 4.6% of total revenue[54] - The number of offline stores decreased from 1,022 as of December 31, 2023, to 958 as of June 30, 2024, due to strategic adjustments in brand positioning and marketing strategies[35] - The number of self-operated stores was 373, accounting for 38.9% of total stores, while the number of franchise stores decreased significantly to 61, representing 6.4%[36] Dividend and Shareholder Information - The group did not declare an interim dividend for the six months ended June 30, 2024, consistent with the previous year[22] - The company did not recommend any interim dividend for the period[54] Fundraising and Utilization - The company raised approximately RMB 704.9 million from its global offering, with all funds utilized as of June 30, 2024[57] - 45% of the raised funds (RMB 317 million) were allocated for repaying existing debts and reducing financial costs[57] - 15% of the funds (RMB 106 million) were designated for brand acquisitions and strategic alliances[57] - 10% of the funds (RMB 70 million) were allocated for upgrading offline retail stores to smart stores[57] Compliance and Reporting - The company has established an audit committee to oversee financial reporting and compliance with applicable accounting principles[58] - The interim results for the six months ending June 30, 2024, will be published on the Hong Kong Stock Exchange and the company's website[59]

Sales Performance - The main brand GXG's sales revenue increased by 9.2% to RMB 1,696 million compared to 2022, driven by the recovery of offline consumer spending and improved operational efficiency[7]. - Sales revenue for gxg.kids decreased by 55.3% to RMB 110.3 million, primarily due to a strategic shift focusing on the main brand GXG[8]. - Total revenue for 2023 reached RMB 2,329,049 thousand, a slight increase of 0.1% compared to RMB 2,326,281 thousand in 2022[24]. - Total sales revenue for the year ended December 31, 2023, was RMB 2,329.0 million, a slight increase of 0.1% or RMB 2.7 million compared to RMB 2,326.3 million in 2022[161]. - Sales revenue for Mode Commuter increased by 11.7% or RMB 3.9 million, attributed to improved management of self-operated stores and optimized product supply[163]. - Online channel sales revenue decreased by 19.5% or RMB 201.9 million to RMB 834.3 million, primarily due to negative impacts on the overall e-commerce industry and a reduction in the scale of small brand operations[164]. - Sales revenue for gxg jeans decreased by 17.1% or RMB 37.4 million compared to 2022, primarily due to a reduction in the number of stores to improve efficiency[185]. - Self-operated store sales revenue increased by 26.1% or RMB 192.2 million to RMB 927.4 million, while distributor store sales revenue rose by 7.9% or RMB 30.9 million to RMB 424.3 million compared to 2022[186]. Profitability and Margins - The group's total gross profit increased by 6.5% to RMB 1,212.2 million, with a gross margin rising to 52.0% from 48.9% in 2022[13]. - The gross profit for GXG and Mode Commuter increased by approximately 16.8% and 21.7% respectively, attributed to revenue growth[14]. - The gross profit margin for self-operated stores grew by 1.8 percentage points to 70.1%, due to lower retail discounts compared to the previous year[16]. - The overall gross margin increased to 52.0% during the period, attributed to effective control over retail discount rates and product costs[137]. - The gross profit margins for GXG, gxg jeans, and Mode Commuter increased to 54.1%, 44.5%, and 51.4% respectively, compared to 50.6%, 42.2%, and 47.2% in 2022[169]. - Gross profit for the online channel decreased by RMB 62.9 million or approximately 15.5% to RMB 342.4 million, while the gross profit margin increased by 1.9 percentage points to 41.0%[171]. Store Operations - The total number of self-operated stores decreased by 100 to 380, while the same-store sales for GXG and Mode Commuter grew by 24.3% and 25.2% respectively[11][20]. - The number of offline stores decreased from 1,122 at the end of 2022 to 1,022 by December 31, 2023, as part of a strategy to enhance store efficiency[26]. - The company has implemented strategies to improve store efficiency by reducing the number of gxg jeans stores[185]. Financial Position - The group's debt-to-asset ratio decreased to 44.1% as of December 31, 2023, down from 50.3% on December 31, 2022, primarily due to a reduction in pledged borrowings[67]. - Cash and cash equivalents decreased by 25.3% to RMB 1,035.4 million from RMB 1,385.8 million at the end of 2022[37]. - Pre-tax profit increased by 139.8% to RMB 51.8 million from RMB 21.6 million in 2022, primarily due to increased gross profit[33]. - The group reported a decrease in available reserves for distribution to shareholders, approximately RMB 331.5 million as of December 31, 2023, compared to RMB 2,527.0 million in 2022[122]. Strategic Initiatives - The company launched a new strategy for the GXG brand, focusing on casual wear suitable for commuting, with a new slogan "Just Right for Work" announced in August[20]. - The company aims to continue expanding its market presence and enhancing brand competitiveness while maintaining sustainable growth[21]. - The group plans to upgrade offline retail stores to smart stores, allocating 10% of the proceeds, which amounts to RMB 70 million[97]. - The group aims to expand its brand and product portfolio through strategic alliances or acquisitions, with 15% of the proceeds, totaling RMB 106 million, designated for this purpose[97]. Governance and Management - The board of directors includes independent members with diverse backgrounds in finance, law, and tax consultancy, enhancing governance and strategic oversight[61][64]. - The management team includes professionals with extensive experience in consumer retail, brand management, and private equity investments[56][57]. - The company is committed to enhancing governance, promoting employee welfare, and achieving sustainable growth without any significant legal or regulatory violations during the reporting period[107]. - The company is focused on enhancing brand awareness and improving member experience through successful marketing initiatives[186]. Risks and Challenges - The group faces risks related to intense competition in the apparel industry in China and uncertainties regarding the maintenance and expansion of offline and online sales networks[91]. - The group did not engage in any financial hedging instruments during the period, exposing it to foreign exchange risks primarily from USD-denominated debts[39].

Financial Performance - The pre-tax profit for the period was RMB 51.8 million, an increase of 139.8% or RMB 30.2 million compared to RMB 21.6 million in 2022, primarily due to increased gross profit[9] - The net profit for the period was RMB 37.2 million, representing a 295.7% increase or RMB 27.8 million from RMB 9.4 million in 2022[12] - Total revenue for the year ended December 31, 2023, was RMB 2,329.0 million, a slight increase of 0.1% or RMB 2.7 million compared to RMB 2,326.3 million for the year ended December 31, 2022[54] - The total gross profit for the period was RMB 1,212.2 million, an increase of 6.5% or RMB 74.3 million compared to RMB 1,137.9 million in 2022, with a gross margin rising to 52.0% from 48.9%[38] - The company's profit before tax for 2023 was RMB 51,809,000, an increase of 139.8% compared to RMB 21,630,000 in 2022[81] Revenue Breakdown - Revenue from offline sales channel was RMB 1,485.8 million, online sales channel was RMB 834.3 million, and other sales amounted to RMB 9.0 million, totaling RMB 2,329.0 million[68] - The main brand GXG saw a revenue increase of 9.2% or RMB 169.6 million compared to 2022, driven by a recovery in offline consumer spending[120] - Revenue from gxg.kids decreased by 55.3% or RMB 110.3 million due to strategic adjustments focusing on the main brand GXG[121] - Online channel sales revenue decreased by 19.5% or RMB 201.9 million to RMB 834.3 million, primarily due to negative impacts on the overall e-commerce industry and a reduction in the scale of small brand operations[124] - Sales revenue from partner stores decreased by 11.0% or RMB 16.5 million to RMB 134.1 million, mainly due to brand strategy adjustments and the sale of higher discount older inventory[123] Cost Management - The total cost of goods sold decreased to RMB 1,142,806,000 in 2023 from RMB 1,206,962,000 in 2022, reflecting a reduction of approximately 5.3%[6] - Selling and distribution expenses increased by 4.2% or RMB 37.3 million to RMB 920.8 million, accounting for 39.5% of total revenue, up from 38.0% in 2022[28] - Employee benefits expenses, excluding directors and key management personnel, totaled RMB 101,849,000 in 2023, down from RMB 131,902,000 in 2022, a reduction of about 22.8%[6] - The company reduced its total employee costs to RMB 100.0 million in 2023, down from RMB 132.6 million in 2022, representing 4.3% of total revenue[171] Asset and Liability Management - The debt-to-asset ratio improved to 44.1% as of December 31, 2023, down from 50.3% in 2022, mainly due to reduced pledged borrowings[17] - Non-current liabilities decreased from RMB 716.2 million in 2022 to RMB 526.8 million in 2023, with interest-bearing bank and other borrowings reducing from RMB 588.2 million to RMB 442.4 million[61] - The company's total liabilities decreased to RMB 1,329,811,000 in 2023 from RMB 1,772,240,000 in 2022, a reduction of approximately 25.0%[86] - Total assets less current liabilities amounted to RMB 1,238.4 million as of December 31, 2023, down from RMB 1,404.7 million as of December 31, 2022[61] Store Operations - The number of offline stores decreased from 1,122 as of December 31, 2022, to 1,022 as of December 31, 2023, due to the closure of underperforming stores[7] - The total number of stores decreased from 1,122 at the end of 2022 to 1,022 by December 31, 2023, as part of a strategy to improve store efficiency[36] - The sales revenue of gxg jeans decreased by 17.1% or RMB 37.4 million, mainly due to a reduction in the number of stores to enhance efficiency[141] Strategic Initiatives - The company did not engage in any significant investments or acquisitions during the period and continues to seek new business development opportunities[19] - The company aims to enhance operational efficiency by reforming its organizational structure and business model, integrating online and offline sales channels[139] - The group aims to enhance gross margins by strengthening omnichannel management and leveraging new retail technologies[116] Governance and Compliance - The company aims to continue reviewing and monitoring its corporate governance practices to ensure compliance with the corporate governance code[155] - The audit committee has been established and consists of three independent non-executive directors, with Mr. Gu Jiong as the chairman, responsible for reviewing the company's financial information and overseeing the financial reporting system, risk management, and internal control systems[175] Miscellaneous - The company did not have any single customer contributing 10% or more to total revenue during the year[70] - The company will not declare any final dividend for the year ending December 31, 2023[155] - The company has not proposed any final dividend for the year, consistent with 2022[81] - The annual report for the fiscal year ending December 31, 2023, will be sent to shareholders in a timely manner and will be published on the stock exchange and the company's website[176]

Revenue and Profit Performance - Revenue for the first half of 2023 reached RMB 1,085,343 thousand, a 3.5% increase compared to RMB 1,048,628 thousand in the same period of 2022[1] - Net profit attributable to owners of the parent company surged to RMB 29,899 thousand, a significant increase from RMB 5,754 thousand in the first half of 2022[1] - The company reported a net profit of RMB 29,899 thousand for the six months ended June 30, 2023, compared to a net profit of RMB 5,754 thousand for the same period in 2022[18][19] - Pre-tax profit increased by RMB 13.8 million to RMB 30.6 million, driven by higher gross profit[53] - Net profit for the period increased by RMB 23.5 million to RMB 27.7 million[55] - The company's pre-tax profit for the six months ended June 30, 2023, was RMB 30,569 thousand[135] - Basic earnings per share for the six months ended June 30, 2023, were calculated based on a profit attributable to ordinary shareholders of RMB 29,899 thousand and 912,500,000 ordinary shares issued[163] Gross Profit and Margin - Gross profit increased by 7.7% to RMB 577,711 thousand, with gross margin rising from 51.2% to 53.2%[11] - GXG brand's gross profit increased by 16.0% to RMB 520,955 thousand, with gross margin improving by 2.6 percentage points to 56.5%[14] - Mode Commuter's gross profit surged by 61.3% to RMB 9,963 thousand, with gross margin increasing by 12.8 percentage points to 53.8%[15] - gxg.kids' gross profit decreased by 83.9% to RMB 6,132 thousand, with gross margin dropping by 32.1 percentage points to 10.9%[15] - The gross profit from self-operated stores increased by RMB 73.9 million or 29.4% year-over-year to RMB 325,478 thousand, with a gross margin increase of 4.2 percentage points to 73.4%[26] - The gross profit from online channels decreased to RMB 156,670 thousand with a gross margin of 36.7%, compared to RMB 194,950 thousand and a gross margin of 41.0% in the same period of 2022[26] - The total gross profit for the six months ended June 30, 2023, was RMB 577,711 thousand, with a gross margin of 53.2%, compared to RMB 536,486 thousand and a gross margin of 51.2% in the same period of 2022[26] - Partnership stores' gross profit decreased by RMB 10.6 million or 30.8% YoY, with gross margin dropping 11.2 percentage points to 29.8% due to subsidies and product supply adjustments[27] - Distributor stores' gross profit increased by RMB 16.7 million or 30.8% YoY, with gross margin rising 8.5 percentage points to 53.9% due to reduced product costs[27] - Online channel gross profit decreased by RMB 38.3 million or 19.6% YoY to RMB 156.7 million, with gross margin dropping 4.3 percentage points to 36.7% due to increased sales of discounted seasonal products[27] Store Performance and Optimization - The number of offline stores decreased from 1,122 at the end of 2022 to 1,047 as of June 30, 2023, due to store network optimization[10] - Partner stores experienced a 15.1% decrease in number, dropping from 184 to 158 stores[98] - The total number of stores decreased from 1,122 to 1,047, with self-operated stores making up 35.5% of the total[98] - The total number of offline stores decreased from 1,122 at the end of 2022 to 1,047 as of June 30, 2023, as the company adjusted brand positioning and marketing strategies to improve store efficiency[119] - The company's self-operated stores saw a 22.0% increase in sales, reaching RMB 443.6 million, compared to the same period in 2022[106] - The company's offline channel sales increased, with self-operated stores contributing 40.8% of total revenue[106] - Partnership store sales decreased by 4.8% or RMB 4.0 million to RMB 79.9 million compared to the same period in 2022, mainly due to subsidies provided to partners[107] Online Channel Performance - The company's online channel sales accounted for 39.3% of total revenue, amounting to RMB 426.8 million[106] - Online channel sales decreased by 10.2% or RMB 48.5 million to RMB 426.8 million compared to the same period in 2022, primarily due to the reduction of non-core brand business scale in online channels[107] - The company's income from online channel sales of clothing products for the six months ended June 30, 2023, was RMB 426,767 thousand, compared to RMB 475,318 thousand for the same period in 2022[149] Financial Position and Cash Flow - Total assets decreased to RMB 1,476,636 thousand as of June 30, 2023, compared to RMB 1,404,673 thousand at the end of 2022[6] - Total liabilities decreased to RMB 785,334 thousand as of June 30, 2023, from RMB 716,195 thousand at the end of 2022[8] - The company's cash and cash equivalents stood at RMB 220,912 thousand as of June 30, 2023, compared to RMB 252,194 thousand at the end of 2022[6] - The company's total equity as of June 30, 2023, was RMB 691,302 thousand, compared to RMB 712,953 thousand as of June 30, 2022[18][19] - The company's cash and cash equivalents decreased by RMB 31,582 thousand to RMB 220,912 thousand as of June 30, 2023, from RMB 252,194 thousand at the beginning of the period[24] - The company's operating cash flow for the six months ended June 30, 2023, was a net outflow of RMB 33,282 thousand, compared to a net outflow of RMB 347,176 thousand in the same period of 2022[22] - The company's net cash used in investing activities was RMB 58,209 thousand for the six months ended June 30, 2023, compared to RMB 95,482 thousand in the same period of 2022[24] - The company's net cash from financing activities was RMB 59,909 thousand for the six months ended June 30, 2023, compared to RMB 298,278 thousand in the same period of 2022[24] - Net operating cash outflow was RMB 33.3 million, a decrease of RMB 313.9 million from the same period in 2022, mainly due to reduced inventory[57] - Cash and cash equivalents decreased by 21.0% or RMB 290.7 million to RMB 1,095.1 million[59] - Asset-liability ratio increased to 53.0% from 50.3%, mainly due to seasonal borrowing for prepayment of winter goods[60] Expenses and Costs - Sales and distribution expenses increased by 5.1% or RMB 21.5 million YoY to RMB 439.3 million, primarily due to increased advertising costs[35] - Administrative expenses increased by 4.8% or RMB 4.9 million YoY to RMB 106.4 million, mainly due to higher professional service costs[37] - Financial assets impairment loss net amount was RMB 4.9 million, compared to a reversal of RMB 12.6 million in the same period of 2022, mainly due to increased trade receivables from some customers and higher expected credit loss rates[50] - Other expenses increased by 45.2% or RMB 1.9 million to RMB 6.1 million, primarily due to higher decoration costs from closed stores[51] - Financial costs increased by 5.3% or RMB 1.6 million to RMB 31.7 million, mainly due to higher bank loan interest[52] - Income tax expenses decreased by RMB 9.7 million to RMB 2.9 million[54] - The company's total financial costs for the six months ended June 30, 2023, were RMB 31,675 thousand, including bank and other borrowing interest of RMB 31,783 thousand and lease liability interest of RMB 3,216 thousand[153] - The company's total tax expense for the six months ended June 30, 2023, was RMB 2,904 thousand, compared to RMB 12,636 thousand for the same period in 2022[156] Strategic Initiatives and Future Plans - The company plans to use the remaining RMB 19.8 million of IPO proceeds within the next 18 months for strategic purposes[47] - The company aims to enhance its leading position in the fashion industry through innovative marketing, retail technology, and optimized store management[38] - The company's integrated omni-channel business model leverages both online and offline advantages to enhance inventory and supply chain management[90] - The company's restricted stock unit plan aims to incentivize and retain skilled personnel for future development and expansion[86] - The company's restricted stock unit plan has a remaining term of approximately 5 years and 10 months as of June 30, 2023[96] Corporate Governance and Compliance - The company has applied the principles of the Corporate Governance Code and complied with all applicable code provisions to maintain high standards of corporate governance[110] - The Audit Committee reviewed the unaudited interim results for the six months ended June 30, 2023, and confirmed compliance with applicable accounting principles, standards, and regulations[113] - The company has adopted the Model Code for Securities Transactions by Directors and confirmed that all directors have complied with the code's provisions during the period[111] - The company did not purchase, sell, or redeem any of its listed securities during the period[112] - The company has applied the amendments to IAS 1, which require the disclosure of material accounting policy information, effective from January 1, 2023, and expects it to impact the annual financial statements[131] Shareholding and Ownership - The company has 950,000,000 issued ordinary shares as of June 30, 2023[78] - Great World Glory Pte. Ltd. holds a 38.27% beneficial ownership stake with 363,579,785 shares[80] - L Capital Asia 2 Pte. Ltd. and related entities collectively hold a 38.27% controlled interest with 363,579,785 shares[80] - Crescent Glory Singapore Pte. Ltd. holds a 14.15% beneficial ownership stake with 134,474,715 shares[80] - GXG Trading Limited holds a 22.50% beneficial ownership stake with 213,750,000 shares[80] - Yu Yong holds 2,000,000 restricted stock units, equivalent to shares held in trust[77] - Madison International Limited controls 22.50% of the company's shares through GXG Trading Limited[80] Asset and Liability Details - Inventory decreased to RMB 556,644 thousand as of June 30, 2023, compared to RMB 683,493 thousand at the end of 2022, with finished goods accounting for the majority at RMB 546,749 thousand[173] - Trade receivables decreased to RMB 703,057 thousand as of June 30, 2023, from RMB 755,334 thousand at the end of 2022, with a significant portion (56.7%) aged over 2 years[169] - Trade payables and notes payable decreased to RMB 279,100 thousand as of June 30, 2023, from RMB 439,366 thousand at the end of 2022, with a significant portion (30.2%) aged over 2 years[184] - Property, plant, and equipment increased to RMB 337,183 thousand as of June 30, 2023, from RMB 311,239 thousand at the end of 2022, with additions of RMB 58,476 thousand during the period[165] - Intangible assets decreased to RMB 35,782 thousand as of June 30, 2023, from RMB 38,591 thousand at the end of 2022, with amortization of RMB 2,669 thousand during the period[172] - Other receivables and prepayments decreased to RMB 340,679 thousand as of June 30, 2023, from RMB 389,733 thousand at the end of 2022, with a significant portion (79.7%) related to other receivables[176] - The company's credit terms with customers (excluding retail customers) generally range from one to three months, with some extending up to one year[174] - The company has no collateral or credit enhancements for its trade receivables, which are non-interest bearing[174] - The company's trade payables are non-interest bearing and generally settled within 120 days[191] - Total interest-bearing bank and other borrowings decreased to RMB 1,602,137 thousand as of June 30, 2023, compared to RMB 1,772,240 thousand as of December 31, 2022[195] - Bank loans of USD 29,600,000 are secured by fixed deposits amounting to RMB 231,216,000 as of June 30, 2023, down from RMB 236,832,000 as of December 31, 2022[195] - Discounted letters of credit decreased to RMB 87,981,000 as of June 30, 2023, from RMB 100,000,000 as of December 31, 2022, secured by fixed deposits of RMB 28,895,000[196] - Other payables decreased to RMB 185,052 thousand as of June 30, 2023, from RMB 203,789 thousand as of December 31, 2022[198] - Short-term secured bank loans with a five-year loan base rate amounted to RMB 25,805 thousand as of June 30, 2023, up from RMB 22,450 thousand as of December 31, 2022[200] - Secured bank loans with a three-month LIBOR plus 1.14% rate amounted to RMB 21,655 thousand as of June 30, 2023[200] - Secured bank loans with a rate of -3.40% decreased to RMB 193,086 thousand as of June 30, 2023, from RMB 387,194 thousand as of December 31, 2022[200] - Discounted bills receivable secured decreased to RMB 127,980 thousand as of June 30, 2023, from RMB 215,980 thousand as of December 31, 2022[200] - Unsecured bank loans decreased to RMB 160,000 thousand as of June 30, 2023, from RMB 262,841 thousand as of December 31, 2022[200] - Non-current secured bank loans with a three-month LIBOR plus 1.14% rate amounted to RMB 181,801 thousand as of June 30, 2023, down from RMB 185,573 thousand as of December 31, 2022[200] Other Income and Gains - Other income and gains increased by 93.0% or RMB 19.9 million YoY to RMB 41.3 million, driven by higher investment income from fixed deposits and foreign exchange gains[28] - The company's other income and gains for the six months ended June 30, 2023, totaled RMB 41,266 thousand, including foreign exchange gains, government grants, and bank interest income[147] Sales Revenue by Brand - GXG Jeans sales revenue decreased by 13.2% or RMB 13.2 million YoY due to store optimization efforts[43] - The company's main brand GXG sales revenue increased by 10.6% or RMB 88.1 million compared to the same period in 2022, driven by the recovery of offline consumer spending and improved operational efficiency in offline retail channels[115] - gxg.kids sales revenue decreased by 36.4% or RMB 32.2 million due to the company's reduction in business scale[104] - Mode Commuter sales revenue increased by 22.5% or RMB 3.4 million, driven by improved management and optimized product offerings[104] Dividend and Financial Statements - The company did not recommend the payment of any interim dividend for the period[108] - The company did not declare any interim dividend for the six months ended June 30, 2023[157] - The company's income from external customers for the six months ended June 30, 2023, was RMB 1,085,343 thousand, with RMB 1,084,959 thousand from goods transferred at a point in time and RMB 384 thousand from services transferred at a point in time[147] - Total revenue for the six months ended June 30, 2023, was RMB 1,085,343 thousand, with offline channels contributing RMB 655,126 thousand and online channels contributing RMB 426,767 thousand[135] Non-Current Assets and Liabilities - Non-current assets in Mainland China decreased from RMB 565,877 thousand as of December 31, 2022, to RMB 522,893 thousand as of June 30, 2023[145] - Capital expenditures decreased by 38.4% or RMB 36.8 million to RMB 59.0 million, primarily due to lower decoration costs for the headquarters office[58]

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) [Performance Overview](index=1&type=section&id=Performance%20Overview) For the six months ended June 30, 2023, the Group achieved double-digit growth in total revenue and net profit, driven by offline consumption recovery, improved retail channel efficiency, successful brand promotion, and effective control over retail discounts and product costs Key Financial Indicators | Indicator | H1 2023 (RMB Million) | H1 2022 (RMB Million) | Growth | | :--- | :--- | :--- | :--- | | **Total Revenue** | 1,085.3 | 1,048.6 | +3.5% | | **Net Profit** | 27.7 | 4.2 | +559.5% | - Key drivers for performance growth include (i) offline consumption recovery and improved retail channel efficiency, (ii) successful brand promotion initiatives, and (iii) effective control over retail discount rates and product costs[7](index=7&type=chunk) [Interim Condensed Consolidated Financial Statements](index=2&type=section&id=Interim%20Condensed%20Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) The company achieved significant net profit growth from RMB 4.2 million to RMB 27.7 million, driven by increased gross profit and effective cost control, despite higher selling and administrative expenses, with basic earnings per share rising from RMB 0.63 cents to RMB 3.28 cents Key Figures from Consolidated Statement of Profit or Loss and Other Comprehensive Income | Item (RMB Thousand) | H1 2023 (Unaudited) | H1 2022 (Unaudited) | Change | | :--- | :--- | :--- | :--- | | **Revenue** | 1,085,343 | 1,048,628 | +3.5% | | **Gross Profit** | 577,711 | 536,486 | +7.7% | | **Profit Before Tax** | 30,569 | 16,844 | +81.5% | | **Profit for the Period** | 27,665 | 4,208 | +557.4% | | **Profit Attributable to Owners of the Parent** | 29,899 | 5,754 | +419.6% | - Basic earnings per share significantly increased to **RMB 3.28 cents** from **RMB 0.63 cents** in the prior period[76](index=76&type=chunk) [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, the Group's total assets were RMB 3.02 billion, slightly down from year-end 2022, while net assets remained stable at RMB 691 million, and net current assets significantly increased from RMB 84.2 million to RMB 188 million, indicating improved short-term solvency Key Figures from Consolidated Statement of Financial Position | Item (RMB Thousand) | June 30, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--- | :--- | :--- | | **Total Non-current Assets** | 1,288,904 | 1,320,467 | | **Total Current Assets** | 1,731,563 | 2,199,693 | | **Total Current Liabilities** | 1,543,831 | 2,115,487 | | **Net Assets** | 691,302 | 688,478 | | **Total Equity** | 691,302 | 688,478 | [Consolidated Statement of Cash Flows](index=6&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) Net cash used in operating activities significantly improved to RMB 33.3 million from a net outflow of RMB 347 million in the prior period, primarily due to effective inventory reduction, while net cash used in investing activities decreased and net cash from financing activities declined Key Figures from Consolidated Statement of Cash Flows | Item (RMB Thousand) | H1 2023 (Unaudited) | H1 2022 (Unaudited) | | :--- | :--- | :--- | | **Net Cash Used in Operating Activities** | (33,282) | (347,176) | | **Net Cash Used in Investing Activities** | (58,209) | (95,482) | | **Net Cash From Financing Activities** | 59,909 | 298,278 | | **Net Decrease in Cash and Cash Equivalents** | (31,582) | (144,380) | [Management Discussion and Analysis](index=20&type=section&id=Management%20Discussion%20and%20Analysis) [Business Overview and Outlook](index=20&type=section&id=Business%20Overview%20and%20Outlook) In H1 2023, the Group's business, particularly offline retail channels, recovered from the pandemic and is expected to continue improving in H2, with confidence in its prospects as a leading fashion company in China and commitment to implementing growth strategies to strengthen market position - The Group remains confident in the prospects of increased consumer spending driven by China's domestic economic development and its omnichannel strategy[25](index=25&type=chunk) - Future growth strategies include reforming organizational structure to deepen online-offline channel integration and improve operational efficiency, adopting innovative marketing initiatives to tap into potential consumer groups and enhance member experience, and optimizing self-operated store management to control discount rates and costs for increased gross margins[25](index=25&type=chunk)[68](index=68&type=chunk) [Financial Analysis](index=20&type=section&id=Financial%20Analysis) This section details the Group's financial performance, with total revenue growing 3.5% driven by the offline recovery of the GXG brand, gross margin improving to 53.2% due to discount and cost control, and significant increases in both profit before tax and profit for the period despite some expense increases [Revenue Analysis](index=20&type=section&id=Revenue%20Analysis) Total revenue increased by 3.5% year-on-year to RMB 1.085 billion, primarily driven by a 10.6% growth in the GXG brand, while gxg.kids declined due to business scale reduction, and offline self-operated and dealer stores grew, but online channels decreased by 10.2% due to non-core brand business reduction Revenue by Brand (RMB Thousand) | Brand | H1 2023 | Share | H1 2022 | Share | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **GXG** | 921,898 | 84.9% | 833,834 | 79.6% | +10.6% | | **gxg jeans** | 86,532 | 8.0% | 99,728 | 9.5% | -13.2% | | **gxg.kids** | 56,343 | 5.2% | 88,474 | 8.4% | -36.4% | | **Mode Commuter** | 18,526 | 1.7% | 15,070 | 1.4% | +22.5% | | **Other** | 2,044 | 0.2% | 11,522 | 1.1% | -82.3% | | **Total** | **1,085,343** | **100.0%** | **1,048,628** | **100.0%** | **+3.5%** | Revenue by Sales Channel (RMB Thousand) | Channel | H1 2023 | Share | H1 2022 | Share | Y-o-Y Change | | :--- | :--- | :--- | :--- | :--- | :--- | | **Offline - Self-operated Stores** | 443,558 | 40.8% | 363,688 | 34.7% | +22.0% | | **Offline - Partner Stores** | 79,918 | 7.4% | 83,857 | 8.0% | -4.8% | | **Offline - Dealer Stores** | 131,650 | 12.1% | 119,391 | 11.4% | +10.3% | | **Online Channels** | 426,767 | 39.3% | 475,318 | 45.3% | -10.2% | | **Total** | **1,085,343** | **100.0%** | **1,048,628** | **100.0%** | **+3.5%** | [Store Network](index=22&type=section&id=Store%20Network) To enhance store efficiency, the Group adjusted its offline store network, reducing the total number of offline stores from 1,122 at year-end 2022 to 1,047 as of June 30, 2023, by closing stores that did not meet sales targets Changes in Number of Stores | Channel/Brand | June 30, 2023 | December 31, 2022 | Net Change | | :--- | :--- | :--- | :--- | | **Total** | **1,047** | **1,122** | **-75** | | Self-operated Stores | 372 | 393 | -21 | | Partner Stores | 158 | 184 | -26 | | Dealer Stores | 517 | 545 | -28 | [Gross Profit and Gross Margin](index=23&type=section&id=Gross%20Profit%20and%20Gross%20Margin) The Group's overall gross profit increased by 7.7% year-on-year to RMB 578 million, with gross margin improving from 51.2% to 53.2%, primarily due to effective control over retail discounts and product costs, and an increased sales contribution from higher-margin offline channels - Overall gross margin increased from **51.2%** in the prior period to **53.2%**[56](index=56&type=chunk)[57](index=57&type=chunk) - Gross margins for GXG, gxg jeans, and Mode Commuter brands all improved due to lower retail discount rates and effective cost control, while gxg.kids saw significant declines in both gross profit and gross margin due to reduced business scale[58](index=58&type=chunk) - Gross margins for offline self-operated and dealer stores improved, while those for partner stores and online channels decreased due to increased subsidies and sales of off-season products[60](index=60&type=chunk)[61](index=61&type=chunk) [Other Income and Expenses](index=25&type=section&id=Other%20Income%20and%20Expenses) Other income and gains surged by 93.0% year-on-year, primarily from fixed deposit investment income and foreign exchange gains, while selling and distribution expenses rose 5.1% due to increased brand promotion, administrative expenses increased 4.8% due to higher professional service fees, and a net impairment loss of RMB 4.9 million on financial assets was recorded, compared to a reversal in the prior period - Other income and gains amounted to **RMB 41.3 million**, a **93.0% year-on-year increase**, primarily due to higher fixed deposit investment income and foreign exchange gains[63](index=63&type=chunk) - Selling and distribution expenses increased by **5.1%** year-on-year to **RMB 439 million**, mainly due to higher advertising expenses[64](index=64&type=chunk) - A net impairment loss on financial assets of **RMB 4.9 million** was recorded, compared to a reversal of **RMB 12.6 million** in the prior period, primarily due to an increase in aged trade receivables[66](index=66&type=chunk) [Profit Analysis](index=26&type=section&id=Profit%20Analysis) Profit before tax increased year-on-year to RMB 30.6 million, driven by higher gross profit, while a significant reduction in income tax expense contributed to the profit for the period rising from RMB 4.2 million to RMB 27.7 million in the prior period Profit Analysis (RMB Million) | Item (RMB Million) | H1 2023 | H1 2022 | Change | | :--- | :--- | :--- | :--- | | **Profit Before Tax** | 30.6 | 16.8 | +82.1% | | **Income Tax Expense** | 2.9 | 12.6 | -77.0% | | **Profit for the Period** | 27.7 | 4.2 | +559.5% | [Liquidity and Financial Resources](index=26&type=section&id=Liquidity%20and%20Financial%20Resources) The Group's net cash outflow from operating activities significantly decreased year-on-year, capital expenditure reduced due to lower headquarters renovation costs, and the gearing ratio slightly increased from 50.3% to 53.0% mainly due to seasonal borrowings for winter goods, while the Group primarily faces foreign exchange risk from USD-denominated debt - Net cash outflow from operating activities was **RMB 33.3 million**, a significant reduction from **RMB 347 million** in the prior period, primarily due to inventory reduction[13](index=13&type=chunk) - Capital expenditure was **RMB 59 million**, a **38.4% year-on-year decrease**, mainly due to lower headquarters office renovation costs[14](index=14&type=chunk) - As of June 30, 2023, the gearing ratio was **53.0%**, a slight increase from **50.3%** at year-end 2022, primarily due to seasonal borrowings for prepayment of winter goods[18](index=18&type=chunk) - The Group faces foreign exchange risk primarily arising from USD-denominated debt and did not use any financial instruments for hedging during the period[22](index=22&type=chunk) [Other Information](index=28&type=section&id=Other%20Information) [Human Resources](index=28&type=section&id=Human%20Resources) To control costs, the Group streamlined its workforce during the period, reducing the number of employees from 603 to 516 as of June 30, 2023, and total staff costs decreased from RMB 68.1 million to RMB 61.5 million in the prior period - Number of employees decreased from **603** at year-end 2022 to **516** as of June 30, 2023[38](index=38&type=chunk) - Total staff costs decreased by **9.7%** year-on-year to **RMB 61.5 million**, with its proportion of total revenue decreasing from **6.5%** to **5.7%**[38](index=38&type=chunk) [Interim Dividend](index=29&type=section&id=Interim%20Dividend) The Board does not recommend the payment of any interim dividend for the six months ended June 30, 2023 - The Board does not recommend the payment of an interim dividend for the current period[40](index=40&type=chunk)[119](index=119&type=chunk) [Use of Proceeds from Global Offering](index=29&type=section&id=Use%20of%20Proceeds%20from%20Global%20Offering) Since its 2019 listing, the company has utilized approximately RMB 685 million of net proceeds, representing 97.2% of the total, with the remaining RMB 19.8 million expected to be fully utilized within the next 18 months as planned Overview of Use of Proceeds (As of June 30, 2023) | Item | Planned Use (RMB Million) | Actual Use (RMB Million) | Unused (RMB Million) | | :--- | :--- | :--- | :--- | | Debt Repayment | 317 | 317 | – | | Brand Acquisitions or Strategic Alliances | 106 | 106 | – | | Upgrading Smart Stores | 70 | 70 | – | | Upgrading Warehouses | 141 | 121 | 20 | | Working Capital and Others | 71 | 71 | – | | **Total** | **705** | **685** | **20** | - As of June 30, 2023, out of approximately **RMB 705 million** in net proceeds from the listing, **RMB 685 million** has been utilized, with approximately **RMB 19.8 million** remaining unused[44](index=44&type=chunk)[45](index=45&type=chunk)

Financial Performance - Total sales for 2022 amounted to RMB 2,326.3 million, a decrease of 13.7% from RMB 2,695.2 million in 2021[2] - Gross profit for the period was RMB 1,137.9 million, down 14.3% from RMB 1,327.9 million in 2021, with a stable gross margin of 48.9%[9] - Gross profit for 2022 was RMB 1,137.9 million with a gross margin of 48.9%, down from RMB 1,327.9 million and a gross margin of 49.3% in 2021[22] - Profit before tax rose to RMB 21.6 million from a loss of RMB 104.4 million in 2021, an increase of RMB 126.0 million[24] - Net profit for the period was RMB 9.4 million, a turnaround from a loss of RMB 91.3 million in 2021, representing an increase of RMB 100.7 million[25] - The main brand GXG's sales revenue decreased by 14.1% to RMB 1,847.4 million due to fluctuating COVID-19 conditions affecting product demand[77] - The sales revenue of gxg.kids increased by 10.5% or RMB 189 million compared to 2021, primarily due to increased online sales[57] - The sales revenue of gxg jeans and Yatlas decreased by 22.0% or RMB 616 million and 53.4% or RMB 117 million respectively, mainly due to recurring COVID-19 impacts and brand repositioning[59] Revenue Channels - Online channel sales decreased by 10.6% or RMB 122.8 million to RMB 1,036.2 million, accounting for 44.5% of total revenue[3] - The total number of offline stores decreased from 1,198 at the end of 2021 to 1,122 by December 31, 2022, reflecting a strategic adjustment in brand positioning and marketing[5] - The number of self-operated stores decreased to 393, while the number of partner stores and distributor stores also saw reductions, indicating a consolidation strategy[6] Expenses and Costs - Selling and distribution expenses decreased by 4.8% to RMB 883.5 million, while the percentage of total revenue increased from 34.5% in 2021 to 38.0% in 2022[18] - Administrative expenses decreased by 7.8% to RMB 205.1 million from RMB 222.5 million in 2021, representing 8.8% of total revenue compared to 8.3% in 2021[19] - Other expenses increased by 33.6% to RMB 20.3 million from RMB 15.2 million in 2021, primarily due to increased impairment of right-of-use assets and renovations[21] - Total employee costs for the period amounted to RMB 132.6 million, compared to RMB 146.4 million in 2021, representing a decrease of approximately 9.5%[123] - Employee costs accounted for 5.7% of the group's revenue during the period, slightly up from 5.4% in 2021[123] Cash Flow and Capital Expenditures - Operating cash inflow increased by RMB 67.0 million to RMB 244.7 million from RMB 177.7 million in 2021, driven by improved sales and inventory management[27] - Capital expenditures decreased by 25.8% to RMB 126.1 million from RMB 169.9 million in 2021, attributed to lower renovation costs[28] - Cash and cash equivalents increased by 101.1% to RMB 1,385.8 million from RMB 689.2 million in 2021[29] Debt and Liabilities - The debt-to-asset ratio increased to 50.3% from 35.0% in 2021, primarily due to changes in collateral for borrowings[30] - As of December 31, 2022, the group had no significant or contingent liabilities, consistent with the previous year[113] Strategic Initiatives - The company is implementing a series of effective growth strategies to stabilize performance in 2023, following the easing of COVID-19 restrictions in China[53] - The company aims to enhance internal management and cost control to mitigate the impacts of recurring COVID-19[54] - The integrated omnichannel business model aims to provide a seamless shopping experience, improving inventory and supply chain management[46] - The launch of the digital virtual space MetaGXG aims to enhance user experience and drive demand through innovative marketing strategies[50] - The company is focused on optimizing its leading supply chain network to adapt to changing consumer preferences and market conditions[51] - The company is committed to sustainable growth by continuously innovating marketing initiatives and exploring potential consumer groups[51] Governance and Compliance - The company has complied with relevant laws and regulations without any significant violations during the reporting period[161] - The board does not recommend the payment of any final dividend for the year ended December 31, 2022, considering operational performance and cash flow[143] - The board will reassess the dividend policy based on the group's operational performance and financial condition[143] Employee and Management - As of December 31, 2022, the total number of employees in the group was 603, down from 831 in 2021[123] - The group is focused on enhancing governance, promoting employee welfare, and achieving sustainable growth[161] - The group had a total of 603 employees as of December 31, 2022, and provided various training programs for operational departments[182] Shareholder Information - The major shareholder, Great World Glory Pte. Ltd., holds a beneficial ownership of 38.27%, equivalent to 363,579,785 shares[187] - Crescent Glory Singapore Pte. Ltd. holds a beneficial ownership of 14.15%, equivalent to 134,474,715 shares[187] - GXG Trading Limited has a beneficial ownership of 22.50%, amounting to 213,750,000 shares[187] Future Outlook - The outlook for 2023 is optimistic, with expectations of increased consumer mobility and economic activity recovery in China[72] - The company is confident in its prospects as a leading fashion company in China, leveraging its omnichannel strategy and online sales advantages[53]

[Financial Summary](index=1&type=section&id=Financial%20Summary) The company achieved a net profit of RMB 9.4 million in 2022 despite the COVID-19 impact, through enhanced internal management and cost control 2022 Key Financial Data | Metric | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | 2,326.3 | 2,695.2 | -13.7% | | Net Profit/(Loss) | 9.4 | (91.3) | increased by 100.7 million | - COVID-19 significantly impacted business in 2022, but a net profit of **RMB 9.4 million** was successfully achieved through strengthened internal management and cost control[42](index=42&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's consolidated financial performance and position for the year ended December 31, 2022 [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=2&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the year ended December 31, 2022, total revenue was RMB 2,326,281 thousand, a 13.7% decrease from 2021, yet the company achieved a profit of RMB 9,351 thousand, reversing the 2021 loss, due to effective cost control and reduced impairment losses Key Data from Consolidated Statement of Profit or Loss and Other Comprehensive Income | Metric | 2022 (RMB thousand) | 2021 (RMB thousand) | Change | | :--- | :--- | :--- | :--- | | Revenue | 2,326,281 | 2,695,234 | -13.7% | | Cost of Sales | (1,188,375) | (1,367,363) | -13.09% | | Gross Profit | 1,137,906 | 1,327,871 | -14.3% | | Other Income and Gains | 64,681 | 33,269 | +94.4% | | Selling and Distribution Expenses | (883,520) | (928,469) | -4.84% | | Administrative Expenses | (205,098) | (222,477) | -7.81% | | Net Impairment Loss on Financial Assets | (8,996) | (240,659) | -96.26% | | Other Expenses | (20,263) | (15,208) | +33.24% | | Finance Costs | (63,080) | (59,412) | +6.17% | | Profit/(Loss) Before Tax | 21,630 | (104,370) | turned profitable | | Income Tax (Expense)/Credit | (12,279) | 13,027 | increased tax expense | | Profit/(Loss) for the Year | 9,351 | (91,343) | turned profitable | | Basic Earnings/(Loss) Per Share Attributable to Owners of the Parent | RMB 1.36 cents | RMB (9.83) cents | turned profitable | - Total comprehensive loss for the year was **RMB (61,347) thousand**, primarily due to exchange differences on translating overseas operations[46](index=46&type=chunk) [Consolidated Statement of Financial Position](index=4&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2022, total current assets were RMB 2,199,693 thousand, total current liabilities were RMB 2,115,487 thousand, resulting in net current assets of RMB 84,206 thousand, with the gearing ratio increasing to 50.3% due to a shift from equity pledge to deposit pledge Key Data from Consolidated Statement of Financial Position | Metric | 2022年12月31日 (RMB thousand) | 2021年12月31日 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Inventories | 683,493 | 840,373 | -18.67% | | Trade and Bills Receivables | 361,657 | 427,072 | -15.32% | | Pledged Deposits | 603,954 | 11,920 | +4975.12% | | Cash and Cash Equivalents | 252,194 | 677,230 | -62.74% | | Total Current Assets | 2,199,693 | 2,211,697 | -0.54% | | Trade and Bills Payables | 439,366 | 474,924 | -7.49% | | Interest-bearing Bank and Other Borrowings (Current) | 1,184,004 | 971,877 | +21.83% | | Total Current Liabilities | 2,115,487 | 2,027,066 | +4.36% | | Net Current Assets | 84,206 | 184,631 | -54.39% | | Total Non-current Assets | 1,320,467 | 811,626 | +62.69% | | Total Non-current Liabilities | 716,195 | 255,783 | +179.92% | | Total Equity | 688,478 | 740,474 | -7.02% | - Cash and cash equivalents and pledged deposits totaled **RMB 1,385.8 million** as of December 31, 2022, an increase of **101.1%** from the end of 2021[14](index=14&type=chunk) - The gearing ratio increased to **50.3%** as of December 31, 2022 (2021: 35.0%), primarily due to the adjustment from equity pledge to deposit pledge[15](index=15&type=chunk) [Notes to Financial Statements](index=6&type=section&id=Notes%20to%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [Company and Group Information](index=6&type=section&id=Company%20and%20Group%20Information) Mulsanne Group Holding Limited is an investment holding company incorporated in the Cayman Islands, primarily engaged in the design, marketing, and sale of apparel products in China through its subsidiaries, with no direct or ultimate holding company - The Company is a limited liability company incorporated in the Cayman Islands, with its principal place of business in Ningbo, Zhejiang Province, China[52](index=52&type=chunk) - The Company has no direct or ultimate holding company, with Great World Glory Pte. Ltd. and L Capital Asia 2 Pte. Ltd. as controlling shareholders[53](index=53&type=chunk) - The Company's subsidiaries are primarily engaged in the design, marketing, and sale of apparel products[59](index=59&type=chunk) [Basis of Preparation](index=6&type=section&id=Basis%20of%20Preparation) The financial statements are prepared in accordance with International Financial Reporting Standards, Hong Kong Generally Accepted Accounting Principles, and the disclosure requirements of the Hong Kong Companies Ordinance, using the historical cost convention and presented in RMB - The financial statements are prepared in accordance with International Financial Reporting Standards, Hong Kong Generally Accepted Accounting Principles, and the disclosure requirements of the Hong Kong Companies Ordinance[53](index=53&type=chunk) - The financial statements are prepared on the historical cost basis and presented in RMB[53](index=53&type=chunk) [Changes in Accounting Policies and Disclosures](index=6&type=section&id=Changes%20in%20Accounting%20Policies%20and%20Disclosures) The Group adopted revised International Financial Reporting Standards for the first time this year, including IAS 16, IAS 37, and Annual Improvements to IFRS 2018-2020, which had no significant impact on its financial position or performance - The Group has adopted the revised IAS 16, IAS 37, and Annual Improvements to IFRS 2018-2020 for the financial statements for the current year[54](index=54&type=chunk)[55](index=55&type=chunk) - Revised IAS 37 clarifies the cost components when assessing onerous contracts, and the Group found no onerous contracts, thus having no significant impact[57](index=57&type=chunk) - Revised IAS 16 prohibits deducting proceeds from selling items produced while bringing an asset to the location and condition necessary for it to be capable of operating as intended, and the Group did not sell such items, thus having no significant impact[63](index=63&type=chunk) [Operating Segment Information](index=8&type=section&id=Operating%20Segment%20Information) The Group primarily sells apparel products through offline and online channels, with the CEO assessing segment performance based on gross profit, but asset and liability analysis by segment is not regularly provided - The Group is primarily engaged in the sale of apparel products, categorized into offline channels (self-operated stores, partner stores, offline distributors) and online channels (Tmall, Taobao, Vipshop, Douyin, WeChat mini-programs)[66](index=66&type=chunk) - The Chief Executive Officer assesses segment performance based on gross profit, but asset and liability analysis by operating segment is not regularly provided[66](index=66&type=chunk) Segment Revenue by Sales Channel | Segment Revenue (Sales to external customers) | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Offline Channels | 1,279,192 | 1,513,716 | | Online Channels | 1,036,195 | 1,158,980 | | Other | 10,894 | 22,538 | | Total | 2,326,281 | 2,695,234 | [Revenue, Other Income and Gains](index=10&type=section&id=Revenue%2C%20Other%20Income%20and%20Gains) Total revenue for 2022 was RMB 2,326,281 thousand, primarily from apparel product sales, with online channels contributing the most, while other income and gains significantly increased by 94.3% to RMB 64,681 thousand, driven by pledged deposit investment income and government subsidies Disaggregation of Revenue from Contracts with Customers | Revenue Source | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Online Channels | 1,036,195 | 1,158,980 | | Self-operated Stores | 735,163 | 847,488 | | Partner Stores | 150,626 | 194,182 | | Distributors | 393,403 | 472,046 | | Sales of Other Products | 8,084 | 12,273 | | Consignment Services | 2,810 | 10,265 | | **Total** | **2,326,281** | **2,695,234** | - Performance obligations are typically satisfied upon transfer of control of apparel products, with payments usually due within 1 to 3 months after shipment, extendable to one year for major customers[75](index=75&type=chunk) Analysis of Other Income and Gains | Other Income and Gains | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Bank Interest Income | 3,975 | 2,426 | +63.85% | | Pledged Deposit Investment Income | 28,023 | - | N/A | | Government Subsidies | 19,642 | 22,879 | -14.14% | | Net Exchange Gains | 7,859 | 1,224 | +542.08% | | Net Gain on Lease Termination | 2,407 | 1,979 | +21.63% | | **Total** | **64,681** | **33,269** | **+94.3%** | [Profit/(Loss) Before Tax](index=12&type=section&id=Profit%2F%28Loss%29%20Before%20Tax) The Group's profit before tax for 2022 was RMB 21,630 thousand, a significant improvement from the RMB 104,370 thousand loss in 2021, primarily due to changes in various expenses including cost of sales, depreciation, amortization, and impairment Components of Profit/(Loss) Before Tax | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Cost of Inventories Sold | 1,206,962 | 1,323,997 | | Depreciation of Property, Plant and Equipment | 62,837 | 54,521 | | Depreciation of Right-of-use Assets | 139,061 | 125,372 | | Amortization of Intangible Assets | 6,317 | 4,913 | | Net Impairment Loss on Trade Receivables | 7,509 | 142,098 | | Inventories (Reversal of Write-down)/Write-down to Net Realizable Value | (20,963) | 35,653 | | Employee Benefit Expenses (Excluding Directors' and Chief Executive's Emoluments) | 131,902 | 151,823 | [Income Tax Expense](index=13&type=section&id=Income%20Tax%20Expense) Income tax expense for 2022 was RMB 12,279 thousand, compared to an income tax credit of RMB 13,027 thousand in 2021, with mainland China subsidiaries enjoying preferential tax rates for small enterprises, and Hong Kong and Macau subsidiaries provisioned at local tax rates Total Income Tax Expense/(Credit) | Income Tax Expense/(Credit) | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Current Tax | 6,605 | 50,677 | | Deferred Tax | 5,674 | (63,704) | | **Total Tax Expense/(Credit) for the Year** | **12,279** | **(13,027)** | - Mainland China subsidiaries qualify as small enterprises, enjoying a preferential income tax rate of **20%**, with an **87.5%** tax reduction on the first **RMB 1,000,000** of annual taxable income and a **75%** tax reduction on income between **RMB 1,000,000** and **RMB 3,000,000**[83](index=83&type=chunk) - Hong Kong profits tax is provided at a rate of **16.5%**, and Macau profits tax at **12%**[82](index=82&type=chunk) [Dividends](index=13&type=section&id=Dividends) The Board of Directors does not recommend the payment of any final dividend for the year ended December 31, 2022 - The Board of Directors does not recommend the payment of any final dividend for the year (2021: nil)[85](index=85&type=chunk) [Earnings/(Loss) Per Share Attributable to Ordinary Equity Holders of the Parent](index=14&type=section&id=Earnings%2F%28Loss%29%20Per%20Share%20Attributable%20to%20Ordinary%20Equity%20Holders%20of%20the%20Parent) Basic earnings per share for 2022 was RMB 1.36 cents, reversing the basic loss per share of RMB 9.83 cents in 2021, and diluted loss per share for 2021 was the same as basic loss per share due to the anti-dilutive effect of restricted share units Basic and Diluted Earnings/(Loss) Per Share Data | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Profit/(Loss) Attributable to Ordinary Equity Holders of the Parent (RMB thousand) | 12,429 | (89,684) | | Weighted Average Number of Ordinary Shares in Issue for Basic Earnings/(Loss) Per Share | 912,500,000 | 912,500,000 | | Dilutive Effect - Weighted Average Number of Ordinary Shares from Restricted Share Units | 4,060,126 | 6,751,461 | | Basic Earnings/(Loss) Per Share | RMB 1.36 cents | RMB (9.83) cents | - Restricted share units had an anti-dilutive effect on the basic loss per share for 2021, as their inclusion would decrease the diluted loss per share, and were therefore ignored in the calculation of diluted loss per share[88](index=88&type=chunk) [Trade and Bills Receivables](index=14&type=section&id=Trade%20and%20Bills%20Receivables) As of the end of 2022, net trade and bills receivables totaled RMB 361,657 thousand, a 15.32% decrease from 2021, with the company maintaining strict control over receivables and credit terms generally ranging from 1 to 3 months, extendable to one year for major customers Trade and Bills Receivables | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade Receivables | 755,334 | 821,195 | -8.02% | | Bills Receivable | 44,840 | 44,020 | +1.86% | | Impairment of Trade Receivables | (438,517) | (438,143) | +0.08% | | **Net Amount** | **361,657** | **427,072** | **-15.32%** | Ageing Analysis of Trade Receivables | Ageing of Trade Receivables | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Less than 3 months | 248,563 | 296,549 | | 3 to 6 months | 33,976 | 23,542 | | 6 to 12 months | 42,743 | 45,705 | | 1 to 2 years | 54,036 | 82,225 | | Over 2 years | 376,016 | 373,174 | | **Total** | **755,334** | **821,195** | - Credit terms generally range from 1 to 3 months, extendable to a maximum of one year for important customers, while new customers typically require advance payment[91](index=91&type=chunk) [Trade and Bills Payables](index=15&type=section&id=Trade%20and%20Bills%20Payables) As of the end of 2022, total trade and bills payables were RMB 439,366 thousand, a 7.49% decrease from 2021, with trade payables being non-interest bearing and generally settled within 120 days Trade and Bills Payables | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Trade Payables | 296,666 | 356,824 | -16.86% | | Bills Payable | 142,700 | 118,100 | +20.83% | | **Total** | **439,366** | **474,924** | **-7.49%** | Ageing Analysis of Trade Payables | Ageing of Trade Payables | 2022 (RMB thousand) | 2021 (RMB thousand) | | :--- | :--- | :--- | | Within 3 months | 248,143 | 325,978 | | 3 to 6 months | 25,865 | 15,309 | | 6 to 12 months | 8,875 | 6,879 | | 1 to 2 years | 10,920 | 7,459 | | Over 2 years | 2,863 | 1,199 | | **Total** | **296,666** | **356,824** | - Trade payables are non-interest bearing and generally settled within 120 days, including amounts due to related parties of **RMB 1,080 thousand**[92](index=92&type=chunk)[96](index=96&type=chunk) [Interest-bearing Bank and Other Borrowings](index=16&type=section&id=Interest-bearing%20Bank%20and%20Other%20Borrowings) As of the end of 2022, total interest-bearing bank and other borrowings significantly increased to RMB 1,772,240 thousand from 2021, with most borrowings denominated in RMB and some in USD, secured by various forms including equity interests, leasehold land, and pledged deposits Total Interest-bearing Bank and Other Borrowings | Item | 2022 (RMB thousand) | 2021 (RMB thousand) | Change (%) | | :--- | :--- | :--- | :--- | | Current Borrowings | 1,184,004 | 971,877 | +21.83% | | Non-current Borrowings | 588,236 | 87,683 | +571.09% | | **Total** | **1,772,240** | **1,059,560** | **+67.27%** | - Bank loans are secured by the Company's equity interests in subsidiaries, leasehold land, and pledged deposits[94](index=94&type=chunk)[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - All loans are denominated in RMB, except for a **USD 29,600,000** bank loan denominated in USD[102](index=102&type=chunk) [Management Discussion & Analysis](index=18&type=section&id=Management%20Discussion%20%26%20Analysis) This section provides management's perspective on the Group's financial performance, position, and future outlook for the reporting period [Business Overview and Outlook](index=18&type=section&id=Business%20Overview%20and%20Outlook) The Group's business was affected by recurring COVID-19 outbreaks in 2022, but a stable recovery is expected in 2023 with policy adjustments and effective growth strategies, including innovative marketing, supply chain integration, online-offline synergy, cost control, and brand portfolio optimization - Business in 2022 was affected by recurring COVID-19 outbreaks, but a stable recovery is expected in 2023[103](index=103&type=chunk) - Growth strategies include adopting continuous innovative marketing initiatives, leveraging online advantages to integrate the supply chain, reforming organizational structure to deepen online-offline integration, strengthening internal management and cost control, and reducing underperforming brand businesses[103](index=103&type=chunk) [Revenue Analysis](index=18&type=section&id=Revenue%20Analysis) Total sales revenue for 2022 was RMB 2,326.3 million, a 13.7% decrease from 2021, primarily due to reduced product demand from recurring COVID-19 outbreaks, with online channels accounting for the largest share at 44.5% of total revenue - Total sales revenue for the period was **RMB 2,326.3 million**, a **13.7%** or **RMB 368.9 million** decrease from 2021, primarily due to reduced product demand from recurring COVID-19 outbreaks[104](index=104&type=chunk) [Revenue by Brand](index=19&type=section&id=Revenue%20by%20Brand) GXG remained the primary revenue source despite a 14.1% sales decline, while gxg jeans and Yatlas also saw decreases of 22.0% and 53.4% respectively due to the pandemic and brand repositioning, but gxg.kids and Mode Commuter grew by 10.5% and 44.8% from online old stock sales and new product development Revenue by Brand | Brand | 2022 (RMB thousand) | 2022 (%) | 2021 (RMB thousand) | 2021 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | GXG | 1,847,359 | 79.4 | 2,150,987 | 79.8 | -14.1% | | gxg jeans | 218,728 | 9.4 | 280,265 | 10.4 | -22.0% | | gxg.kids | 199,347 | 8.6 | 180,358 | 6.7 | +10.5% | | Mode Commuter | 33,335 | 1.4 | 23,039 | 0.9 | +44.8% | | Yatlas | 10,188 | 0.4 | 21,926 | 0.8 | -53.4% | | Other | 17,324 | 0.8 | 38,659 | 1.4 | -55.2% | | **Total** | **2,326,281** | **100.0** | **2,695,234** | **100.0** | **-13.7%** | - Decreased sales revenue for GXG, gxg jeans, and Yatlas was primarily due to recurring COVID-19 outbreaks and brand repositioning[106](index=106&type=chunk)[107](index=107&type=chunk) - Increased sales revenue for gxg.kids was primarily due to increased online sales of old stock, and for Mode Commuter due to new product development[107](index=107&type=chunk) [Revenue by Sales Channel](index=19&type=section&id=Revenue%20by%20Sales%20Channel) In 2022, all offline channels (self-operated, partner, distributor stores) experienced sales declines ranging from 13.3% to 22.5% due to recurring pandemic outbreaks, and online channel sales also decreased by 10.6% due to warmer weather during promotion season affecting winter wear sales and logistics disruptions, yet still comprised 44.5% of total revenue Revenue by Sales Channel | Sales Channel | 2022 (RMB thousand) | 2022 (%) | 2021 (RMB thousand) | 2021 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Self-operated Stores | 735,163 | 31.6 | 847,488 | 31.4 | -13.3% | | Partner Stores | 150,626 | 6.5 | 194,182 | 7.2 | -22.5% | | Distributors | 393,403 | 16.9 | 472,046 | 17.5 | -16.7% | | Online Channels | 1,036,195 | 44.5 | 1,158,980 | 43.0 | -10.6% | | Sales of Other Products | 8,084 | 0.3 | 12,273 | 0.5 | -34.1% | | Consignment Services | 2,810 | 0.2 | 10,265 | 0.4 | -72.6% | | **Total** | **2,326,281** | **100.0** | **2,695,234** | **100.0** | **-13.7%** | - Online channel sales ranked first, accounting for **44.5%** of the Group's revenue composition[110](index=110&type=chunk) - The decrease in online channel sales was primarily due to warmer weather during the November 11 promotion season leading to lower winter wear sales and logistics disruptions[110](index=110&type=chunk) [Store Count Analysis](index=20&type=section&id=Store%20Count%20Analysis) As of December 31, 2022, the total number of offline stores decreased by 6.3% to 1,122 from 1,198 at the end of 2021, mainly due to the Group's brand repositioning, marketing strategy adjustments, store network optimization, closure of underperforming stores, and distributors' reduced confidence in opening new stores amidst the pandemic - The total number of offline stores decreased by **6.3%** from **1,198** at the end of 2021 to **1,122** as of December 31, 2022[111](index=111&type=chunk)[114](index=114&type=chunk) - The decrease in store count was primarily due to adjusting brand positioning and marketing strategies to improve store efficiency, and closing offline stores that failed to meet sales targets[111](index=111&type=chunk)[114](index=114&type=chunk) - Under the impact of recurring COVID-19 outbreaks, distributors had insufficient confidence in expanding stores, resulting in fewer new distributor stores than closed ones[114](index=114&type=chunk) [Store Count by Brand](index=20&type=section&id=Store%20Count%20by%20Brand) GXG store count slightly decreased but still represented 86.8% of the total, gxg jeans and gxg.kids also saw declines, Mode Commuter slightly increased, and Yatlas no longer had independent stores Store Count by Brand | Brand | 2022年12月31日 (Number of Stores) | 2022 (%) | 2021年12月31日 (Number of Stores) | 2021 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | GXG | 973 | 86.8 | 992 | 82.8 | -1.9% | | gxg jeans | 80 | 7.1 | 99 | 8.3 | -19.2% | | gxg.kids | 51 | 4.5 | 82 | 6.8 | -37.8% | | Mode Commuter | 18 | 1.6 | 16 | 1.3 | +12.5% | | Yatlas | 0 | 0.0 | 8 | 0.7 | -100.0% | | Other | 0 | 0.0 | 1 | 0.1 | -100.0% | | **Total** | **1,122** | **100.0** | **1,198** | **100.0** | **-6.3%** | [Store Count by Sales Channel](index=20&type=section&id=Store%20Count%20by%20Sales%20Channel) As of the end of 2022, the number of self-operated, partner, and distributor stores all decreased, with distributor stores seeing the largest reduction, reflecting the company's store network adjustments and market environment impact Store Count by Sales Channel | Sales Channel | 2022年12月31日 (Number of Stores) | 2022 (%) | 2021年12月31日 (Number of Stores) | 2021 (%) | Change (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Self-operated Stores | 393 | 35.0 | 398 | 33.2 | -1.3% | | Partner Stores | 133 | 11.9 | 146 | 12.2 | -8.8% | | Distributors | 596 | 53.1 | 654 | 54.6 | -8.8% | | **Total** | **1,122** | **100.0** | **1,198** | **100.0** | **-6.3%** | [Gross Profit and Gross Margin Analysis](index=21&type=section&id=Gross%20Profit%20and%20Gross%20Margin%20Analysis) Total gross profit for 2022 was RMB 1,137.9 million, a 14.3% decrease from 2021, with the overall gross margin remaining relatively stable at 48.9%, attributed to strengthened brand operation management, optimized product structure, and effective control of operating costs - Total gross profit for the period was **RMB 1,137.9 million**, a **14.3%** decrease from 2021[115](index=115&type=chunk) - The gross margin for the period remained stable at **48.9%**, compared to **49.3%** in 2021[115](index=115&type=chunk) - The overall gross margin remained relatively stable primarily due to continuous strengthening of brand operation management, optimization of product structure, and effective control of operating costs[116](index=116&type=chunk) [Gross Profit and Gross Margin by Brand](index=21&type=section&id=Gross%20Profit%20and%20Gross%20Margin%20by%20Brand) Gross profit for GXG and gxg jeans decreased due to reduced revenue, while gxg.kids and Mode Commuter saw increases from higher revenue; Yatlas gross profit significantly dropped by 69.7% mainly due to lower revenue and sales of lower-margin old stock, with gxg.kids and Yatlas gross margins declining due to increased online sales and old stock sales respectively Gross Profit and Gross Margin by Brand | Brand | 2022 Gross Profit (RMB thousand) | 2022 Gross Margin (%) | 2021 Gross Profit (RMB thousand) | 2021 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | GXG | 934,443 | 50.6 | 1,094,636 | 50.9 | | gxg jeans | 92,320 | 42.2 | 119,355 | 42.6 | | gxg.kids | 88,609 | 44.4 | 84,940 | 47.1 | | Mode Commuter | 15,733 | 47.2 | 11,062 | 48.0 | | Yatlas | 1,032 | 10.1 | 3,273 | 14.9 | | Other | 5,769 | 33.3 | 14,605 | 37.8 | | **Total** | **1,137,906** | **48.9** | **1,327,871** | **49.3** | - gxg.kids gross margin decreased by **2.7 percentage points**, primarily due to increased sales through online channels, which typically have lower gross margins[119](index=119&type=chunk) - Yatlas gross margin decreased by **4.8 percentage points**, primarily due to sales of old stock, which typically has lower gross margins[119](index=119&type=chunk) [Gross Profit and Gross Margin by Sales Channel](index=22&type=section&id=Gross%20Profit%20and%20Gross%20Margin%20by%20Sales%20Channel) Gross profit for self-operated, partner, and distributor stores all decreased due to reduced revenue, with partner stores' gross margin declining by 3.3 percentage points to 32.9% mainly from increased old stock sales, while gross margins for self-operated, distributor, and online channels remained relatively stable Gross Profit and Gross Margin by Sales Channel | Sales Channel | 2022 Gross Profit (RMB thousand) | 2022 Gross Margin (%) | 2021 Gross Profit (RMB thousand) | 2021 Gross Margin (%) | | :--- | :--- | :--- | :--- | :--- | | Self-operated Stores | 501,848 | 68.3 | 584,781 | 69.0 | | Partner Stores | 49,492 | 32.9 | 70,205 | 36.2 | | Distributors | 180,266 | 45.8 | 215,913 | 45.7 | | Online Channels | 405,333 | 39.1 | 453,909 | 39.2 | | Sales of Other Products | 533 | 6.6 | 511 | 4.2 | | Consignment Services | 434 | 15.4 | 2,552 | 24.9 | | **Total** | **1,137,906** | **48.9** | **1,327,871** | **49.3** | - Partner stores' gross margin decreased by **3.3 percentage points** to **32.9%**, primarily due to increased sales of old stock, which typically has lower gross margins[120](index=120&type=chunk) - Gross margins for self-operated stores, distributor stores, and online channels remained relatively stable compared to 2021[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) [Other Income and Gains](index=23&type=section&id=Other%20Income%20and%20Gains_MDA) Other income and gains for 2022 were RMB 64.7 million, a significant increase of 94.3% from 2021, primarily driven by growth in pledged deposit investment income Other Income and Gains | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Other Income and Gains | 64.7 | 33.3 | +94.3% | - The increase was primarily due to pledged deposit investment income[122](index=122&type=chunk) [Selling and Distribution Expenses](index=23&type=section&id=Selling%20and%20Distribution%20Expenses) Total selling and distribution expenses for 2022 were RMB 883.5 million, a 4.8% decrease from 2021, mainly due to reduced store management fees, advertising expenses, and commissions payable to department stores; however, their percentage of total revenue increased from 34.5% in 2021 to 38.0%, reflecting a greater decline in revenue than in expenses Selling and Distribution Expenses | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Selling and Distribution Expenses | 883.5 | 928.5 | -4.8% | - The decrease was primarily due to reduced store management fees, advertising expenses, and commissions payable to department stores[123](index=123&type=chunk) - Selling and distribution expenses as a percentage of the Group's total revenue increased from **34.5%** in 2021 to **38.0%**, primarily because the decrease in total revenue exceeded the decrease in selling and distribution expenses[1](index=1&type=chunk) [Administrative Expenses](index=23&type=section&id=Administrative%20Expenses) Total administrative expenses for 2022 were RMB 205.1 million, a 7.8% decrease from 2021, mainly due to reduced employee benefit expenses, utilities, office expenses, and operating lease rentals, with administrative expenses as a percentage of total revenue remaining relatively stable at 8.8% Administrative Expenses | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Administrative Expenses | 205.1 | 222.5 | -7.8% | - The decrease was primarily due to reduced employee benefit expenses, utilities and office expenses, and operating lease rentals[2](index=2&type=chunk) - Total administrative expenses as a percentage of the Group's total revenue remained relatively stable at **8.8%** (2021: **8.3%**)[2](index=2&type=chunk) [Impairment Loss on Financial Assets, Net](index=23&type=section&id=Impairment%20Loss%20on%20Financial%20Assets%2C%20Net) Net impairment loss on financial assets significantly decreased to RMB 9.0 million in 2022, a 96.3% reduction from RMB 240.7 million in 2021, primarily due to the Group's enhanced accounts receivable management and stricter credit control policies Net Impairment Loss on Financial Assets | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Net Impairment Loss on Financial Assets | 9.0 | 240.7 | -96.3% | - The decrease was primarily due to the Group strengthening its accounts receivable management and adopting stricter credit control policies for customers[3](index=3&type=chunk) [Other Expenses](index=23&type=section&id=Other%20Expenses) Other expenses increased by 33.6% to RMB 20.3 million in 2022, mainly due to increased impairment of right-of-use assets and renovation costs Other Expenses | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Other Expenses | 20.3 | 15.2 | +33.6% | - The increase was primarily due to increased impairment of right-of-use assets and renovation costs[4](index=4&type=chunk) [Finance Costs](index=24&type=section&id=Finance%20Costs) Finance costs increased by 6.2% to RMB 63.1 million in 2022, primarily due to increased bank loan interest Finance Costs | Item | 2022 (RMB million) | 2021 (RMB million) | Change (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 63.1 | 59.4 | +6.2% | - The increase was primarily due to increased bank loan interest[6](index=6&type=chunk) [Profit Before Tax](index=24&type=section&id=Profit%20Before%20Tax) The Group recorded a profit before tax of RMB 21.6 million in 2022, a significant increase of RMB 126.0 million compared to a loss before tax of RMB 104.4 million in 2021, primarily driven by reduced selling and distribution expenses, administrative expenses, and net impairment loss on financial assets Profit/(Loss) Before Tax | Item | 2022 (RMB million) | 2021 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Profit/(Loss) Before Tax | 21.6 | (104.4) | increased by 126.0 million | - The increase in profit before tax was primarily due to reduced selling and distribution expenses, administrative expenses, and net impairment loss on financial assets[7](index=7&type=chunk) [Income Tax Expense](index=24&type=section&id=Income%20Tax%20Expense_MDA) Income tax expense for 2022 was RMB 12.3 million, an increase of RMB 25.3 million compared to an income tax credit of RMB 13.0 million in 2021 Income Tax Expense/(Credit) | Item | 2022 (RMB million) | 2021 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Income Tax Expense/(Credit) | 12.3 | (13.0) | increased by 25.3 million | [Profit for the Period](index=24&type=section&id=Profit%20for%20the%20Period) Profit for the period in 2022 was RMB 9.4 million, a net increase of RMB 100.7 million compared to a loss of RMB 91.3 million in 2021, primarily attributable to the aforementioned reductions in expenses and improved revenue Profit/(Loss) for the Period | Item | 2022 (RMB million) | 2021 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Profit/(Loss) for the Period | 9.4 | (91.3) | increased by 100.7 million | [Operating Cash Flow](index=24&type=section&id=Operating%20