Core Viewpoint - The company reported a decline in revenue and net profit for the first half of 2025, indicating challenges in the market and the need for strategic adjustments to maintain competitiveness [1][9]. Company Overview - Fujian Septwolves Industrial Co., Ltd. is a leading men's clothing brand in China, primarily engaged in the design, production, and sales of its "Septwolves" brand apparel, including shirts, suits, pants, jackets, and knitwear [4]. - The company operates through a diversified multi-channel model, combining direct sales and franchising, along with online and offline integration [4]. Financial Performance - Total revenue for the reporting period was approximately 1.37 billion yuan, a decrease of 5.93% compared to the same period last year [1]. - Net profit attributable to shareholders was approximately 160.47 million yuan, down 13.93% year-on-year [1]. - The net profit after deducting non-recurring gains and losses fell by 61.35% to approximately 29.11 million yuan [1]. - The net cash flow from operating activities was negative at approximately -22.60 million yuan, a decline of 245.21% [1]. - Total assets at the end of the reporting period were approximately 9.88 billion yuan, down 8.58% from the previous year [1]. Market Environment - The overall economic environment in China showed stability, with GDP growth of 5.3% in the first half of 2025, but the retail sales of clothing and textiles only grew by 3.1% [5]. - New consumer trends are emerging, focusing on personalization, health, and cultural identity, which traditional companies need to adapt to in order to capture new growth opportunities [5]. Business Strategy - The company is enhancing its offline channels by creating differentiated business models and improving service standards to increase customer loyalty [9]. - Online, the company is focusing on data-driven strategies to enhance product visibility and improve conversion rates [10]. - The company emphasizes quality and cultural integration in its product offerings, launching innovative designs that incorporate local heritage and advanced materials [11]. Supply Chain Management - The company prioritizes collaboration with suppliers to ensure quality and efficiency throughout the production process [11]. - Cost control is integrated into the design process to enhance product competitiveness and reduce development cycles [11]. Brand Development - The company continues to strengthen its "Karl Lagerfeld" brand positioning and enhance customer loyalty through targeted marketing and brand image upgrades [12].

Financial Data and Key Metrics Changes - Non-GAAP earnings per diluted share increased to $0.19 from $0.12 year-over-year, exceeding guidance [13][37] - Net sales for the quarter were $584 million, down from $610 million in the same period last year, aligning with expectations [35] - Gross margin percentage was 42.2%, slightly down from 42.5% in the previous year [35][36] - Non-GAAP net income for the first quarter was $8.4 million compared to $5.8 million in the previous year [37] - Ending cash and availability was approximately $740 million, indicating a strong financial position [13][38] Business Line Data and Key Metrics Changes - Wholesale segment net sales decreased to $563 million from $598 million year-over-year [35] - Retail segment net sales increased to $36 million from $31 million in the previous year [35] - Key owned brands, including DKNY, Karl Lagerfeld, and Donna Karan, experienced double-digit growth, offsetting losses from exited businesses [5][14] Market Data and Key Metrics Changes - International markets are seen as significant growth opportunities, particularly in Europe [14][22] - The brand Donna Karan saw nearly 50% sales growth, with strong performance in dresses and suit separates [15][16] - DKNY and Karl Lagerfeld also reported strong sales growth, particularly in North America and Europe [20][22] Company Strategy and Development Direction - The company is focused on driving growth through its owned brands, which are expected to be sustainable long-term profit drivers [13][14] - Strategic initiatives include sourcing diversification, vendor negotiations, and selective price increases to mitigate tariff impacts [7][39] - The company is also enhancing its omni-channel capabilities and optimizing its global store footprint [30][31] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about the consumer environment despite macroeconomic uncertainties [6][33] - The potential unmitigated tariff impact for fiscal 2026 is estimated at approximately $135 million, with ongoing efforts to mitigate this through various strategies [7][39] - The company remains committed to investing in key owned brands and growth initiatives despite challenges [12][33] Other Important Information - The company successfully renegotiated favorable lease terms for corporate offices and is streamlining its warehouse network [11] - The planned relaunch of the Sonya Riquel brand was postponed due to uncertainties in the operating environment [12][54] Q&A Session Summary Question: Pricing Power and Areas for Price Increases - Management indicated strong cooperation from retailers in adjusting pricing, focusing on areas where consumers will accept price increases [45][46] Question: Impact of Sonya Riquel Postponement on Guidance - The decision to postpone the Sonya Riquel launch was made to avoid losses, but strength in other brands allows the company to maintain its sales guidance [53][54][75] Question: Inventory Levels and Supply Chain Challenges - Inventory levels are expected to align with sales growth, with management actively managing inventory purchases in light of supply chain disruptions [78][80] Question: Promotions and Consumer Demand - Management does not anticipate significant pressure on promotions, citing strong demand for their products and effective management of inventory levels [84][85]