(26 October 2022 - Hong Kong) Topsports International Holdings Limited (“Topsports” or the “Company”; Stock Code: 6110.HK) announces its unaudited interim results for the six months ended 31 August 2022 (the "Reporting Period").

During the Reporting Period under review, in spite of more complex and volatile external market conditions, the Company has proactively confronted and embraced challenges through synergizing its business scale while reiterating on quality fuelled by efficient operation, enhancing consumer engagement as well as deepening cooperation with business partners. The Company recalibrated its Omni-operation and digital capability with enriched brands portfolio. It also confronted market headwinds jointly with its upstream and downstream strategic partners and persistently fortify the moat of the Company. Despite the challenging external market condition, the Company maintained a healthy and manageable inventory level and high-quality operational efficiency and achieved a healthy cash reflow, consistently generating values for shareholders through excellent operations.

Due to industry headwinds, the total revenue of the Company decreased by 15.1% year-on-year to RMB13,218.0 million in the first half of the financial year ending 28 February 2023. Meanwhile, as the largest sportswear retailer in the industry, the Company has dynamically addressed the market equilibrium despite more complex market conditions, and maintained a healthy and manageable inventory level with efficient turnover. As of 31 August 2022, inventory decreased by 16.6% as compared with 31 August 2021, and decreased by 4.2% as compared with 28 February 2022. The healthy inventory management enabled the Company with more flexibility to confront and mitigate the impact from external promotional market activities. During the Reporting Period, attributed by prudent markdown control and integrated cooperation with its strategic brand partners, the Company’s gross profit margin increased by 1.1 percentage points to 45.6% year-on-year. Meanwhile, through disciplined expense control and continued execution of directly-operated retail network optimization strategy based on “Select + Optimize”, the Company partially eased the direct impact to expense ratios due to revenue decline. Profit margin attributable to equity holders slightly declined by 0.5 percentage points year-on-year to 8.7%. Earnings per share decreased by 19.9% year-on-year to RMB18.47 cents. The Board has proposed an interim dividend of RMB13.00 cents per ordinary share for the first half of the Financial Year ending 28 February 2023, representing a dividend payout rate of 70.4%, to consistently generate values for shareholders through excellent operations.

Prioritize Efficiency and Deepen Synergy to Navigate Diverse Challenges via Omni-operations

Adhering to the principle to prioritize efficiency, the Company seized additional business opportunities for scale aid on efficient Omni-operation, also underpinned by enhanced synergies internally from headquarter to regional branches and in-depth cooperation with external brand partners. Although overall revenue in the first half of the fiscal year declined year-on-year due to industry headwinds, sales contributed by retail online segment recorded a significant increase year-on-year, of which the sales from online private domain originated from social community operation recorded the most substantial growth, with its sales mix to total sales doubled on a year-on-year basis.

During the Reporting Period, the Company accelerated the optimization of directly-operated stores with the strategy of “Select + Optimize”, and strengthened the store-based Omni-operation capabilities. In view of market challenges brought by the pandemic, the Company adopted more prudent approach to evaluate store efficiency on on-going basis and accelerated the closure of low-productivity and loss-making stores accordingly, so as to effectively optimize the store structure from the perspective of operational efficiency. Meanwhile, stores with Omni-operation capabilities were steadily launched or upgraded by the Company among major commercial areas in different regions with quality and high-standard as the core. The Company piloted core functions such as browses and analysis for its channel system, which was built upon the immense information collection and procession including data related to cities and commercial areas etc. With the steady implementation and promotion of the large format store strategy, the large format store accounted for an increasing proportion while carried on its operational excellence.

As of 31 August 2022, the Company operated a network of 6,928 directly-operated stores. As compared with 28 February 2022, it recorded a net decrease of 767 stores with gross selling area decreasing by 5.1% half-on-half, and a net decrease of 857 stores with gross selling area decreasing by 0.7% year-on-year as compared with 31 August 2021. Large format stores over 300 square meters accounted for 14.9%, representing an increase of 2.0 percentage points from 28 February 2022, and an increase of 4.1 percentage points from 31 August 2021.

Dedicated to Consumer Operations for Double Increase of User Scale and Loyalty

During the Reporting Period, the Company catered to consumers' needs through Omnipresent engagement, social community interaction and consumer operation. In addition, it persistently optimized services including the operation of social media community and membership as well as the upgrade of member benefits, empowered by digital tools. As such, the Company strengthened consumers’ awareness and recognition of Topsports through facilitating their lifestyle and demand for social activities.

During the Reporting Period, the impact caused by volatile offline traffic as a result of recurrent pandemic outbreaks was offset by member acquisition from virtual settings together with traditional physical exposure, jointly expanding the numbers of WeChat followers and enrolled members. As at 31 August 2022, the cumulative number of enrolled members reached 60.2 million, representing an increase of 28% year-on-year, and the cumulative WeChat followers exceeded 9 million, nearly doubled year-on-year.

In terms of precise user operation, the Company distinctly focused on seizing potential demand of its core members while achieving breakthrough on scale expansion, by carrying out various programs for differentiated and targeted operation methods based on member levels and upgrading a series of member products. By the end of August 2022, the contribution to total in-store retail sales (inclusive of VAT) by membership sales remained high, with more significant contribution from repeated purchases of existing members. Both the scale and sales mix contributed by the Company’s core members elevated, while they also revealed stronger spending potential and stickiness as compared with members in general. The average spending per user for core members is significantly higher than members in total and non-members as a whole. Along with the increased number of WeChat followers, the sales mix contributed by online private domain to total sales doubled on a year-on-year basis.

Further Engagement along the Consumer Journey

Topsports deeply value every conservation with consumers. To extend connection and companionship with consumers in a broader and deeper extent and encompass each segment along consumer journey, the Company focus on communicating and interacting with them through its content media matrix. The Company has curating and publishing quality and popular contents to fans through its official WeChat account TOPSPORTS, making product recommendations on platforms such as Xiaohongshu (小紅書) and Douyin (抖音), and incubating proprietary IP accounts.

During the Reporting Period, the Company’s official WeChat accounts have more than 28 million followers, with approximately 100 million views in total for content published across all social media accounts. In addition, Top eSports club has continuously succeeded in various competitions, which attracted a soaring traffic inflow, with the total number of Weibo followers of Top eSports Weibo exceeding 6 million, paving the way for commercialization.

OUTLOOK

Looking ahead at the future, the Company will insist on deepening brand partnerships and optimizing brand offerings, promoting upgrades of stores network under the “Select + Optimize” strategy and advancing store-based Omni-operations, deepening long-term digitalization with “Precision + Efficiency” strategy, focusing on the dual-expansion of membership scale and enhanced loyalty by doubling down on consumer engagement and traffic operations, and extending service offerings along segments of consumer journey to fully unlock of consumer lifetime value.

The management of Topsports stated that amid the market uncertainties, the Company will continue to focus on upgrading its Omni-operation capability and strengthening its digitalization capability, deepening interactions with consumers jointly with brand partners, while observantly following industry trends. The Company will continue to forge ahead towards its goals with focus on a number of measures and strategically respond to industry dynamics with efficiency as the first priority.

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About Topsports International Holdings Limited

Topsports is a leading sportswear retailer in China. It has an extensive and deep retail network, covering nearly 7,000 directly-operated stores in more than 300 cities across the country, and has in-depth cooperation with 12 well-known sports brands. Topsports is committed to providing consumers with first-class sports goods and services, and creating a never-ending, active, healthy and happy sports life experience.