Shoemaker's first-half profit rose 22% in the same period last year - 2

Expanding the retail network to improve channel management The Group has been actively expanding its distribution and retail network throughout the country for many years. The second and third tier markets have focused on exploration and accounted for more than 90% of the Group's retail network. On June 30, 2010, the total number of Xtep branded retail stores reached 6,579 (December 31, 2009: 6,103), surpassing the target set for 6,500 at the beginning of the year. The Group also explored overseas markets during the period. In June 2010, through a third-party distributor, Xtep opened its first branded retail store in Taipei and stepped on the road to Southeast Asia. During the period under review, the Group added 6 Xtep brand flagship stores. On June 30, 2010, the total number of Xtep brand flagship stores was 36.

To ensure that Xtep’s image as a leading fashion sporting goods is implemented, the Group regularly provides systematic training, including training in marketing, product display design and inventory management. The Group also developed a standard set of codes of practice to ensure that all retail outlets maintain a consistent brand image. The appearance and layout of the store will also be updated every two years to provide customers with a brand new shopping experience.

With fast and convenient online shopping becoming the increasingly popular consumer channel for young people, the Group established a partnership with Taobao.com, China’s largest online e-commerce market, in May 2010 to establish a special online flagship store and build an efficient online business platform for further development. Expand Xtep's sales and distribution channels to meet the needs of target customers.

Innovative Products With a strong design and R&D team, the Group continues to launch innovative products that combine fashion and sports elements. During the period under review, the Group launched a total of more than 1,900 new and stylish footwear products in the six series, mainly running shoes, retro shoes, casual shoes, basketball shoes, tennis shoes and children's wear shoes, with both stylish and functional elements. In addition, the Group also launched the Marathon ultralight running shoes series, which uses advanced technology to improve product shock absorption and uses nano-silver antibacterial chemicals to inhibit bacterial parasites.

In terms of apparel, during the period under review, the Group launched a total of more than 2,600 new-designed sportswear of the four major series, namely football, general training, tennis and urban categories, to show the target customers the dynamic aspects of the Xtep brand.

In addition, the brand new "Happy Girl" campaign series was introduced to carefully outline the characteristics of the winner of the "Happy Girl" singing contest and was well received by customers. In addition, the Group continues to introduce cutting-edge technology to enhance the function of sportswear, focusing on comfort, and strengthening the characteristics of warmth and breathability.
Strengthen design and R&D capabilities In order to maintain product innovation and quality products, the Group opened a new R&D center in Guangzhou in April 2010, focusing on the development of new apparel lines. The center occupies 2,500 square meters, is equipped with advanced design facilities, and has a design team with rich international and domestic experience, leading the ever-changing trend. In addition, the Group has adopted a product lifecycle management system, which is a solution for managing the entire lifecycle of products through the network, aiming to reduce product development time and improve product quality.

Future plans To face increasing competition among domestic and foreign peers, Xtep is determined to enhance the sustainable development and potential of the brand portfolio and increase the visibility of Xtep brand in the country and globally. The Group will continue to focus on sponsoring international and national events. For example, the English Premier League team Birmingham Football Team offers professional “Tec-Birmingham” fashion jerseys. In order to support the 16th Asian Conference to be held in Guangzhou in November this year, the Group will increase television advertising and open flagship stores in Guangzhou to further establish the brand image of Xtep.

In expanding its retail network, the Group plans to open more flagship stores nationwide and increase the number of Xtep branded retail stores to 7,000 by the end of the year. In addition, it plans to expand its overseas sales network to focus on Middle East countries such as Turkey, Saudi Arabia and Egypt, and Southeast Asian countries such as Indonesia. In order to support the continuous growth and expansion of the business, the Group will further implement refined internal management and intensify efforts to enhance product design, R&D, financial and operational management efficiency, and implement strict monitoring and management of the sales channel sales network. Optimize the supply chain process to establish a flexible and effective operating system.