Commencing 2017, China has entered the most critical stage in the supply-side structural reform of its real economy. During the first half, GDP increased by 6.9% year-on-year on the basis of comparable prices while total retail sales of consumer goods recorded a year-on-year growth of 10.4%, indicating a stable economy on a stronger rising trend, together with enhanced stability, coordination and sustainability in China’s economic development.
Benefitting from the structural adjustments on economic growth in China and the rising of consumers’ brand awareness, the outlet industry continued to maintain its rapid growth, as evidenced by increases in both the number of newly opened stores and the scale of outlet operation. According to a research report issued by the Ministry of Commerce in June 2017, a number of factors contributed to the satisfactory sales from outlets, including higher residents’ income, enhanced brand sensitivity and increased vehicle ownership. Outlet malls reported solid operational performance, with their composite index outperforming that of three other types, namely metropolitan shopping malls, regional malls and community malls.
At the end of 30 June 2017 (the “Period”), the Group further increased its investment and acquired the land use rights for its Outlets projects in the two target cities of Chongqing and Kunming, bringing the total number of Outlets projects owned and managed by it to 14, which further strengthened its leading position within the sector. Meanwhile, the Group also fully leveraged advantages arising from its chain operations nationwide to promote branding strategic alliances among multiple projects, to help attract desired brands to under-construction projects, and to bring in additional brands for development projects. Through these concerted efforts, the Group aimed to create operational resilience shared within its system, with a view to gradually taking advantage of its group development.
During the Period, on top of its on-going commitment towards improving operational efficiency, expanding product portfolio, improving service quality and increasing brand influence, the Group also actively explored online channels and adopted new retail formats, aiming to integrate the Capital Outlets shopping experience into the daily lives of its target customer groups. Through the official launch of “鉅 MAX”, our self-operated e-commerce platform, we set out to foster our O2O capabilities, to expand our contact points with customers through O2O integration using an omni-channel approach, thereby creating “outlets at fingertips” that offer services on a 24/7 basis. Further, we also operated a trampoline-themed park through a joint venture arrangement with JUMP 360 - a leader in the trampoline park industry, through which we created a Capital-unique consumption experience while providing the new generation of consumers with an excellent opportunity for relaxation and parent-child interaction
During the Period, the four operating Capital Outlets stores in Fangshan of Beijing, Wanning of Hainan, Kunshan of Jiangsu and Huzhou of Zhejiang recorded superior performance, with turnover increasing over 33% year-on-year. As our flagship project, not only has Beijing Capital Outlets recorded outstanding sales performance, its influence within the industry has also been increasing over the years. For two consecutive years in 2015 and 2016, Beijing Capital Outlets - whose sales growth broke industry record, managed to remain one of the top 10 practitioners in China’s outlet industry while being listed as one of the “Top 10 Business Brands in Beijing”. As its marketing approach shifted from “Outlets with a view” to “launching microtourism”, not only has Beijing Capital Outlets become an industry pioneer, it has also established itself as a successful practitioner who explores innovative marketing. Through innovative marketing and comprehensive promotion, Beijing Capital Outlets achieved a customer traffic of 1.20 million in the three days during its “1 May” anniversary in 2017, recording sales of RMB53 million, which set a new record in its single-day sales. During the Period under review, the Group achieved operating revenue of RMB300,138,000. Net profit attributable to the owners of the Company amounted to RMB8,838,000. The Board resolved not to declare the interim dividend as at 30 June 2017.
During the Period, the Group maintained sufficient communication and coordination with its strategic shareholders, namely Sino-Ocean Group and KKR, in relation to a number of aspects, including among others, project resources, commercial resources, enhancement of business operations management and capital operation; in particular, it made noticeable progress in enhancing its business operations management by relying on KKR’s exceptional skills in post-investment management. In addition, the diversification of its shareholding structure also fostered better standardization of corporate governance and greater professionalism in its operational decision-making, thereby enabling the Group’s Outlets business to find its way into a fast track of healthy development. In the second half of the year, the Group, persisting on the sound expansion strategy of “Precise Expansion and Lean Operation”, will proceed with its opening schedule in an orderly manner. With customer experience and the value of brand owners as the two main cores, and seizing digital innovation as its window for business breakthrough, the Group will also establish a timely and effective feedback mechanism on consumption demand, providing consumers with an improved and refined experience at its Outlets stores, its brand owners with more value-added services, thereby boldly setting new retail standards for the outlet industry!
On behalf of the Board, I would like to extend my sincere gratitude to all shareholders, cooperative partners and clients for their caring and strong support to Capital Grand. Adhering to our strategic objective of “Becoming the Largest Outlets Integrated Operator in China”, we set out to further capitalize on strategic synergy with resources of shareholders, as well as the connection between our global vision and commercial resources. Through the promotion of innovative development and the continued enhancement of our differentiated core competitiveness, we venture to establish “Capital Outlets” as a unique and rich brand, thereby leading the outlet industry towards healthy yet fast development, and creating long-term values for our shareholders!
Beijing, 17 August 2017
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