China Dongxiang, whose holdings include the ownership of the Kappa brand in China, reported a huge net loss of 748 million yuan renmimbi (€103.5m-$115.6m) for the first half of its financial year ended Sept. 30, compared with a profit of RMB 1,116.2 million in the same period a year ago. The negative performance was mostly due to a loss on investments of RMB 661 million (€91.4m-$102.2m).
The group’s total revenues increased by 4.5 percent to RMB 852 million (€117.8m-$133.8m). The gross margin contracted by 4.8 percentage points to 64.8 percent, while distribution and administrative expenses went up by 16 percent and 30 percent, respectively, leading to an operating loss of RMB 75 million (€10.4m-$11.8m) against a profit of RMB 65 million in the year-ago period. Excluding investments, the company’s apparel and footwear operations booked a negative operating margin of 8.8 percent versus a positive margin of 8.0 percent.
Excluding kidswear, the company’s revenues from the Kappa brand inched down by 0.1 percent to RMB 747 million (€103.3m-$11.7.3m), coming in below guidance, due especially to a downturn in tourism caused by regional pandemic flare-ups; combined with continued poor weather in northern China. A 4.5 percent dip in apparel sales offset gains of 3.8 percent in footwear and 0.7 percent in accessories. Revenues from e-commerce declined by 6.9 percent, representing 15.7 percent of the total turnover.
The gross margin rose by 0.6 percentage points to 73.3 percent in apparel, but it fell by 1.1 points to 57.1 percent in footwear and by 9.8 points to 69.5 percent in accessories.
The Kappa Kids apparel business turned in a strong 50.0 percent sales increase to RMB 69 million (€9.5m-$10.8m), delivering a gross margin improvement of 5.4 percentage points to 54.4 percent. Revenues from international and other operations grew by 71 percent to RMB 36 million (€5.0m-$5.6m).
