China Dongxiang reported a 17.3 percent increase in total revenues to 1,706 million yuan renmimbi (€225.2m-$254.3m) for 2018, driven by an 18.4 percent increase in its Kappa business in China, whose revenues represented 68.8 percent of the total turnover. Kappa grew by 11.6 percent in Japan, where the Phenix brand raised its sales by 4.1 percent, accounting for 13.6 percent of the group's turnover. Sales in the rest of the world jumped by 117 percent, but they were still relatively minor at RMB 65 million (€8.6m-$9.7m).
The improved Kappa business was attributed to a more effective and consumer-focused approach in product and branding, making efforts to rediscover the brand's DNA and cooperating with well-known designers and opinion leaders.
The number of Kappa stores in China increased by 43 in the course of the year, ending at 1,175, of which 63.6 percent were directly operated by the group. The number of Kappa Kids stores declined by 34 units to 316. E-commerce operations on the company's marketplaces at Tmall and JD.com continued to improve. China Dongxiang is a shareholder in Alibaba.
The gross margin contracted by 1.5 percentage points to 57.3 percent. The operating profit fell by 59.3 percent, resulting in an operating margin of 24.5 percent. The company's comprehensive net income slipped by 63 percent to RMB 478.6 million (€63.2m-$71.3m). Excluding special items, it declined to RMB 310.3 million (€41.0m-$46.3m) from RMB 800.9 million, implying a still positive net margin of 18.5 percent.