Caixin Media, August 28 News (Reporter Lu Tingting) Cosmo Lady (02298.HK), which submitted a double increase in income and profit for the 'half-year exam' this year, resumed dividend distribution after 5 years. One of the main reasons for the significant increase in profits in the first half of the year was the expansion of the e-commerce business through cooperation with affiliates, which increased market share. Zheng Yaonan, Chairman and CEO of the company, said at the mid-term performance briefing that the cooperative development of sales, which started only in the first half of this year, has been good overall, and it is expected that the e-commerce sector of the company will achieve GMV of 0.8 billion to 1 billion yuan in the second half of the year. At the performance conference, the company's management also answered specific measures to reduce costs, the impact of product price reductions on performance, and the main markets for channel deployment, including questions raised by Caixin reporters.

The latest interim report released by Cosmo Lady for 2024 shows that the company achieved a revenue of 1.514 billion yuan in the first half of the year, a year-on-year increase of 11%; and a net profit of 82.398 million yuan, a year-on-year increase of 215%. Dividend has been distributed again since June 2019, with a dividend per share of HKD 1.1 and a dividend payout ratio of about 30%.

In terms of business segments, in the first half of 2024, the performance of Cosmo Lady's intimate clothing products, industrial projects, and logistics divisions (referring to reportable divisions excluding pre-tax surplus or loss) were 60.257 million yuan and 79.841 million yuan, respectively, an increase of approximately 37% and 787% compared to the same period in 2023.

'Currently, cooperative development has greatly benefited the company's online retail revenue.' Zheng Yaonan said that if the online business relies solely on self-operation, it would have shortcomings for Cosmo Lady, because the company's advantage is offline. Through the online cooperative model, the company controls the supply chain, product pricing, and brand management, and does not bear inventory. The backend operations are handled by affiliates who are skilled in online strategies, and Cosmo Lady collects a certain percentage of service fees from them.

At the performance conference, Caixin reporters learned that the total trading volume of goods on related e-commerce platforms in the first half of the year was approximately 0.23 billion yuan, exceeding the company's own online sales GMV of 0.22 billion yuan.

'Combining self-operation with cooperative development has greatly increased our market share, and the breakthrough in the e-commerce sector of the cooperative sector is also expected to be fast.' said the management of Cosmo Lady.

In addition to the boost from e-commerce, the growth in profit in the first half of Cosmo Lady was also attributed to the reduction in operating costs and the completion and inclusion of several units from industrial projects during the reporting period.

Cosmo Lady's management team stated that cost control actually includes supply chain costs and operating costs. The company has not reduced its investment in marketing, advertising, and digital construction. What has been reduced is the waste of funds, such as merging three departments into one to reduce ineffective investment. This is the company's method of reducing costs and increasing efficiency in the past period.

Data shows that Cosmo Lady's general and administrative expenses in the first half of this year decreased by 10.6% year-on-year to 83.833 million yuan, compared to 93.793 million yuan in the same period last year.

In addition, Cosmo Lady intends to continue investing in industrial projects to revitalize assets and generate income for the group.

The management team of Cosmo Lady revealed at the earnings conference that after customizing the old factory buildings, apart from selling them to manufacturers in need for profit, a portion of the total floor area has been retained for self-use as warehousing and logistics. The leasing of the warehouse has also shown very good results, and the expected rental income can be more than 16 million yuan per year. The group currently has a land reserve of approximately 0.11 million square meters in Dongguan Fenggang Town, and there is an opportunity to revitalize assets through similar transformation methods in the future.

According to the semi-annual report, Cosmo Lady's industrial project "Yuquan Project" in Fenggang Town, Dongguan, Guangdong, has been completed with a total floor area of 0.145 million square meters, of which approximately 0.089 million square meters are for sale. In the first half of this year, approximately 0.025 million square meters have been delivered and recorded as revenue, generating a revenue of 0.172 billion yuan. The project has also signed contracts for approximately 0.036 million square meters, and the delivery and recognition of revenue will be carried out successively before 2025.

Cosmo Lady has long emphasized high cost performance. This year's operational plan of the company mentioned that there will be a price reduction of up to 5% for products. Will this affect the company's performance in the first half of the year? How to ensure the operating efficiency per store while offering discounts?

Zheng Yaonan told the reporter of CaiLian News that the company has made layout arrangements for channels and price matrices. In addition to pricing, the key to clothing sales lies in the final sell-through rate and discounts. If the price is set high but the sell-through rate does not meet expectations, or if the discount is set too low, it will not be profitable. In practice, although the prices of the company's related products have been reduced by about 5 percentage points in the past, the sell-through rate has increased and the discounts have not decreased, so the gross margin has not decreased.

In the first half of the year, Cosmo Lady's overall gross margin was about 47.5%, compared to 47.4% in the same period last year. The gross margin of intimate clothing products has increased to 49.1%, compared to 48.2% in the same period last year.

In terms of offline retail outlets, as of the end of June 2024, cosmo lady had a total of approximately 4,500 offline stores, with a net increase of about 2%, including 373 new openings in the first half of 2024. The management of cosmo lady expects to open at least 500 more stores in the second half of the year, with a focus on expanding into lower-tier markets including prefecture-level and county-level cities.

For first and second-tier cities, cosmo lady stated that in 2024, the focus will be on promoting the layout of stores in "major provinces and strong counties", with continuous expansion of stores planned in Guangdong, Henan, Sichuan, and Shandong provinces.