Xtep International Holdings Aktie

Investors, good afternoon. Welcome to Xtep International Holdings Limited 2025 Annual Results Announcement Investor Session. I am Sophia, Director of IR of Xtep. So let me introduce to you our management in attendance. They are Group Chairman and CEO, Mr. Ding Shui Po; Group President, Mr. Tian Zhong; Group CFO, Ms. Dona Ding.

In today's event, we will conduct this event in Mandarin with English simultaneous interpretation. The management will present the annual results for 2025, followed by a Q&A session. Before our management speaks, please enjoy the following concluding video clip for the year 2025.

[Presentation]

Now I would pass the floor to Group Chairman and CEO, Mr. Ding Shui Po. Please, Mr. Ding.

Honorable investors, friends, good afternoon. Thank you for joining Xstep's 2025 Annual Results announcement. In 2025, the global economic environment was complex and volatile with uncertainty prevailing throughout the year. Nevertheless, we still achieved steady growth. This is largely due to the strategy of focusing on running that we adopted several years ago. Running has been one of the most promising sectors in recent years. The number of runners in China has grown from fewer than 90 million to 300 million in 2025. And for marathons, the number of participants has grown by over 20% annually.

In 2025, Xtep continued to lead the way in this sector. In the 7 flagship marathon events in China, including Beijing, Shanghai, Guangzhou, Xiamen, Chengdu, Wuxi and Lanzhou, Xtep ranks first in overall wear rate and it has been #1 in the men's top 100 for 4 consecutive years and inthe women's top 100, #1 for 3 consecutive years.

At the Tokyo Marathon in early March, Feng Peiyou wearing the 160X 7.0 Pro led the Chinese Marathon team into the [ 205 ] era. Shortly afterwards, we are launching the Chinese speed upgrade program, introducing the first-ever price for breaking Asian records. This marks a milestone in Xstep's effort to drive forward China's historical evolution of faster marathon signs.

Xstep's core brand expanded our product range. We have successfully extended our professional expertise to the wider mass market. Xstep Kids by refining its brand positioning, Xstep Kids is helping children and teenagers reach new heights in sports and driving rapid business growth. Saucony is a century old running shoe brand. We have successfully established a premium sports brand image.

This year, we will continue to step up our effort to invest in and enhance the brand experience and store performance to drive rapid business growth. In the past 5 years, Xtep has transformed from a single brand company into a multi-brand group with a clear strategic focus on running. Over the next 5 years, will continue. Actually, in 2025, we made new high in terms of both revenue and profit.

Over the next 5 years, we'll continue to focus on running and guided by our strategy of brand enhancement and improving quality and efficiency will further strengthen a consumer-centric operational approach that has effectively driven the development of DTC and channel optimization. We will cement our position as China's #1 running brand. By 2030, the national sports industry is set to exceed RMB 7 trillion in total value. And the sector continues to hold significant potential for growth.

We'll capitalize on policy benefits and growth opportunities in niche sectors whilst leveraging the synergies of the group's multi-brand strategy to achieve high-quality growth. Now I will pass the floor to Dona and Mr. Tian, who will present the financial and operational analysis.

Thank you. Good afternoon. Welcome to Xtep's 2025 Annual Results Presentation. In 2025, the consumer market as a whole remained stable. The group's various brands also achieved steady growth. The performance of Professional Sports division was particularly impressive. Please turn to the second slide. Our group's total revenue was up 4.2% to RMB 14.151 billion. Of this, revenue from Xtep core brand was up 1.5% to RMB 12.515 billion.

Revenue from the Professional Sports segment comprising Saucony and Merrell grew by over 30% to RMB 1.636 billion. Our group's net profit stood at RMB 1.372 billion, up 10.8% year-on-year. Our balance sheet remains in good health. During the year, net cash increased 73.4% to RMB 1.707 billion. Net asset value per share rose 12.3% to RMB 3.64.

Annual shareholder return stood at 14.5%, up 0.4 percentage point year-on-year. In light of our strong financial performance, the Board recommended the payment of final dividend of HKD 0.095 per share. Together with the interim dividend of HKD 0.18 per share, the annual dividend payout ratio is 50.4%. Since listing, our group has maintained a dividend payout ratio of no less than 50% for 18 consecutive years. We remain committed to creating long-term value for shareholder return.

Page 4, our profit and loss statement. Our group's total revenue was up 4.2% to RMB 14.151 billion. Gross profit rose by 3.4% to RMB 6.063 billion. Gross profit margin, 42.8%. SG&A expenses, up 6.2%. The reasons for the changes in gross margin and expense ratio will be explained in detail later.

Operating profit rose 2.7% to RMB 2.019 billion, whilst operating profit margin fell 0.2 percentage points to 14.3%. Excluding the combined loss of RMB 67 million from K-Swiss and Palladium last year, our group's net profit rose 10.8% to RMB 1.372 billion. Our net profit margin was up 0.6 percentage points year-on-year to 9.7%.

Page 5, group balance sheet. Our balance sheet remains in good shape. Cash and deposits totaled RMB Cash and deposits totaled RMB 4.14 billion. Operating cash inflow, RMB 950 million, remaining stable. Last year, we repaid most of our Hong Kong dollar loans, reducing our bank borrowings by RMB 930 million, whilst issuing RMB 500 million convertible bonds. Excluding bank loans and convertible bonds, net cash increased 73.4% to RMB 1.707 billion.

Current ratio rose to 2.4x, whilst net asset value per share increased by 12.3% to RMB 3.64. Page 6, our group's operating capital analysis. Total working capital days increased by 23 days to 110 days compared with the end of 2024. Inventory turnover days increased by 9 days from the end of last year, reaching 77 days. However, this represents a significant decline from the 91 days recorded in the first half of the year and inventory value also down to below RMB 1.9 billion for those within 14 days. This year, we'll focus on improving operational efficiency.

With regards to payables, we selectively settle payments early in order to secure discounts from suppliers. So payable turnover days has fallen by 14 days compared with the end of last year to 87 days. Payable days remained stable at 120 days. And then on Page 7, performance of the business sectors. First, mass market Xtep core brand. Revenue rose 1.5% to RMB 12.515 billion with e-commerce continuing to drive growth.

Gross profit, RMB 5.156 billion, similar to last year. Gross margin fell 0.6 percentage points. Last year, particularly in the second half, industry pressure was greater. And so there is a bigger e-commerce discount. Operating profit fell 1.8% year-on-year to RMB 1.92 billion. Operating profit margin fell 0.6 percentage points year-on-year to 15.3%, mainly due to decline in gross margin.

Next, Professional Sports sector. Revenue from Saucony and Merrell rose 30.8% to RMB 1.636 billion, with Saucony being the main driver of this growth. Gross profit rose by 27% to RMB 908 million. Gross margin down 1.7 percentage points to 55.5%, primarily due to the product mix.

Last year, proportion of sales accounted for by Apparel, footwear and lifestyle products increased, but as the sales scale remains small, this has resulted in a lower gross margin. Operating profit rose by 46.4% year-on-year to RMB 114 million.

Operating profit margin up 0.7 percentage points to 7%. With regards to the strategy of positioning the Saucony brand as a premium brand, we'll continue to invest in marketing, product development and channel expansion this year to increase market share and scale.

Page 8, expense and cost analysis. Our group's total expenses rose 6.2% to RMB 4.562 billion, accounting for 32.2% of revenue, up 0.6 percentage points year-on-year. For A&P, through refined marketing management, we effectively controlled A&P expenses at a healthy level. Now it accounted for 12.9% of revenue, down 0.5 percentage point year-on-year. R&D expenses accounted for 2.9% of revenue, more or less the same as last year.

R&D expenses was primarily driven by the Xtep core brand, the iterative development of its professional running shoe range and ongoing expansion of mass market product portfolio. Saucony, adding products such as apparel and lifestyle items. In the future, R&D expenses will be kept at around 3% of revenue. Staff costs, up 5.9%, accounting for 5.2% of revenue. This percentage was similar with last year's.

Other expenses, up 14.2%, mainly due to strong e-commerce sales, which led to higher platform fees and logistics and warehousing costs increase. And there is also system upgrades arising from digitalization strategies. This year, we'll continue to improve efficiency and achieve sustainable growth through more refined operational management. So that concludes my financial part. I will now pass the floor to Mr. Tian.

Thank you. Thank you, Dona. Honorable investors, good afternoon. Now I will review for you our group's operations in 2025. First of all, the core of our group strategy. Our group remains firmly committed to our core strategy of continuing to focus on running Xtep core brand. we target at the mass market and use flagship products as a growth engine to achieve professional to mass influence. Saucony, upholding its brand positioning as a century old running shoe dynasty, deepening the perception of an elite sporting lifestyle and strengthening its premium offering.

Merrell, we continue to focus on professional outdoor sports. We continue to strengthen synergies and resource integration among the 3 major brands, consolidating our position as China's #1 running brand in the market to drive high-quality growth. For brands, Xtep core brand and Saucony last year at major marathon events, the Xtep brand maintained #1 position among all brands in terms of wear rate. And for Saucony, it is within top 3. And then if you look at the 160 series in the past 3 years, they help our marathon runners to break Chinese marathon records 4 times.

So just now you heard that our marathon record was broken again. So we are into the 205 era already in terms of China marathon. So in terms of products for Xtep core brand, we upgraded our professional product matrix. Flagship products are to lead our overall growth. And then for our Champion running shoe families in 2025, sales was doubled that of 2024, especially [ 160 7.0. ] as what Mr. Ding said.

And then in terms of sales results, we achieved a new high. At the same time, we will continue to expand our product mix. So just now, in our display, you can see our antishock running shoes. So they are having high value for money so as to achieve professional to mass influence.

And then for channels, well, we will continue to optimize our retail channels and upgrade store image. We'll continue to open bigger and better stores. At the same time, we will accelerate the layout in shopping malls and outlets. And then in municipality grade cities, we will plan to open bigger stores.

In 2026, we will get into boutique stores. As of 31st December 2025, Xtep operated 6,357 adult stores, 70% of them are new image stores. For our Xtep main brand, e-commerce, in 2025, it continued to lead the way, achieving double-digit growth and accounting for over 30% of Xtep's core brand revenue. For e-commerce, we will continue to focus on having flagship products to lead. For example, our 2,000-kilometer fifth generation, it was launched in December last year.

Market response has been excellent. Sales have topped the new product chart for domestic brands on Tmall. And in 2025, sales was doubled that of 2024. So looking at the current trend, we believe that this trend will continue into 2026. E-commerce we will continue to focus on running first brand strategy.

We'll continue to enrich bestseller matrix, enhance our product capability to drive growth. X Young. In 2025, X Young was relaunched from Xtep Kids. So this is a new name X Young. So we adopt a more precise brand positioning and focus on seizing opportunities to drive business growth. In 2025, for offline, growth stores, well, they are well received by consumers. And for main stores, there is double-digit year-on-year growth. As of the end of 2025, X Young has 1,488 stores in China.

And then for overseas development, in 2025, we achieved very good results. Business growth nearly doubled, especially in cross-border e-commerce business. There is year-on-year growth exceeding 220%. In 2025, we accelerated offline layout in Southeast Asia. Last September, we opened our first overseas running club in Singapore. So we provided for local runners a full range of running products and specialized service.

In the future, we will also make use of this runners club approach to build a wider network in Southeast Asia. In December last year, we entered into a strategic partnership with Malaysian Group Bonia. And now we have already opened a 300 square meter store. In the future, we'll invest more in cross-border e-commerce, and we'll focus on emerging markets like such as in Southeast Asia.

Saucony in 2025, we'll continue to uphold the brand positioning as a century-old running shoe brand. So we have successfully established an elite active lifestyle mindset. And with a premium brand positioning, we will strengthen marketing and product portfolio, channel distribution and operations.

At the same time, we are continuously strengthening the sharing of global and marketing resources with Wolverine, further enhancing Saucony's competitiveness in China. For Saucony's products, first of all, we will still focused at professional products, especially running shoes will continue to refine the product matrix of running shoes. Last year, we launched [indiscernible] and also Victory TRIUMPH 23. So thanks to our outstanding product quality and marketing campaigns. So we have received very positive market response, thereby strengthening the brand's professional status.

Apart from professional products, we have increased investment into our apparel. So last year, we launched Wool collection, and we got very positive feedback from consumers. For the Wool series, it had also promoted rapid growth for our apparel products. Then apart from professional products and apparel, we have increased some lifestyle product categories. So running culture is included in elite living scenarios so as to expand business scale.

So we increased lifestyle products and OG products. We launched co-branded products with Nathan Bell so that consumers will have a very fresh impression. Then for Saucony channels, we will focus on opening large stores in core business districts and high-tier cities. By opening new image stores, we will penetrate into high-tier cities so that we can reach consumers in a precise way.

As of 31st December 2025, Saucony had 175 stores in our country. And for Merrell, we'll continue to focus on professional outdoor area. And we will focus on mountaineering, trail running and outdoor lifestyle so as to achieve strong growth. For sustainable development, our group continues to protect the environment, maintain sustainable value chain and be people-centric.

Now for sustainable development. Well, we launched a special initiative to recycle waste textiles using recycled yarn to produce the official uniform for Xiamen Marathon. In the future, we'll continue to do clothing recycling and total weight of clothing production scraps collected in the year exceeded 50 tons. And we have started environmental protection and social responsibility training and ESG audits were conducted on over 140 suppliers with compliance rate of 99%.

For social responsibility, our group donated cash and goods worth over RMB 64 million throughout the year, demonstrating corporate responsibility through concrete actions. For 2025, I think we have made an outlook for our group. Basically, for our group, we'll continue to focus on running and harness synergies between our brands so as to drive sustained growth.

For Xtep core brand, we will continue to focus on running. We will use our flagship products as a growth engine and expand product matrix. We will accelerate the professional to mass influence strategy. Saucony, we will continue the positioning as a century-old brand. It will be positioning towards the premium side and core strategy will be product marketing and premium channel development.

Then Merrell is an outdoor brand will make plans in relation to products and channel so as to seize market opportunities in the outdoor segment. We'll seize the opportunities of sports -- robust sports development in China, and then we'll expand the leading advantage in running so as to continue the high-speed growth of our group. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Investors and media friends, good afternoon. Welcome to Xtep's 2025 Interim Results Online Webcast and Conference Call. I am Sophia, Director of Investors Relations.

On the line, we also have our management, including Group Chairman and CEO, Mr. Ding Shui Po; Group President, Mr. Tian Zhong; Executive Director, Mr. Ricky Yeung; Group CFO, Ms. Dona Ding.

Today's webcast and conference call will be conducted in Mandarin with English simultaneous interpretation. The management will first go through the 2025 interim results, followed by a Q&A session. After that, well, I will explain the procedures for Q&A.

Before our management presents, please enjoy the group's 2025 interim results video.

[Presentation]

Now I will pass the floor to our group Chairman and CEO, Mr. Ding Shui Po. Mr. Ding, please.

Investors, media friends. Good afternoon. Welcome to Xtep's 2025 Interim Results Presentation. I'm Ding Shui Po. Despite the overall economic pressure in China, the government has continued to increase investment and support for public health and sports activities. This demand for -- the demand for sports goods has been steadily growing with running category performing particularly well.

In the first half of 2025, leveraging our strengths in the running category and our status as China's leading running brand, Xtep once again secured the highest overall runner adoption rate and wear rates in major events such as Xiamen, Wuxi and Lanzhou. Saucony also ranked second and third in overall wear rates.

For Xtep brands, professional to mass influence strategy, it has successfully penetrated the mass market and increased market share. Saucony has also made significant breakthroughs in the running sector. As a century-old running brand, Saucony has successfully established a premium sports brand image among elite athletes and cultivated a mindset for elite sports lifestyles.

We're further strengthening our brand strategy and business scale, deepening our focus on running, expanding our apparel and lifestyle product portfolio, opening new concept stores, enhancing store efficiency and driving sustainable growth for the group.

Our group strategy of focusing on running is very clear. We will capitalize on the peak season for marathons and running events in the second half of the year, leveraging the synergies between the Xtep Core brand and Saucony to expand our influence in the running sector and further increase our market share.

With the government's various supports for the sports sector, we are confident in the long-term development of the sports industry.

To address the rapid changes in China's retail market, we will implement more refined operational management to improve efficiency, laying a solid foundation for the group's sustainable growth while creating greater returns for investors. Thank you all.

Now I will pass the floor to Dona and Mr. Tian, so that they can present to you their financial and business analysis.

Welcome to Xtep's 2025 Interim Results Presentation. In the first half of 2025, the Chinese government continued to implement various economic stimulus measures and the macroeconomic environment is gradually improving. The group's various brands also achieved steady growth in the first half of the year. The Xtep Core brand, Mass market maintained stable performance, while Professional Sports division continued its high-speed growth.

Please turn to the second page of the PPT. Our group's total revenue was up 7.1% to RMB 6.838 billion. Among them, the revenue of Xtep Core brand increased by 4.5% to RMB 6.053 billion. Professional Sports division, comprising Saucony and Merrell saw revenue increase by over 32% to RMB 785 million. The group's operating profit increased by 9.1% to RMB 1.305 billion. The operating profit margin improved by 0.4 percentage point to 19.19%. Net profit for the first half of the year was RMB 914 million in the same period last year, the group included 2 fashion sports brands, K-Swiss and Palladium, which incurred a combined loss of RMB 106 million. Therefore, the group's net profit for the first half increased by 21.5% year-on-year. Annualized return on equity was 19.7%, an increase of 3.3 percentage point year-on-year.

Our cash flow remained healthy with operating cash flows of RMB 774 million and net cash increasing by 94.3% to RMB 1.913 billion. Based on the strong financial performance, the Board declared an interim dividend of HKD 0.18 per share, a year-on-year increase of 15.4%, maintaining dividend payout ratio of 50%.

It is worth emphasizing that since our listing, the group has maintained a dividend payout ratio of no less than 50% for 17 consecutive years, fully demonstrated our long-term commitment to shareholder returns.

Now please turn to Page 4, showing our consolidated income statement. Total revenue was up 7.1% to RMB 6.838 billion. Gross profit was up 6.9% to RMB 3.074 billion, with gross profit margin of 45%, remaining stable year-on-year. SG&A expenses increased 9.5%, with the reasons for the increase to be detailed later. Operating profit increased by 9.1% to RMB 1.305 billion, outpacing revenue growth.

Operating profit margin improved 0.4 percentage points to 19.1%. Net profit from continuing operations increased by 6.4% to RMB 914 million, including losses from K-Swiss and Palladium brands in the same period last year. The group's net profit was up 21.5%. Our net profit margin increased by 1.6 percentage point year-on-year to 13.4%.

Now please turn to Page 5, our balance sheet. The balance sheet remains in a healthy state. Bank cash increased 8% to RMB 3.218 billion. Operating cash inflow, RMB 770 million, maintaining a stable level. In the first half of the year, we repaid all Hong Kong dollar loans and some domestic loans resulting in a reduction of over RMB 1 billion in bank loans. Besides, we issued RMB 5 billion in convertible bonds in the first half of the year. After deducting bank loans and convertible bonds, net cash increased nearly twofold to RMB 1.913 billion. Current ratio improved to 2.2x and net asset value per share was up 9.6% to RMB 3.55.

Please turn to Page 6. Analysis of our operating capital. Total working capital days increased by 3 days to 90 days compared to the end of 2024. Inventory turnover days increased by 23 days from the end of last year to 91 days, mainly due to an increase in inventory for the core brand within 3 months to prepare for the peak season for marathons and running events in the second half of the year, requiring us to increase inventory. Inventory beyond 3 months remains at a healthy level.

Besides the launch of the new brand Saucony in the second half of the year also necessitated increased inventory. Inventory levels are expected to return to a healthy level by year-end. Due to increased inventory, accounts payable days also increased by 18 days compared to the end of last year, reaching 119 days. Accounts receivable days outstanding decreased by 2 days compared to the end of last year, reaching 118 days.

Page 7, performance of each business segment. First, the Mass market. Revenue increased 4.5% to RMB 6.053 billion with e-commerce growing at a faster pace and kids business performing better than adult business. Gross profit was up 4% to RMB 2.641 billion. Gross margin slightly decreased 0.3 percentage points, primarily due to increasing proportion of kids sales composed with slightly deeper e-commerce discounts compared to last year.

Operating profit, up 1.5% year-on-year to RMB 1.21 billion. Operating profit margin, down 0.6 percentage point year-on-year to 20%, primarily due to an increase in SG&A expenses, which will be explained on the next page.

Next, Professional Sports division. Revenue from Saucony and Merrell increased by 32.5% to RMB 785 million, with Saucony leading the growth. Gross profit was up 28.7% to RMB 433 million. Gross profit margin, down 1.6 percentage points to 55.2%. This is mainly due to increased sales of lifestyle and OG products in footwear, coupled with a higher proportion of apparel sales. These products currently have a smaller sales volume, resulting in a slightly lower gross margin compared to professional functional products.

In the first half of the year, operating profit was up nearly 2.4x to RMB 79 million. Operating profit margin improved to 10%. In the second half of the year, Saucony will continue to launch new products and marketing campaigns with profits reinvested into the brand. The Professional Sports division's operating profit margin for the full year is expected to remain at a mid- to high single-digit level.

Page 8, cost analysis. The group's overall expenses increased 9.5% to RMB 2.123 billion, accounting for 31% of revenue, up 0.6 percentage points year-on-year. In the first half of the year, the number of domestic marathons running events and participants increased significantly compared to last year. So our sponsorship of Marathon and running events also increased accordingly.

Besides the brand upgrade of Saucony, with the brand upgrade of Saucony, we also increased marketing investment. Therefore, advertising and promotion expenses was up 7.3% year-on-year, but remained stable at approximately 12.6% of revenue. R&D expenses was up 20.4% year-on-year to RMB 190 million, accounting for 2.8% of revenue. The increase was primarily due to: one, increased R&D for the next-generation Champion running shoe series 160X and expansion of the product portfolio for Xtep Core brand; two, increased R&D investment in apparel and lifestyle OG products for Saucony.

Future R&D expenses will also be controlled at around 3% of revenue. Staff costs increased by 4.5%, accounting for 5.6% of revenue, a decrease of 0.2 percentage points. Other expenses increased by 12.6%, primarily due to rise in e-commerce sales, which led to higher platform fees and logistics warehousing costs.

Looking ahead to the second half of the year, we'll continue to enhance efficiency through more refined operational management to achieve sustainable growth. The above is my presentation on financials.

I will now pass the floor to Mr. Tian.

Thank you, Dona. Honorable investors and media friends, good afternoon. Now I will go through our group's operations for the first half of 2025. Group strategic core. The group remains firmly committed to our core strategy of focusing on running. For Xtep Core brand, we will deep -- we are deeply rooted in the Mass market, driving growth through flagship products and leveraging professional to mass influence strategy.

For Saucony, we are clearly positioned as a century-old running heritage or running brand. We established an elite sports lifestyle mindset and consolidate our image as a high-end sports brand. For Merrell, we will focus on professional outdoor sports. The group continues to strengthen synergies among the 3 brands, consolidate our market position as China's leading running brand and drive sustainable growth.

Page 11. In first half 2025, the popularity of marathon running in China continued to rise. According to data from the Chinese Athletics Association, over 300 marathons were held nationwide in the first half of the year with over 3 million participants. If you look at some top marathon events like Wuhan Marathon, there are more than 450,000 registered participants breaking the past record and almost 100% increase year-on-year.

And for Wuxi Marathon, over 400,000 registrations with full marathon success rate of just 6%. So we continue to perform very strongly. In top marathon brands, Xtep maintained highest wear rates overall speaking. For Saucony, in Wuxi Marathon, Saucony rose to second place in overall wear rates, surpassing all international brands for the first time. The group's efficient and coordinated running matrix enables us to maintain a competitive edge in the running category.

Page 12. Xtep Core brand continues to upgrade our professional product portfolio with flagship products driving growth. On 15th August, that is last Friday, we launched the new generation of Champion running shoes, 160X 7.0 PRO, which further breaks through in professional performance and continues to help athletes achieve outstanding results.

Page 13. We expanded professional product matrix and strengthened our professional-to-mass influence strategy. In first half 2025, we introduced the 360X 2.0, the new generation style. So from daily wear to training, it is a full -- it is an all-round product. And then with comfort and high value for money, we gained widespread market favor with this Qing Yun cushion flagship running shoes. Now we will continue to optimize retail channel management and upgrade customer experience.

In first half this year, we accelerated our expansion into shopping malls and outlets, opening large-format stores while closing small ones with a focus on improving store efficiency. As of 30th June 2025, the number of Xtep adult stores stood at 6,360 with about 70% being new image stores.

For Xtep Kids, in August this year, we -- for X-Youth, we introduced the growth sneakers. So for young people, we offer stability and support for their growth. And then with Tsinghua University, Shanghai Sports University and also other sports institutions for youth sports demand, we offer a full range solutions. So through AI health test, an examination with the results, we will introduce or we will select the right shoes, and then we offer scientific sport solutions for them.

So on an all-around basis, we help youngsters achieve better results in sports. And in August, we took part in an expert team organized with 8 authoritative institutions, and we published the playbook on youth sports and growth. We focus on R&D, medicine, sports and health professional findings.

These institutions include the Maternal and Child Health Services Division of National Health Commission, Institute of Sports Medicine at Peking University Third Hospital and Center for Sports and Health Sciences at Tsinghua University. So we establish a sports growth system to provide scientific guidance for youth sports growth.

As of June 30, 2025, X Young operates 1,564 stores in Mainland China, primarily managed by authorized distributors of the group. And we will also open more new image stores.

Page 16. In relation to e-commerce in the first half of the year, e-commerce continued to drive the group's growth with revenue achieving double-digit growth and accounting for over 30% of the Core brands revenue. E-commerce operations focused on running sector, refining a product portfolio centered on the 2,000-kilometer flagship product while enhancing flexible supply chain capabilities to improve rapid replenishment capacity and drive high-quality development of e-commerce operations.

For Professional Sports division, Saucony is positioned as a century-old running shoe brand. We focus on elite groups. We expand channels and enhance marketing and diversify product offerings to establish a premium sports brand image.

And then regarding brand marketing, we launched a comprehensive large-scale marketing campaign centered around the release of our flagship product, the TRIUMPH 23, and through 5 consecutive years of sponsorship of the Hood to Coast China, we have demonstrated the brand's professional capabilities. At the same time, we will continue to dig deeper into running.

In the first half of the year, we launched TRIUMPH 23 in July and other popular products. We will enhance or reinforce consumption scenarios. So for apparel and OG product lines, we are continuously expanding consumption scenarios in this regard, gradually increasing apparel and OG lifestyle products to enrich our lifestyle product portfolio.

For Saucony, it continues to open brand stores in core commercial districts of high-end cities to further strengthen our high-end sports image. We also accelerated offline store opening. In January this year, we opened a concept store and a boutique store in Hangzhou Wanda Plaza and Beijing Sanlitun, respectively, continuing to improve store efficiency and same-store sales growth.

As of June 30, 2025, Saucony operates 155 stores in China. For Merrell, we focus on professional outdoor tracks with trail running, hiking and water hiking as our 3 core products. The division will deepen our online layout and continue to tap into the potential of outdoor market.

Then regarding sustainable development, please turn to Page 23. So in the area, we have always been committed to the vision of becoming a leader in sustainable development with corporate governance as the cornerstone and have continued to focus on 3 pillars: protecting the environment, creating a sustainable value chain and being people oriented.

In the recently released 2025 MSCI ESG rating, Xtep achieved AA rating, marking our fourth consecutive year of rating improvement. We are the first Chinese sports company to achieve AA grade, leading the industry. For environmental protection, we are a signatory to the ZDHC strictly managing chemicals. We also innovate through initiatives like old clothing recycling and the production of regenerated fiber clothing, forming a green closed-loop system.

In terms of social responsibility and corporate governance, there is stable enhancement. Finally, I would like to summarize our strategy and outlook.

Please turn to Page 24. We will continue to focus on running, strengthen the synergy among different brands and drive high-quality growth, so that we can reinforce our position as the #1 running brand. And we lead growth through flagship products, expand product portfolio, leverage professional-to-mass influence strategy and solidify our group's position as China's leading running brand.

We'll continue to deepen channel management, advance the DTC strategy and respond to rapid changes in market demand. For Saucony and Merrell, Saucony will target at elite consumers, continuing to reinforce the elite athletic lifestyle mindset and build a high-end sports brand image.

In terms of products, it continues to deepen the focus on running while expanding its portfolio of apparel and OG products.

In terms of channels, Saucony will strengthen channel management, slightly accelerate the opening of channels and concept stores and flagship stores to enhance customer experience. Against the backdrop of the continued positive development of China sports industry will further consolidate our differentiated competitive advantage in the running sector and drive our group's sustained growth. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]