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China Xiniya Fashion Limited Reports Fiscal Year 2010 Financial Results

Fiscal Year 2010 Results

Revenue for the year ended December 31, 2010 was RMB899.3 million, compared with revenue of RMB672.1 million for the year ended December 31, 2009, which represented a 33.8% increase. Revenue was driven by volume growth of 10.0%, with the number of units sold increasing from 5.1 million units in 2009 to 5.6 million units in 2010. ASP grew 21.6% from RMB131.7 in 2009 to RMB160.2 in 2010, which was attributable to approximately a 13% benefit from a change in product mix and approximately an 8% increase to reflect higher materials and labor costs.

At the end of 2010, Xiniya completed the restructuring of its department store chains operated by department store operators, placing them under the supervision of its distributors. This initiative increased sales rebates in 2010 by approximately RMB9 million, which negatively impacted revenue growth by approximately 1% for the full year. Xiniya will begin to realize the full effect of an increase in sales rebates granted to distributors from 2011 onwards, but the Company believes this is an important measure to streamline its distribution network and strengthen control over its retail channels, which will ultimately contribute to improved long-term operational efficiency.

During 2010, Xiniya’s authorized network of retailers opened 223 new retail outlets, which was higher than the Company’s original planned increase of 180-200 new outlets. The total store count as of December 31, 2010 was 1,404. The Company places significant emphasis on opening quality stores and maintaining sustainable store expansion rates. The chart below sets forth the number of retail stores by outlet type.
 
As of December 31,
Outlet Type          

2008
              2009               2010
Flagship 1 1 1
Managed by Distributors 30 49 68
Managed by Department Store Chains 257 304 326
Managed by Authorized Retailers 720               827               1,009
Total Store Counts 1,008               1,181               1,404

Gross profit increased 32.9% to RMB310.0 million in 2010 from RMB233.3 million in 2009. Gross margin was 34.5% compared with 34.7% achieved in 2009. The modest decline in gross margin was mainly attributable to the increase in outsourced production and the increase in sales rebates arising from the restructuring of our sales outlets that resulted in the department store chains coming under the direct supervision of the distributors. ASP growth of 21.6% in 2010 helped to mitigate higher materials and labor costs.

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