Dear Shareholders,

I am pleased to present the annual results of Pou Sheng International (Holdings) Limited (the “Company” and together with its subsidiaries, the “Group”) for the financial year ended December 31, 2022, to the shareholders of the Company (the “Shareholders”).

2022 was another challenging year as the impact of the COVID-19 pandemic (the “Pandemic”) in China reached its peak. Despite an encouraging start to the year, our business was soon hit from all sides by escalating lockdowns in several cities and regions, which quickly impacted consumer sentiment even in corners of the country unencumbered by Pandemic control measures. This has a pronounced effect on foot traffic at our physical retail stores especially in the higher tier cities throughout much of the year.

On the digital and online side of our business, the picture was rosier. Our omni-channels proved more resilient, despite logistics and last-mile delivery being impacted in some instances under immense pressure from the Pandemic. Online channels accounted for 21% of our total sales in 2022, up from 24% in 2021, with a great bulk of it contributed by robust growth in its private domain channels, as a result of our continued commitment to digital transformation. A ratio that is supportive of our longer-term efforts to improve the quality of our sales, shorten the sales cycle, encourage more full-price in-season sales and better connect with e-commerce community ultimately contributing to our margins and profitability.

Our customised, content-rich and action-oriented Pan-WeChat Ecosphere, a private channel domain integrates our WeChat stores, Douyin live-streaming shopping events and shopping mall membership platforms, is an integral part of our efforts to engage with our customers more closely. More importantly, we further deepen cooperation with our brand customers, particularly in areas such as an impeccable and diverse shopping experience and consumer connectivity. Through the increased integration and direct connection of our membership programmes, our customers can access the same limited products, offerings and services whether they shop with us or with the brand partners directly – in other words, a seamless YYsports x brands shopping experience. It is a win-win arrangement that is already having a real impact.

Our partnerships with brands also extend to our Omni-Hub programme, through which we accelerate sales cycle, enhance our inventory mix and further optimise the service provided to our loyal customers. This expanded cooperation has helped elevate our business model and we have already seen some notable achievements. Coupled with our product-sharing platform, all of inventory integration initiatives have helped improve the mix and efficiency of sales and inventory.

WeChat, membership programme and other value-added services are integrated in our brick and mortar (“B&M”) stores which, as part of our ongoing digital transformation, remain the most important point of contact for discovering new products and experiences. Through our retail refinement strategy and channel optimisation efforts, we further right-sized our physical store network to drive greater overall efficiency. We continued to optimise store formats to prioritise quality larger-format stores and embed its digital tools in B&M networks, where allow customers to enjoy a personalised and seamless shopping experience that is fully cohesive with our digital offerings, membership programmes and sports-related service offerings.

What is beyond doubt is the immense potential of the China’s sports market. According to the 2022 Research Report on Mass Fitness Behaviour and Consumption《2022年大眾健身行為與消費研究報告》released by the China Sporting Goods Industry Federation and the PBC School of Finance, Tsinghua University, sports participation rates continued to increase in 2022 compared to 2021 despite the average spending on sports-related consumption declining by 16.9% – illustrating pent-up demand and the potential for future “revenge spending”. There is evidently an immense unmet desire among many consumers across the Greater China region to make more and different types of sports a part of their lives.

As China emerges from its strict policy on COVID-19 control measures, we are already seeing some signs of sound improvement in certain regions, both in terms of store traffic and purchasing intent in the first few weeks of 2023 backed by early Chinese New Year. Despite the likelihood of short-term volatility in consumer confidence, the prospect of the sports industry remains bright. We are closely monitoring the situation and are making every effort to sustain this sales recovery.

Carrying on with the collective memory of the hugely successful 2022 Beijing Winter Olympics, 2024 Paris Summer Olympics will continue to support demand in the market. And it is in the area of experiences where the future of the Group lies, both through expanded cooperation and links with our brand partners and across our well-positioned channels and touchpoints: experience-driven physical stores, private and public traffic domains and memberships to further deepen engagement with customers and generate sustainable consumer loyalty. We will fully strive to capitalise on this potential by leveraging our competitive edge.

I would like to thank our customers, business partners, financial institutions, shareholders and my dedicated colleagues for their constant support and trust. We look forward to the promising years ahead.


Yu Huan-Chang
Chairman

Hong Kong
March 15, 2023