Financial Highlights –Third quarter ended September 30, 2013

Revenue

The global macroeconomic environment remained uncertain throughout the third quarter of 2013, which had an adverse impact on the Chinese economy and the sportswear industry. In addition, initial forecasts for sports product demand in the preceding years have proved to be overly optimistic, leading to a build-up of inventory levels industry-wide. In response, most sportswear brands aggressively cleared their excess inventory during the period.

In anticipation of the impact that market headwinds would have on the Chinese sportswear industry, we continued to carry out a number of strategic initiatives throughout the third quarter of 2013 to maintain our competitive position and pricing power, and to manage inventory levels and the efficiency of our distribution network.

Among others, we continued to engage our distributors and authorized third party retailers to manage the level of wholesale orders placed with us to prevent an inventory build-up at our distributors due to weaker consumer demand.

As a result, revenue for the third quarter of 2013 was RMB481.8 million (US$78.7 million), reflecting a 12.9% decrease from RMB553.3 million for the third quarter ended September 30, 2012.  However, such revenue increased 37.3% from RMB350.8 million for the preceding quarter is primarily attributable to the seasonal nature of our footwear and apparel products and the fact that our autumn and winter collections generally command higher selling prices than our spring and summer collections.

Apparel

Sports apparel accounted for 52.5% of revenue for the third quarter ended September 30, 2013. Sports apparel principally includes sports tops, sports pants, jackets and track suits. Our apparel production is entirely outsourced.

Revenue from apparel was RMB252.7 million (US$41.3 million) for the third quarter ended September 30, 2013, representing a decrease of 14.0%, from RMB294.0 million for the third quarter ended September 30, 2012. This decrease was primarily due to a 18.2% decrease in sales volume, the effects of which were partially offset by the increase in the ASP.

The ASP of apparel increased by 5.0% year-over-year for the third quarter ended September 30, 2013, primarily caused by the improvement of the design and quality of certain of our autumn/winter apparel products to better align with consumer demand. In contrast to the year-over-year trend, revenue from apparel for this quarter increased 37.0% from RMB184.5 million for the preceding quarter.