The company's performance remained stable, and in the second quarter, after adjustments, the main footwear industry stabilized and recovered steadily, which was basically in line with expectations. 1) 19H1 achieved operating income of 1.05 billion yuan, an increase of 4.3% over the previous year; realized net profit of 120 million yuan, a decrease of 12.4% over the previous year, and net profit of 110 million yuan after deducting non-net profit of 110 million yuan, a decrease of 12% over the previous year. 2) 19Q2 achieved revenue of 560 million yuan, an increase of 4.1% over the previous year, net profit of 82.77 million yuan, an increase of 30.9% over the previous year, and net profit of 77.55 million yuan after deducting non-net profit of 77.55 million yuan, an increase of 16.3% over the previous year. 3) Among them, 19H1, the main footwear business, achieved revenue of 870 million yuan, a slight decrease of 0.9% over the previous year. Revenue for the second quarter alone increased slightly by 0.6% year on year, net profit from net income increased 41% year on year, and net profit after deducting non-net profit increased 17% year on year, mainly due to adjustments in business priorities, strengthening member operations, and deepening cost control in the second quarter to achieve cost reduction and efficiency. Gross profit margin and net interest rate declined slightly, period expenses were well controlled, and asset quality was healthy. 1) The decline in gross margin led to a decline in net interest rate. The gross margin of 19H1 decreased by 2.8pct to 55.1% compared to the same period last year, mainly due to the increase in the share of mobile Internet media advertising business with low margin in Xiaozi Technology, which led to a decline in overall gross margin. The sales expense ratio decreased by 0.3 pct to 27.6%, and the management expense ratio (including R&D expenses) increased by 0.4 pct to 12.4%. Net interest rate decreased by 2.4pct to 11.7% compared to the same period last year. 2) Asset quality remains good. 19H1 accounts receivable decreased by $25.49 million to $300 million from the beginning of the year, and inventory decreased by $36.85 million to $450 million from the beginning of the year. The operating cash flow of 19H1 was 140 million yuan, a decrease of 46.05 million yuan from the same period last year. The overall asset quality was relatively good. Offline stores continue to adjust, and e-commerce is clearly recovering. 1) Continuously optimize the offline channel structure and optimize or close inefficient stores. As of 19H1, the company's total number of stores was 1,861, a decrease of 64 from the beginning of the year, including 1,318 direct-run stores (68%), 59 net customs, 543 franchise stores (32%), and 5 net customs. 2) Active adjustments online, and the recovery trend is obvious. 19H1 achieved online revenue of 160 million yuan, an increase of 26.3% over the previous year. Online revenue accounted for 18.4% of revenue, an increase of 4 pct over the same period last year, a significant increase. Among them, e-commerce increased by about 50% year-on-year in the second quarter alone, and the momentum is impressive. Xiaozi Technology continues to grow rapidly and is actively developing new businesses. 1) The scale of Xiaozi Technology's business continues to grow rapidly. 19H1 Xiaozi Technology achieved revenue of 180 million yuan, an increase of 40.6% over the previous year; realized net profit of 54.22 million yuan, an increase of 16.7% over the previous year, and a net profit performance ratio of 48% for the current period (promised to achieve net profit of 110 million yuan in 2019). 2) The expansion of new business has led to a decline in gross margin. In order to cope with increasingly intense competition in mobile marketing, Xiaozi Technology is actively developing new businesses, including helping advertisers such as large apps awaken sleeping users to reactivate, and arranging the applet business to enter the WeChat ecosystem. However, due to the low gross margin of the new business, Xiaozi Technology's gross margin fell 5.2 pct to 38.8%. The company is a leading enterprise in the women's shoes industry. Offline channels continue to optimize their structure, grow rapidly online, maintain stable performance, and maintain an “increased holding” rating. The company's offline stores were gradually adjusted to strengthen store efficiency, optimize the supply chain, and reduce costs and increase efficiency. Online has begun to recover after adjustments. The performance in 19Q2 was impressive, and it is expected to maintain a good upward trend in the second half of the year. Considering that offline channels are still being adjusted, the original profit forecast was slightly lowered. The net profit for 19-21 is expected to be 2.6/2.9/3.3 billion yuan (originally 2.8/3.2/3.7 billion yuan), corresponding EPS to be 0.61/0.68/0.75 (originally 0.64/0.74/0.85 yuan), and PE is 10/9/8 times, maintaining the “increase in holdings” rating.