Ever-Glory International Group, Inc.
Q1 2019 Earnings Call Transcript

Published: 14 May 2019

[Operator:]

Good day and welcome to the Ever-Glory International Group First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over Mr. Wilson. Please go ahead.

[Wilson Bow:]

Thank you, operator. Hello, everyone, and welcome to Ever-Glory International Group first quarter 2019 earnings conference call. The company distributed its earning press release earlier today via Newswire services. You can also download it from Ever-Glory’s website at www.everglorygroup.com. With us today is Ever-Glory's Chief Financial Officer, Mr. Jason Wang; Mr. Yihua Kang, Ever-Glory's Chairman, President and Chief Executive Officer is on a business trip today and is unable to join this call. Mr. Wang will read the prepared remarks on behalf of Mr. Kang. Before we get started, I will review the Safe Harbor statement regarding today's conference call. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results may differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in other documents filed with the U.S. Securities and Exchange Commission. Ever-Glory does not assume any obligation to update any forward-looking statement, except as required under applicable law. As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Ever-Glory's Investor Relations website. Now, I will turn the call over to Mr. Wang. Please.

[Jason Wang:]

Thank you, Wilson. Good morning to those in the U.S. and good evening to those participants in Asia. Thank you for joining our first quarter 2019 earnings conference call. We are very pleased to announce the 2019 first quarter results with 11.3% year-over-year increase in wholesale sales. Notably, we achieved year-over-year improvement in gross profit for -- of 13% for our wholesale business. Retail side, our brands continue to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management strategy continually improve the balance between inventory turnover and the sales growth. And our division cost control measures further strengthened the profitability of our business. All of our efforts have contributed to solid results for the past year. In order to create more visible and accessible locations, we remodeled or relocated seven stores in first quarter 2019. As of March 31, 2019, we operated a nationwide network of 1,315 stores compared with 1,409 stores as of March 31, 2018. While we still see strong demand for our product at our retail stores, we continue to see opportunities in the e-commerce area. Mobile platforms, such as our La go go stores on Tmall and [Indiscernible] are used as strategic and effective way for us to drive customer engagement. We encourage cross-channel shopping, reduce out-of-season inventory and create a unique and differentiated customer experience to grow our loyal customer base. Looking at our wholesale business, total revenue increased 13% in the fourth quarter of 2019 compared with 2018. The overall market conditions in many of our key global markets remained challenged. However, we expressed encouraging sales results from Mainland China, the European markets, and Japan, which reported a year-over-year increase of 155%, 17%, and 103%, respectively compared to same period 2018. Looking ahead, with the same foundation, we are -- we invest in the brands and innovation and focus on operational excellence and efficiency to further enhance our position in China's feminine apparel market and the wholesale industry. This concludes Mr. Kang's comments. I will now walk through our financial results for the first quarter 2019. Please note that, all numbers discussed today are in U.S. dollars unless otherwise noted. Total sales for the first quarter of 2019 were $88 million, a decrease of 5.2% from $92.8 million in the first quarter of 2018. This decrease was primarily driven by a 11.4% decrease in our retail business, partially offset by 11.3% increase in wholesale business. Sales for company's branded fashion apparel retail division decreased by 11.4% to $59.9 million for the first quarter of 2019, compared with $57.5 million for the first quarter of 2019. In 2018, this decrease was primarily due to a decrease in same-store sales. The company has 1,315 retail stores as of March 31, 2019, compared with 1,409 retail stores as of March 31 2018. Sales for the company's wholesale division increased by 11.3% to $28.1 million for the first quarter of 2019, compared with $25.3 million for the first quarter of 2018. This increase was primarily attributable to increased sales in Mainland China, other European markets and Japan, partially offset for decreased sales in Hong Kong, the United States, the United Kingdom and Germany. Total gross profit for the first quarter of 2019 decreased, by 6.3% to $29.4 million, compared with $31.3 million for the first quarter of 2018. Total gross margin decreased to 33.4% from 33.8% for the first quarter of 2018. Gross profit for the retail business decreased by 10.7% to $22.8 million for the first quarter of 2019, compared with $25.5 million for the first quarter of 2018. Gross margin was 38.1%, compared to 37.8% for the first quarter of 2018. Gross profit for the wholesale business increased by 13% to $6.6 million for the first quarter of 2019, compared with $5.8 million for the first quarter of 2018. Gross margin increased to 23.3% from 23% for the first quarter of 2018. Selling expenses for the first quarter of 2019 decreased by 5.5% to $21 million or 23.9% of total sales, compared with $22.2 million or 24% of total sales for the first quarter of 2018. The decrease was attributable to the decreased sales. General and administrative expenses for the first quarter of 2019 decreased by 1.9% to $5.5 million (sic) [$7.5 million] or 8.6% of total sales compared with $7.7 million or 8.3% of total sales for the first quarter of 2018. The decrease was mainly attributable to the decreased office expenses. Income from operations for the first quarter of 2019 decreased by 43.2% to $0.8 million, compared with $1.4 million for the first quarter of 2018. Net income attributable to the company for the first quarter of 2019 was $0.5 million, compared with $0.8 million for the first quarter of 2018. Basic and diluted share loss per share were $0.04 for the first quarter of 2019, compared with basic and diluted earnings per share of $0.06 for the first quarter of 2018. As of March 31, 2019, Ever-Glory had approximately $57.9 million of cash and cash equivalents, compared with approximately $47 million as of December 31, 2018. Ever-Glory had working capital of approximately $28.5 million as of March 31, 2019, and outstanding bank loans of approximately $28.8 million as of March 31, 2019. Our businesses, they both have been plenty up with 2019 first quarter results and we look forward to further strengthening the fundamentals and increasing operating leverage to support the long-term profitability of our business. Thanks for attending Ever-Glory's first quarter 2019 earnings call. We look forward to talking with you next quarter. If you have additional questions, please feel free to connect to our IR department. Thanks. Thank you, operator.

[End of Q&A:]

Thank you, operator, and to all the participants. Greetings from China and from Ever-Glory. See you next time.

[Operator:]

This concludes today's call. Thank you for your participation. You may now disconnect.