Ever-Glory International Group, Inc.
Q2 2019 Earnings Call Transcript

Published: 17 Aug 2019

[Operator:]

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

[Wilson Bow:]

Thank you, operator. Hello everyone and welcome to Ever-Glory International Group second 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 are Ever-Glory's Chairman, President and Chief Executive Officer, Mr. Yihua Kang; and the Chief Financial Officer, Mr. Jason Wang. Both of them will deliver prepared remarks followed by closing remarks.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 also be available on Ever-Glory's Investor Relations website.I will turn the call over to Mr. Kang. Everyone please.

[Yihua Kang:]

Okay, thank you, Wilson. Good morning to those in the United States and good evening to those in Asia. Thank you for joining our second quarter 2019 earnings conference call.Results for the second quarter of 2019 decreased both in retail business and wholesale business. This decrease was primarily due to the pressure of the economical downtime and China-U.S. trade forecasting. We were actively responded to the change in the challenging economic environment.During the second quarter, we maintained our focus on developing the retail businesses through our multi-brand strategy and store network optimization initiative, while improving our wholesales businesses by upgrading customer portfolio and enhancing our accounts receivables.Retail side, our brands continue to attract new customers and retain existing customers by focused on design, quality and volume. Our inventory management strategy continually improved the balance between inventory turnover and our division cost control measures further strengthened the profitability of our business.All of our efforts have contributed to the solid results for the past year. In order to create more visible and accessible locations, we remodeled or relocated 37 stores in the second quarter of 2019. As of June 30, 2019, we operated a nationwide network of 1,235 stores compared with 1,417 stores as of June 30, 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 JD.com 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 customers experience to grow our loyal customer base.As a wholesale business, the Company exchanged their product development and supply chain management expertise as well as network of higher quality, reliable and cost efficiency broad channels and manufacture. In addition, our large research center provided our wholesale customers [indiscernible] research and analysis of in the area including branding image, fashion trend, new material development and use that design.Going forward, we will continue to focus on in kind our product development capabilities and optimizing the customer page with our long-term attention of being [indiscernible] from middle to high end ever brand both in Mainland China and worldwide.Now, I will turn the call over to our CFO, Jason Wang, to provide details of our financial results. Jason?

[Jason Wang:]

Thank you, Mr. Kang, and hello to everyone on the call. I will now move through our financial results for second quarter 2019. Please note that, all numbers discussed today are in U.S. dollars unless otherwise noted.Total sales for the second quarter of 2019 were $77.3 million, a decrease of 12.7% from $88.5 million in the second quarter of 2018. This decrease was mainly due to 19.4% decrease in our retail business and a 4% decrease in wholesale business.Sales for the Company's branded fashion apparel retail division decreased by 19.4% to $40.1 million for the second quarter of 2019, compared with $49.7 million for the second quarter of 2018. This decrease was mainly due to a decrease in the numbers of stores and same-store sales. The Company had 1,235 retail stores as of June 30, 2019, compared with 1,417 retail stores as of June 30, 2018.Sales for the Company's wholesale division decreased by 4.0% to $37.3 million for the second quarter of 2019, compared with $38.8 million for the second quarter of 2018. This decrease was mainly due to decreased sales in Mainland China, Hong Kong China, Japan, Germany, United Kingdom and other European markets partially offset for increased sales in the United States.Total gross profit for the second quarter of 2019 decreased by 16.1% to $29 million, compared with $34.5 million for the second quarter of 2018. Total gross margin decreased to 37.5% from 39.0% for the second quarter of 2018.Gross profit for the retail business decreased by 16.1% to $23 million for the second quarter of 2019, compared with $27.4 million for the second quarter of 2018. Gross margin was 57.3%, compared to 55.1% for the second quarter of 2018.Gross profit for the wholesale business decreased by 16.0% to $6.0 million for the second quarter of 2019, compared with $7.2 million for the second quarter of 2018. Gross margin decreased to 16.1% from 18.4% for the second quarter of 2018.Selling expenses for the second quarter of 2019 decreased by 12.8% to $19.7 million, or 25.5% of total sales, compared with $22.6 million, or 25.5% of total sales for the second quarter of 2018. The decrease was mainly due to the marketing expenses associated with the promotion of the retail brand.General and administrative expenses for the second quarter of 2019 decreased by 16.8% to $7.3 million, or 9.5% of total sales, compared with $8.8 million, or 10.0% of total sales for the second quarter of 2018. The decrease was mainly due to the decline in number of stores.Income from operations for the second quarter of 2019 decreased by 37.7% to $2 million compared with $3.1 million for the second quarter of 2018.Net income attributable to the Company for the second quarter of 2019 was $1.9 million compared with $2.8 million for the second quarter of 2018. Basic and diluted earnings per share were $0.13 for the second quarter of 2019 compared with $0.19 for the second quarter of 2018.As of June 30, 2019, Ever-Glory had approximately $34.5 million of cash and cash equivalents, compared with approximately $47 million as of December 31, 2018. Ever-Glory had working capital of approximately $42.6 million as of June 30, 2019, and outstanding bank loans of approximately $26.0 million as of June 30, 2019.Our businesses, they both have been plenty up with 2019 second quarter results and we look forward to further strengthening the fundamentals and increasing operating leverage to support the long-term profitability of our business.This concludes my prepared remarks. Thank you for participating in Ever-Glory's second quarter of 2019 earnings call. We look forward to talking with you next quarter. If you have additional questions, please feel free to contact our IR Department. Thank you.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.