Ever-Glory International Group, Inc.
Q4 2019 Earnings Call Transcript

Published: 30 Mar 2020

[Operator:]

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

[Wilson Bow:]

Thank you, operator. Hello, everyone and welcome to Ever-Glory International Group’s fourth quarter 2019 earnings conference call. The company distributed its earnings 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 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 statements 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 will 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, 2019 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 statements 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 now turn the call over to Mr. Wang. Jason, 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 full year 2019 earnings conference call.Results for the 2019 full year decreased both in retail business and wholesale business. This decrease was mainly due to the pressure of the economic downturn and the China-U.S. trade session. We will actively respond to the changes in the internal economic environment. During the fourth quarter, we intend our forecast on developing the retail business through our multi-brand strategy and store network optimization initiative while improving our wholesale business by upgrading customer portfolio and enhancing our account receivables.Retail side, our brands continue to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management changes continually improved the balance between inventory turnover and our diligent cost control measures further strengthened profitability of our business. All of our efforts have contributed to the solid build-out for the past year in order to create more visible and accessible locations rewarded or we located 117 stores during 2019.As of December 31, 2019 we operated a nationwide network of 1,101 stores compared with 1,381 stores as of December 31, 2018. While we still see strong demand for our products at our retail stores we continue to see opportunities in the e-commerce areas.Mobile platforms, such as our La go go stores on Tmall and the Dangdang.com are used as a 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. As a wholesale business, the company enhanced our extensive product development and the supply chain management expertise as well as network of high quality, reliable and cost efficient sourcing channels and manufacturing.In addition, our market research center provides our wholesale customers with in-depth research and analysis in the areas including brand, positioning, fashion trends, new material development and new guide design. Going forward, we will continue to focus on enhancing our product development capabilities and optimizing the customer base with our longer term vision of being a leading supply chain solution provider for middle to high apparel ground both in Mainland China and the worldwide.The company’s results of operations are obviously affected by global conditions in the global economy, including conditions that are outside of its control such as the impact of health and safety concerns from the outbreak of COVID-19. Although China has already begun to recover from the outbreak of COVID-19, epidemic continues to spread on the global scale and there is a risk of the epidemic returning to China in the future thereby causing future further business interruption. This concludes his comments.I will now walk through our financial results for the full year 2019. Please note that all numbers discussed today are in U.S. dollars unless otherwise noted. Full year 2019 financial results, total sales for the full year of 2019 were $383.1 million, a 14.6% decrease from $448.5 million in the full year of 2018. This decrease was mainly due to a 10.7% decrease in wholesale sales and an 18.2% decrease in retail sales.Wholesale sales from the company’s wholesale business decreased by 10.7% to $195.2 million for the full year of 2019 compared with $218.6 million for the full year of 2018. This decrease was mainly due to the decreased sales in Mainland China, United Kingdom, Hong Kong China, Germany and Europe-Other partially offset by increasing sales in Japan and United States.Retail sales for the company’s branded fashion apparel retail division decreased by 18.2% to $187.9 million for the full year of 2019 compared with $229.9 million for the full year of 2018. This decrease was mainly due to the decrease in same-store sales.Total gross profit for the full year of 2019 decreased by 19.4% to $118.8 million compared with $147.4 million for the full year of 2018. Total gross margin for the full year of 2019 decreased to 31% from 32.9% for the full year of 2018. Gross profit for wholesale business decreased by 4.6% to $39.9 million for the full year of 2019 compared with $41.8 million for the full year of 2018. Gross margin for the full year of 2019 increased to 20.4% compared with 19.1% for the full year of 2018. Gross profit for retail business decreased by 25.2% to $78.9 million for the full year of 2019 compared with $105.6 million for the full year of 2018. Gross margin for the full year of 2019 decreased to 42% from 45.9% for the full year of 2018.Selling expenses for the full year of 2019 decreased by 12.3% to $80.2 million or 20.9% of total sales compared with $91.4 million or 20.4% of total sales for the full year of 2018. The decrease was attributable to lower retail sales. General and administrative expenses for the full year of 2019 decreased by 11.8% to $35.1 million or 9.2% of total sales compared with $39.8 million or 8.9% of total sales for the full year of 2018. The decrease in absolute amount was mainly attributable to the decline in number of stores.Income from operations for the full year of 2019 decreased by 76.5% to $3.5 million compared with $15 million for the full year of 2018. Net income attributable to the company for the full year of 2019 decreased by 89.4% to $1.3 million compared with $12 million for the full year of 2018. Basic and diluted earnings per share were $0.09 and $0.81 for the full year of 2019 and 2018 respectively.As of December 31, 2019, Ever-Glory had approximately $48.6 million of cash and cash equivalents compared with approximately $47 million as of December 31, 2018. Ever-Glory had working capital of approximately $39.8 million as of December 31, 2019 and outstanding bank loans of approximately $29.9 million as of December 31, 2019.Our relentless efforts have been paying off with 2019 full year results and we look forward to further strengthening the fundamentals and increasing operating leverage to support the long-term profitability of our business.Thank you for participating in Ever-Glory’s 2019 full year earnings call. We look forward to talking with you last quarter. If you have additional questions please feel free to contact our IR department. Goodbye. Thank you. Thank you, operator.

[Operator:]

That’s concludes today’s presentation. Thank you for your participation. You may now disconnect.[No Q&A session for this event]