Ever-Glory International Group, Inc.
Q1 2018 Earnings Call Transcript

Published: 15 May 2018

[Operator:]

Good day, and welcome to the Ever-Glory International Group First Quarter 2018 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 sir.

[Wilson Bow:]

Thank you, Operator. Hello everyone, and welcome to Ever-Glory International Group's first quarter 2018 earnings conference call. The company distributed the earning press release earlier today via Newswires 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. Jiansong Wang, while Edward Mr. Yihua Kang, the Ever-Glory's Chairman, President and Chief Executive Officer is on the business trip today and unable to join the 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 result may defer 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, 2017 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, the 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.

[Jiansong Wang:]

Thank you, Wilson. Good morning to those in the United States and good evening to those participants in Asia. Thank you for joining our first quarter 2018 earnings conference call. We are glad to start 2018 with solid first quarter without same to strong execution on our overall trends which focuses our operational improvement in all to enhance efficiencies and increase profitability. Our total sales increased by 9% year-over-year mainly driven by an 18.9% year-on-year revenue growth in our retail business. Retail side our four retail brands have delivered transparent sales results for the 2018 spring/summer collections in [indiscernible] La go go which focuses on innovative and distinctive product designs that tend for special, trend, quality and value. Our store network optimization depends and commencing initiative also helps to improve retail sales and enhance customer. Particularly, we look forward we will continue to optimize our operation so that positive trends can continue. We remodeled or relocated 40 stores during the first quarter and remain on check to relocate or remodel a creative - of 200 to 300 stores in 2018 as March 31, 2018 we operated a nationwide network of 1,409 stores compared with 1,359 stores as of March 31, 2017. We currently had also played an important role in our overall retail changes. I wanted to elaborate a little bit more on this point. For example the number of new customers that come in through our retail store and same-store has constant growth and those platforms have also brought a lot of cost channel spending opportunities at our offline stores. We believe we will have more opportunities in the e-commerce area and we will be able to bid customers shopping be heavier and fashion tested which in turn will enable us to acquire new customers and retail service our existing customers. Looking at our hotel business, total revenues decreased on a year-on-year basis primarily attributable to the decreased sales in Mainland China, that’s mainly because we proactively terminated our contract with some domestic clients who have relatively poor credit and delayed payment history with a goal of reducing our credit risk going forward we will implement a greater client evolution system and remains diligent in account receivable connection. And always careful with control and margin measurement, we believe that enduring exchange of our hotel business we are supporting it long-term profitability. This concludes Mr. Wang's comments. I will now go through our financial results for the first quarter of 2018. Please note that all numbers discuss today are in U.S. dollars unless otherwise noted. Total sales for the first quarter of 2018 were $92.8 million, a increase of 9% from $85.1 million in the first quarter of 2017. This increase was primarily driven by an 18.9% increase in our retail business, partially offset by a 10.8% decrease in wholesale business. Sales for the company’s branded fashion apparel retail division increased by 18.9% to $57.5 million for the first quarter of 2018, compared with $56.8 million for the first quarter of 2017. This increase was primarily due to an increase in same-store sales. The company had 1,409 retail stores as of March 31, 2018, compared with 1,359 retail stores as of March 31, 2017. Sales for the company’s wholesale division decreased by 10.8% to $25.3 million for the first quarter of 2018, compared with $28.3 million for the first quarter of 2017. This decrease was primarily attributable to decreased sales in Mainland China, Germany, the United Kingdom, other European markets and Hong Kong, partially offset by increased sales in the United States and Japan. Total gross profit for the first quarter of 2018 increased by 9.9% to $31.3 million, compared with $28.5 million for the first quarter of 2017. Total gross margin increased to 33.8% from 33.5% for the first quarter of 2017. Gross profit for the retail business increased by 15% to $25.5 million for the first quarter of 2018 compared with $22.2 million for the first quarter of 2017. Gross margin was 37.8%, compared to 39.1% for the first quarter of 2017. Gross profit for the wholesale business decreased by 7.9% to $5.8 million for the first quarter of 2018, compared with $6.3 million for the first quarter of 2017. Gross margin increased to 23% from 22.3% for the first quarter of 2017. Selling expenses for the first quarter of 2018 increased by 12.6% to $22.2 million, or 24% of total sales, compared with $19.7 million, or 23.2% of total sales for the first quarter of 2017. The increase was attributable to the increased store decoration and marketing expenses. General and administrative expenses for the first quarter of 2018 increased by 5.8% to $7.7 million, or 8.3% of total sales compared with $7.3 million or 8.5% of total sales for the first quarter of 2017. The increase was mainly attributable to the increased average salaries. Income from operations for the first quarter of 2018 decreased by 4.2% to $1.4 million compared with $1.5 million for the first quarter of 2017. Net income attributable to the company for the first quarter of 2018 was $0.8 million compared with $1 million for the first quarter of 2017. Basic and diluted earnings per share were $0.06 for the first quarter of 2018 compared with basic and diluted share earnings per share of $0.07 for the first quarter of 2017. Turning to the balance sheet as of March 31, 2018, Ever-Glory had approximately $55.2 million of cash and cash equivalents, compared with approximately $52.9 million as of December 31, 2017. Ever-Glory had a working capital of approximately $57.7 million as outstanding bank loan of approximately $41.6 million as of March 31, 2018. We are glad to say that our operating efficiency continued to improve in the first quarter overall gross margin increased by total 50 points with wholesale gross margin increasing by 70 basis points compared with the same period of last year. Looking ahead to the remainder of 2018, our percentage remains the same and we executed against about very focused and very efficiently. We changed in the fundamentally and improved of rating the average of our overall business. We are excited about the opportunities that is before us and we look forward to updating you with our progress next quarter. This concludes our prepared remarks. Thank you for participating in today’s call. If you have additional questions, please feel free to contact our IR department or TPG Investor Relations. Good bye. Thank you.

[Operator:]

Thank you. That will conclude today’s conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.