Ever-Glory International Group, Inc.
Q4 2018 Earnings Call Transcript

Published: 29 Mar 2019

[Operator:]

Good day and welcome to the Ever-Glory International Group Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jason Wang, Chief Financial Officer. Please go ahead.

[Wilson Bow:]

Thank you, operator. Hello, everyone, and welcome to Ever-Glory International Group's fourth quarter 2018 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 are Ever-Glory's Chairman, President and Chief Executive Officer, Mr. Yihua Kang; and Chief Financial Officer, Mr. Jason Wang. Both will deliver prepared remarks followed by question-and-answer session. 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 Safe Harbor provisions of the US 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 US 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 now turn the call over to Ever-Glory's Chairman, President and CEO, Mr. Yihua Kang. Edward, 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 fourth quarter and full year 2018 earnings conference call. We are very pleased that we announced the 2018 full year results with a 14.9% year-over-year increase in wholesale business and 2% year-over-year increase in retail sales. Notably, we achieved year-over-year improvement in gross profit of 15.7% for our wholesale business, as well as 6% for our retail business. On retail side, our brand continues to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management strategy continued to improve the balance between inventory hangover and sales growth. And our segment 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 provide more better access to location, we remodeled or relocated 250 stores in 2018. As of December 31, 2018, we operated a nationwide network of 1,381 stores compared with 1,400 stores as of December 31, 2017. 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 Dang mall and JD.com are used as strategy, an effective way for us to drive customer engagement. We encourage broad channel shopping to reduce our facing inventory and create a unique and disciplined customer experience to grow our loyal customer base. Looking at our wholesale business, although revenue remained relatively flat for 2018 compared with 2017, the overall market conditions in many of our key global markets remained challenging. However, we’re excitedly encouraged by sales results from Japan, Mainland China, United Kingdom and United States, which reported a year-over-year increase of 115.7%, [75.6%], 24.5% and 22.5% respectively for 2018. Looking ahead, we are excited with where we invest in the plan and are emerging, and focued on operational excellence and efficiency to further enhance our position in China's ladies apparel market and wholesale industry. Now, I'd like to turn the call over to our CFO, Jason Wang, who will provide details of our financial results for you. Thank you.

[Jiansong Wang:]

Thank you, Mr. Kang and hello to everyone on the call. Operating efficiency continued to improve in 2018, demonstrating our ability to control costs in the weak market environment. I will now walk through our financial results for the full year 2018. Please note that all numbers discussed today are in US dollars unless otherwise noted. Total sales for the full year of 2018 were $448.5 million, a 7.9% increase from $415.6 million in the full year of 2017. This increase was primarily due to a 14.9% increase in wholesale sales and a 2% increase in retail sales. Wholesale sales from the company's wholesale business increased by 14.9% to $218.6 million for the full year of 2018, compared with $190.2 million for the full year of 2017. This increase was primarily due to increased sales in Japan, Mainland China, United Kingdom and United States, partially offset by decreased sales in Hong Kong China, Germany and Europe-Other. Retail sales from the company's branded fashion apparel retail division increased by 2% to $229.9 million for the full year of 2018, compared with $225.3 million for the full year of 2017. This increase was primarily due to an increase in same-store sales. Total gross profit for the full year of 2018 increased by [9.6%] to $147.4 million compared with $135.7 million for full year of 2017. Total gross margin for the full year of 2018 increased to 32.9% from 32.7% for the full year of 2017. Gross profit for wholesale business increased by 15.7% to $41.8 million for the full year of 2018, compared with $36.1 million for the full year of 2017. Gross margin for the full year of 2018 increased to 19.1% compared with 19% for the full year of 2017. Gross profit for retail business increased by 6% to $105.6 million for the full year of 2018, compared with $99.6 million for the full year of 2017. Gross margin for the full year of 2018 increased to 45.9% from 44.2% for the full year of 2017. Selling expenses for the full year of 2018 increased by 6.4% to $91.4 million, or 20.4% of total sales, compared with $85.9 million, or 20.7% of total sales for the full year of 2017. The increase was attributable to higher retail sales. General and administrative expenses for the full year of 2018 increased by 13.6% to $39.8 million, or 8.9% of total sales, compared with $35.1 million, or 8.4% of total sales for the full year of 2017. The increase was mainly due to increased average salaries. Income from operations for the full year of 2018 increased by 1.8% to $15 million compared with $14.7 million for the full year of 2017. Net income attributable to the company for the full year of 2018 decreased by 3.6% to $12 million compared with $12.5 million for the full year of 2017. Basic and diluted earnings per share were $0.81 and $0.84 for the full year of 2018 and 2017, respectively. Turning to the balance sheet. As of December 31, 2018, Ever-Glory had approximately $47 million of cash and cash equivalents, compared with approximately $62.9 million as of December 31, 2017. Ever-Glory had working capital of approximately $80.1 million as of December 31, 2018, and outstanding bank loans of approximately $29.5 million as of December 31, 2018. Our businesses, they both have been plenty up with 2018 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. This concludes my prepared remarks. Operator, we are now ready to take questions.

[Yihua Kang:]

Okay, thank you. Thank you for joining Ever-Glory's fourth quarter and a full year 2018 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. Thank you.

[Operator:]

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