SHANGHAI, July 29, 2014 /PRNewswire/ -- Zuoan Fashion
Limited (NYSE: ZA) ("Zuoan" or the "Company"), a leading
design-driven fashion casual menswear company in China, today announced its financial results
for the first quarter ended March 31,
2014.
First Quarter 2014 Financial Highlights
- Revenues in the first quarter of 2014
were RMB189.2 million ($30.4 million), a decrease of 36.1% from
RMB296.3 million in the same quarter
of 2013.
- Gross profit in the first quarter
decreased 44.2% year over year to RMB75.5
million ($12.1 million) from
RMB135.5 million in the same quarter
of 2013.
- Gross margin was 39.9% compared to
45.7% in the prior year period.
- Net income was RMB27.9 million ($4.5
million), a decrease of 62.2% from RMB73.8 million in the same quarter of 2013.
- Diluted earnings per ordinary share
was RMB0.25 ($0.04) in the first quarter, equivalent to
RMB1.00 ($0.16) per ADS, compared to diluted earnings per
ordinary share of RMB0.66
($0.11) or RMB2.65 ($0.43) per
ADS in the first quarter of 2013.
James Hong, Founder, Chairman and
Chief Executive Officer, commented, "The ongoing downturn in
China's retail industry has had an
impact on many retailers and their supply chain partners, including
Zuoan. In spite of these challenges, we are pleased to have met our
revenue guidance and continue to generate positive cash flows from
our operations. Although the general market environment is not
expected to improve in the short term, we believe that many of the
macro challenges that impacted our business over the last year are
slowly abating. As our growth returns to improved levels, we will
remain prudent with spending and ensure our resources are applied
to the most relevant areas of our business to ensure revenue and
profit growth ahead. While many of our smaller competitors are
expected to endure more challenges ahead, we are confident Zuoan is
on a gradual path to recovery, enabling us to be a stronger player
in China's fashion casual menswear
industry."
First Quarter 2014 Financial Performance
Revenue for the first quarter of 2014 was RMB189.2 million ($30.4
million), representing a decrease of 36.1% from RMB296.3 million in the same quarter of 2013.
This was primarily driven by a decrease in sales volume from
company distributors due to the economic downturn in China since 2013 as well as the 3% decrease in
wholesale price from the retail price since third quarter of 2013.
During the quarter, distributor sales decreased by 36.2% to
RMB187.1 million from RMB293.1 million in the same quarter of 2013.
First quarter 2014 self-operated direct store sales decreased to
RMB2.1 million from RMB3.1 million in the same quarter of 2013.
A net total of 6 distributor and sub-distributor stores were
opened and 1 self-operated direct store was closed in the first
quarter of 2014, resulting in a total of 1,087 store locations as
of March 31, 2014 compared to 1,362
store locations as of March 31, 2013
and 1,082 store locations as of December 31,
2013.
Cost of sales decreased by 29.3% to RMB113.7 million ($18.3
million) in the first quarter of 2014 from RMB160.8 million in the same quarter of 2013,
primarily due to the sales decrease in the first quarter. As a
percentage of revenues, cost of sales increased to 60.1% in the
first quarter of 2014 from 54.3% in the same quarter of 2013.
Gross profit decreased by 44.2% to RMB75.5 million ($12.1
million) from RMB135.5 million
in the first quarter of 2013. First quarter 2014 gross margin was
39.9% compared to 45.7% in the same quarter of 2013. The decrease
in gross margin was primarily due to the aforementioned decrease in
wholesale pricing. Gross margin at the Company's self-operated
direct stores and distributor stores was 44.4% and 39.9%,
respectively.
Selling and distribution expenses in the
first quarter were RMB24.6 million
($4.0 million), or 13.0% of revenue,
compared to RMB26.5 million, or 8.9%
of revenue in the same quarter of 2013. The percentage increase was
primarily due to the increase in the advertising and promotion
expenses for the marketing activities carried out to attract the
brand awareness since third quarter of 2013.
Administrative expenses in the first quarter were
RMB12.4 million ($2.0 million), or 6.5% of revenue, compared to
RMB10.3 million, 3.5% of revenue in
the same quarter of 2013. This percentage increase was primarily
due to the depreciation charges of leasehold improvement of our
office building located in Shanghai which has been occupied since second
quarter of 2013.
Effective tax rate in the first quarter was 26.0%
compared to 25.2% in the same quarter of 2013.
Net income for the first quarter decreased by 62.2% to
RMB27.9 million ($4.5 million) from RMB73.8
million in the same quarter of 2013. First quarter net
margin was 14.7% compared to 24.9% in the first quarter of
2013.
Diluted earnings per ordinary share were
RMB0.25 ($0.04) in the first quarter of 2014, equivalent
to RMB1.00 ($0.16) per ADS, compared to diluted earnings per
ordinary share RMB0.66 ($0.11) or RMB2.65
($0.43) per ADS in the first quarter
of 2013. The Company's diluted number of shares outstanding were
111.3 million in the first quarter ended March 31, 2014.
As of March 31, 2014, the Company
had cash, cash equivalents of RMB1,461.7
million ($235.1 million),
compared to RMB1,227.4 million as of
December 31, 2013. Net cash provided
by operating activities was RMB232.7
million ($37.4 million) in the
three months ended March 31, 2014,
compared to RMB208.2 million in the
three months ended March 31,
2013.
Outlet
Type:
|
1Q2013
|
1Q2014
|
Direct
Stores
|
7
|
6
|
Distributor and
Sub-distributor Stores
|
1,292
|
1,027
|
Distributor-Operated
Flagship Stores
|
63
|
54
|
Total:
|
1,362
|
1,087
|
Financial Outlook
For the second quarter of 2014, the Company currently
anticipates revenue in the range of RMB230-RMB250 million ($37.0-$40.2 million), gross margin of
approximately 30-33%, net loss of approximately RMB3.0-RMB5.0 million ($0.5-$0.8 million) and basic and fully diluted
loss per share of approximately RMB0.03 ($0.004)-RMB0.04 ($0.007), equivalent to RMB0.11 ($0.02)-RMB0.18 ($0.03) per ADS.
Approximately 160-180 net retail stores are expected to be
closed by distributors and sub-distributors in the second quarter
of 2014.
Conference Call Information
Zuoan's management will host a conference call on July 29th, 2014 at 8:30 AM
ET to discuss financial results. Listeners may access the
call by dialing #1-719-325-2454. A webcast will also be available
via http://public.viavid.com/index.php?id=110196. A replay of the
call will be available through August 5th,
2014 by dialing #1-858-384-5517, access code: 8079702.
Exchange Rate
This announcement contains translations of certain Renminbi
amounts into U.S. dollars at specified rates solely for the
convenience of readers. Unless otherwise noted, all translations
from Renminbi to U.S. dollars were made at the exchange rate of
RMB 6.2164 to US$1.00, as set forth
in the H.10 statistical release of the Federal Reserve Board on
March 31, 2014.
About Zuoan Fashion Limited
Zuoan Fashion Limited is a leading design-driven fashion casual
menswear company in China, and is
head-quartered in Shanghai. Zuoan offers a wide range of
products, including men's casual apparel, footwear and lifestyle
accessories, primarily targeting urban males between the ages of 20
and 40 who prefer stylish clothing that represents a sophisticated
lifestyle. Through extensive networks of distributors and retail
stores, Zuoan sells its products in 31 of China's 32 provinces and municipalities. As of
March 31, 2014, Zuoan had 1,087
stores located in China.
Safe Harbor
This news release may contain forward-looking information about
Zuoan Fashion Limited, which is covered under the safe harbor for
forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are
statements that are not historical facts. These statements can be
identified by the use of forward- looking terminology such as
believe, expect, may, will, should, project, plan, seek, intend, or
anticipate or the negative thereof or comparable terminology, and
include discussions of strategy, and statements about industry
trends and Zuoan Fashion Limited's future performance, operations,
and products.
Such statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
projected. Actual performance results may vary significantly from
expectations and projections. Further information regarding this
and other risk factors are contained in Zuoan's public filings with
the U.S. Securities and Exchange Commission.
All information provided in this news release and in any
attachments is as of the date of the release, and the companies do
not undertake any obligation to update any forward-looking
statement as a result of new information, future events or
otherwise, except as required under law.
Contact Information
John Low
Email: john.low@zuoancn.com
ICR, LLC
William Zima
Phone: +86-10-6583-7511
Zuoan Investor Relations Department
US: 1-646-308-1614
ZUOAN FASHION
LIMITED
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|
|
|
|
Three months period ended March 31
|
|
|
2013
|
2014
|
2014
|
|
|
RMB
|
RMB
|
US$
|
(in
thousands)
|
|
|
|
|
Revenues
|
|
296,254
|
189,179
|
30,432
|
Cost of goods
sold
|
|
(160,802)
|
(113,661)
|
(18,284)
|
Gross
profit
|
|
135,452
|
75,518
|
12,148
|
Other
income
|
|
1,888
|
1,430
|
230
|
Selling and
distribution expenses
|
|
(26,463)
|
(24,630)
|
(3,962)
|
Administrative
expenses
|
|
(10,309)
|
(12,356)
|
(1,988)
|
Finance
costs
|
|
(1,941)
|
(2,256)
|
(363)
|
Profit before
taxation
|
|
98,627
|
37,706
|
6,066
|
Income tax
expense
|
|
(24,822)
|
(9,806)
|
(1,577)
|
Profit after
taxation
|
|
73,805
|
27,900
|
4,488
|
|
|
|
|
|
Other comprehensive
loss:
Foreign exchange
difference arising from
translation of foreign currency financial
statements
|
|
(858)
|
805
|
129
|
Total comprehensive
income for the periods
|
|
72,947
|
28,705
|
4,617
|
|
|
|
|
|
Earnings per share
(RMB):
|
|
|
|
|
Basic earnings per
share
|
|
0.66
|
0.25
|
0.04
|
Diluted earnings per
share
|
|
0.66
|
0.25
|
0.04
|
|
|
|
|
|
Weighted average
basic no. of shares ('000)
|
|
111,276
|
111,276
|
|
Weighted average
diluted no. of shares ('000)
|
|
111,276
|
111,276
|
|
ZUOAN FASHION
LIMITED
|
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
As of
December 31
|
As of March
31
|
(in
thousands)
|
2013
|
2014
|
2014
|
ASSETS
|
RMB
|
RMB
|
US$
|
|
|
|
|
Non-current
assets
|
|
|
|
Property, plant and
equipment
|
17,377
|
13,923
|
2,240
|
|
|
|
|
Current
assets
|
|
|
|
Inventories
|
24,629
|
36,141
|
5,814
|
Trade and other
receivables
|
450,983
|
286,434
|
46,077
|
Prepayments
|
94
|
-
|
-
|
Fixed deposits -
pledged
|
41,800
|
58,160
|
9,356
|
Cash and cash
equivalents
|
1,227,402
|
1,461,655
|
235,129
|
|
1,744,908
|
1,842,390
|
296,376
|
Total
assets
|
1,762,285
|
1,856,313
|
298,615
|
|
|
|
|
EQUITY AND
LIABILITIES
|
|
|
|
|
|
|
|
Share
capital
|
185
|
185
|
30
|
Share
premium
|
426,165
|
426,165
|
68,555
|
Reserves
|
49,165
|
50,269
|
8,086
|
Retained
profits
|
1,007,517
|
1,035,417
|
166,562
|
Total
equity
|
1,483,032
|
1,512,036
|
243,233
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
Trade and other
payables
|
124,398
|
185,167
|
29,787
|
Interest-bearing bank
borrowings
|
149,550
|
148,910
|
23,954
|
Income tax
payable
|
5,305
|
10,200
|
1,641
|
Total
liabilities
|
279,253
|
344,277
|
55,382
|
Total equity and
liabilities
|
1,762,285
|
1,856,313
|
298,615
|
ZUOAN FASHION
LIMITED
|
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOWS
|
|
|
Three months period ended March 31
|
|
2013
|
2014
|
2014
|
(in
thousands)
|
RMB
|
RMB
|
US$
|
Cash flows from
operating activities
|
|
|
|
Profit before
taxation
|
98,627
|
37,706
|
6,066
|
Adjustments for
:
|
|
|
|
Depreciation of
property, plant and equipment
|
588
|
3,276
|
527
|
Equity-settled
employees benefit expenses
|
457
|
299
|
48
|
Interest expenses on
bank borrowings
|
1,941
|
2,256
|
363
|
Loss on disposal of
property, plant and equipment
|
183
|
178
|
29
|
Interest
income
|
(1,888)
|
(1,430)
|
(230)
|
|
|
|
|
Operating profit
before working capital changes
|
99,908
|
42,285
|
6,802
|
Increase in
inventories
|
(17,909)
|
(11,512)
|
(1,852)
|
Decrease in trade and
other receivables
|
143,613
|
164,549
|
26,470
|
Decrease in
prepayments
|
-
|
94
|
15
|
(Increase)/decrease
in fixed deposits pledged
|
1,021
|
(16,360)
|
(2,632)
|
Increase in trade and
other payables
|
7,305
|
60,769
|
9,776
|
Cash generated from
operations
|
233,938
|
239,825
|
38,579
|
Interest
paid
|
(1,941)
|
(2,256)
|
(363)
|
Income tax
paid
|
(23,786)
|
(4,911)
|
(790)
|
Net cash generated
from operating activities
|
208,211
|
232,658
|
37,426
|
|
|
|
|
Cash flows from
investing activities
|
|
|
|
Acquisition of
property, plant and
equipment
|
(9)
|
-
|
-
|
Interest
received
|
1,888
|
1,430
|
230
|
Net
cash (used in)/generated from investing
activities
|
1,879
|
1,430
|
230
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities
|
|
|
|
Bank loans
obtained
|
16,150
|
64,360
|
10,353
|
Repayment of bank
loans
|
(13,400)
|
(65,000)
|
(10,456)
|
Net cash
(used in)/generated from financing
activities
|
2,750
|
(640)
|
(103)
|
|
|
|
|
Net increase in cash
and cash equivalents
|
212,840
|
233,448
|
37,554
|
Exchange
difference
|
(858)
|
805
|
129
|
Cash and cash
equivalents at beginning of the periods
|
918,451
|
1,227,402
|
197,446
|
Cash and cash
equivalents at end of the periods
|
1,130,433
|
1,461,655
|
235,129
|
SOURCE Zuoan Fashion Limited