Zuoan Fashion Limited a leading design-driven fashion casual menswear company in China, announced its financial results for the second quarter ended June 30, 2013.
Second Quarter 2013 Financial Highlights
-Revenues in the second quarter of 2013 were RMB317.6 million ($51.7 million), an increase of 5.3% from RMB301.6 million in the same quarter of 2012.
-Gross profit in the second quarter decreased 3.7% year over year to RMB140.1 million ($22.8 million) from RMB145.5 million in the same quarter of 2012.
-Gross margin was 44.1% compared with 48.2% in the prior year period and 45.7% in the first quarter of 2013.
-Net income was RMB67.6 million ($11.0 million), an increase of 2.2% from RMB66.2 million in the same quarter of 2012.
-Diluted earnings per ordinary share was RMB0.61 ($0.10) in the second quarter, equivalent to RMB2.43 ($0.40) per ADS, compared to diluted earnings per ordinary share of RMB0.60 ($0.10) or RMB2.38 ($0.39) per ADS in the second quarter of 2012.
Second Quarter 2013 Financial Performance:
Revenue for the second quarter of 2013 was RMB317.6 million ($51.7 million), representing an increase of 5.3% from RMB301.6 million in the same quarter of 2012. The increase was primarily driven by growth in distributor sales volume.
During the quarter, distributor sales increased by 15.3% to RMB312.8 million from RMB271.2 million in the same quarter of 2012. Second quarter 2013 self-operated direct store sales increased to RMB 4.7 million from RMB3.2 million in the same quarter of 2012.
A net total of 20 distributor and sub-distributor stores and 1 self-operated direct store were opened in the second quarter of 2013, resulting in a total of 1,383 store locations as of June 30, 2013 compared to 1,362 store locations at the end of the first quarter.
Cost of sales increased by 13.7% to RMB177.4 million ($28.9 million) in the second quarter of 2013 from RMB156.1 million in the same quarter of 2012, primarily due to the higher quality of raw materials used in the Company's production of its products as well as the increased sales volume. As a percentage of revenues, cost of sales increased to 55.9% in the second quarter of 2013 from 51.8% in the same quarter of 2012.
Gross profit decreased by 3.7% to RMB140.1 million ($22.8 million) from RMB145.5 million in the second quarter of 2012. Second quarter 2013 gross margin was 44.1% compared with 48.2% in the same quarter of 2012. The decrease in gross margin was primarily due to higher unit costs the Company was not able to pass on to its customers as well as decreased revenue associated with the transition of the Company's higher margin, self-operated flagship stores to its distributors at the end of 2012. Gross margin at the Company's self-operated direct stores and distributor stores was 60.7% and 43.9%, respectively.
