Ever-Glory International Group, a leading apparel supply chain manager and retailer based in China, reported its financial results for the second quarter ended June 30, 2013.
Total sales for the quarter were $59.1 million, an increase of 25.3% compared to $47.2 million in the second quarter of last year. This increase was primarily attributable to increased sales in Ever-Glory's retail business, which was partially offset by decreased sales in our wholesales business.
Retail sales for the quarter from LA GO GO, Ever-Glory's branded retail division, increased 74.5% to $32.1 million, compared to $18.4 million for the same period last year. This increase was primarily due to the increase in new stores opened and increase in same store sales. Ever-Glory had 831 LA GO GO stores as of June 30, 2013, compared to 562 LA GO GO stores as of June 30, 2012.
Wholesale sales generated from Ever-Glory's wholesale business for the quarter decreased 6.1% to $27.1 million, compared to $28.8 million for the same period last year. This decrease was primarily attributable to decreased sales in China, the United States, Germany and France.
The reduced sales in the oversea segment due to global economic uncertainty and instability, the developed economies represented by Europe and the U.S. are recovering slowly, which seriously impacted China's apparel exports; as a result, Ever-Glory's overseas wholesale business also faced declining orders.
Furthermore, domestic fashion consumption in China was weak due to the slow microeconomic development in China. Retailers in China who buy from Ever-Glory's domestic wholesale business reduced their inventories, resulting in a 21.2% decrease in our domestic wholesale sales compared to the same period last year.
Total gross profit for the quarter was $19.5 million, or 32.9% of total sales, compared to $13.6 million, or 28.8% of total sales for the same period last year.
Selling expenses for the quarter increased 42.1% to $9.9 million compared to $7.0 million for the same period last year. As a percentage of sales, selling expenses increased to 16.7% compared to 14.8% for the same period last year.
The increase was attributable to the increased number of LA GO GO stores, leading to increased numbers of retail employees and increased average salaries, as well as the increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.
General and administrative expenses for the quarter increased 31.3% to $5.5 million compared to $4.2 million for the same period last year. As a percentage of sales, general, and administrative expenses increased to 9.3% compared to 8.9% for the same period last year. The increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of Ever-Glory's business expansion.
Income from operations for the quarter increased 67.9% to $4.1 million compared to $2.4 million for the same period last year as a result of increased gross revenue. As a percentage of sales, income from operations accounted for 6.9% of Ever-Glory's total sales for the quarter, an increase of 1.8% compared to 5.1% last year.
For the second quarter, net income was $2.7 million or $0.18 per diluted share, an increase of 16.0% from $2.4 million, or $0.16 per diluted share in the second quarter of 2012. Net income in the second quarter of 2012 includes approximately $0.2 million, or $0.01 per diluted share, of non-cash income related to the change in fair value of a derivative liability.
The change in fair value of a derivative liability in the second quarter of 2013 was not significant. Excluding this non-cash item for the second quarter 2013 and 2012, non-GAAP diluted earnings per share were $0.18 in the second quarter of 2013 compared to $0.15 in the second quarter of 2012. See "About Non-GAAP Financial Measures" below.