China-based and New York Stock Exchange listed - Zuoan Fashion Limited, a leading design-driven fashion casual menswear company witnessed its revenues and gross profits slipping by 36.1 percent and 44.2 percent respectively, year-on-year in the first quarter ending March 31, 2014.
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 same period fell 44.2% year over year to RMB75.5 million ($12.1 million) from RMB135.5 million in the same quarter of 2013.
Gross margin also dipped to 39.9% compared to 45.7% in the prior year period. Net income clocked RMB27.9 million ($4.5 million), a slide 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.
Chairman James Hong said, “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."
For the second quarter of 2014, Zuoan 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.