Retail sales from LA GO GO up, Ever-Glory

09 Aug '10

5 min read

Ever-Glory International Group, Inc., a leading apparel supply chain manager and retailer in China, reported its financial results for the second quarter ended June 30, 2010.

During the second quarter of 2010, net sales increased 9.4% to $23.1 million compared to $21.1 million in the second quarter of 2009. The increase in our sales was primarily attributable to increased sales in our retail business.

Sales generated from the Company's wholesale business decreased 4.3% to $18.3 million, compared to $19.1 million in the second quarter of 2009. This decrease was primarily due to our giving up some of the lower margin orders in the fourth quarter of 2009. Most orders we fulfilled to realize our sales in the second quarter of 2010 were taken in the fourth quarter of 2009, in which time some of our clients couldn't offer a good price due to the economic slowdown, so we voluntarily gave up some lower margin orders.

Retail sales from LA GO GO, the Company's branded retail division, increased 137.5% to $4.8 million, compared to $2.0 million in the second quarter of 2009. As of June 30, 2010, the Company had 210 LA GO GO retail stores.

In the second quarter of 2010, gross profit was $4.5 million, which represents a slight increase compared to the same period in 2009. Gross margin decreased 1.8% to 19.5% in the second quarter of 2010, compared to 21.3% in the second quarter of 2009.

For our wholesale business, gross margin decreased 4.9% to 13.9% in the second quarter of 2010, compared to 18.8% in the second quarter of 2009. This decrease was primarily due to an increase in labor and raw material prices. When customers placed orders with us in the fourth quarter of 2009, the prices of the orders were based on the labor costs and raw material costs in that period. In the second quarter of 2010, when we began to fulfill the orders placed in the fourth quarter of 2009, the average labor and raw material costs increased significantly. Therefore, the margin on these orders decreased.

For our retail business, gross margin decreased 4.3% to 40.6% in the second quarter of 2010, compared to 44.9% in the second quarter of 2009. The decrease was primarily due to the fact that we reduced our sales prices in order to increase our sales volume.

"The second quarter of 2010 proved to be a challenging quarter for us on wholesale business due to the increased labor and raw material prices," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory.

"But we are also very encouraged by our retail business's performance. Sales generated from our retail business increased considerably in the second quarter of 2010, which demonstrates the strong momentum we have with our retail strategy. We opened 26 new LA GO GO stores in the second quarter of 2010 and now have a total of 210 LA GO GO stores in China as of June 30, 2010."

Mr. Kang continued, "We plan to continue to develop LA GO GO through perfecting design styles and improving our store management efficiency. We are confident that we can strengthen and enhance same-store sales, and further expand LA GO GO's presence in China, in order to lay a foundation for organic growth."

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