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Good business trends at VLOV
23
Aug '10
VLOV, Inc., China-based designer of VLOV brand men's apparel, announced financial results for the second quarter ended June 30, 2010.

"We are pleased with the business trends and financial results during the quarter," stated Mr. Qingqing Wu, Chairman and CEO of VLOV. Mr. Wu continued, "We are executing on our strategy to upscale our brand image amongst our target demographic by working with our distributors to move towards operating stand alone stores and store-in-stores and away from counters and concessions which lessen the value of our brand. Our distributors are presently operating 519 points of sale and plan to open between 30 and 40 high-end stand alone store locations by the end of 2010."

Mr. Wu concluded, "Even with our distributors closing over 200 counters and concessions this year, we were able to achieve top line revenue growth during the quarter of 27%. We are reconfirming our July 2010 guidance of $71 to $75 million top line revenue and adjusted net income of between $13.2 and $14.2 million."

Sales
Net sales in the second quarter of 2010 were $17.9 million compared to $14.1 million in the second quarter of 2009, a 27% increase. Net sales for the six months ended June 30, 2010 were $36.0 million, an increase of 12.8% from $31.9 million for the same period of 2009. The increase in our sales for the three months ended June 30, 2010 was primarily attributable to increased marketing efforts in the provinces of Liaoning and Shandong provinces and sales in Sichuan, a province our distributors did not operate POS during 2009.

Cost of Sales
Cost of sales in the second quarter of 2010 was $11.1 million, an increase of 23% from $9.0 million for the same three-month period in 2009. Cost of sales for the first six months of 2010 was $22.3 million, an increase of 9% from $20.5 million for the same six-month period in 2009. The increase was primarily due to the increase in net sales during the three months ended June 30, 2010.

As a percentage of net sales, our cost of sales was 62% and 62% for the three months and six months ended June 30, 2010 respectively, down slightly from 64% and 64% for the same three-month and six- month periods in 2009, respectively. Consequently, gross margin as a percentage of net sales increased to 38% and 38% for the three months and six months ended June 30, 2010, respectively, from 36% and 36% in the same periods in 2009, respectively.

Gross Profit
Second quarter 2010 gross profit increased 35% to $6.8 million versus $5.1 million for the second quarter of 2009. The increase in gross margin is primarily attributable to a 5% increase in the Company's average selling price to its distributors.

Selling Expenses
Second quarter 2010 selling and advertising expense totaled $2.6 million, or 14% of sales. This compares to $1.3 million, or 9% of sales in the second quarter of 2009. Selling expenses for the first six months of 2010 totaled $4.0 million, or 11% of sales compared to $2.1 million or 6% of sales in the period of 2009. These increases were mainly due to expenses associated with the Company's Fall 2010 preview held in May 2010 as well as increased advertising costs to increase brand awareness.

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