Revenues dive 20.1% at Zuoan Fashion in Q3

20 Dec '13

4 min read

Zuoan Fashion Limited, a leading design-driven fashion casual menswear company in China, announced its financial results for the third quarter ended September 30, 2013.

Third Quarter 2013 Financial Highlights

• Revenues in the third quarter of 2013 were RMB380.5 million ($62.2 million), a decrease of 20.1% from RMB476.3 million in the same quarter of 2012.

• Gross profit in the third quarter decreased 30.3% year over year to RMB155.8 million ($25.5 million) from RMB223.6 million in the same quarter of 2012.

• Gross margin was 40.9% compared with 46.9% in the prior year period and 44.1% in the second quarter of 2013.

• Net income was RMB23.0 million ($3.8 million), a decrease of 75.3% from RMB92.8 million in the same quarter of 2012.

• Diluted earnings per ordinary share was RMB0.21 ($0.03) in the third quarter, equivalent to RMB0.83 ($0.13) per ADS, compared to diluted earnings per ordinary share of RMB0.83 ($0.14) or RMB3.34 ($0.55) per ADS in the third quarter of 2012.

Third Quarter 2013 Financial Performance

Revenue for the third quarter of 2013 was RMB380.5 million ($62.2 million), representing a decrease of 20.1% from RMB476.3 million in the same quarter of 2012. The decrease was primarily attributed to a cancellation of sales orders for the Company's Fall/Winter collection 2013 back in June, due to the economic downturn in the menswear sector during the second half of 2013.

During the quarter, distributor sales decreased by 16.0% to RMB378.3 million from RMB450.2 million in the same quarter of 2012. Third quarter 2013 self-operated direct store sales decreased to RMB2.2 million from RMB2.9 million in the same quarter of 2012. A net total of 309 distributor and sub-distributor stores were closed in the third quarter of 2013, resulting in a total of 1,074 store locations as of September 30, 2013 compared to 1,383 store locations at the end of the second quarter.

Cost of sales decreased by 11.1% to RMB224.7 million ($36.7 million) in the third quarter of 2013 from RMB252.7 million in the same quarter of 2012, in-line with the revenue decrease associated with cancelled sales orders. As a percentage of revenues, cost of sales increased to 59.1% in the third quarter of 2013 from 53.1% in the same quarter of 2012.

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