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LJ International expects significant earnings improvements in 2009

01
Jul '08
LJ International Inc (LJI) a leading jewelry manufacturer and retailer, reported financial results for the first quarter ended March 31, 2008.

Revenues for the first quarter of 2008 totaled $30.4 million, down 11% from $34.1 million in the first quarter of 2007. The Company noted that the decrease was primarily due to the recent global economic weakness, which resulted in decreased demand from the U.S., its largest wholesale market, as well as no sales of its high-end "Signature" jewelry line.

Revenues at the wholesale level totaled $21.8 million, down from $25.2 million in the first quarter of 2007. Overall retail revenues totaled $8.5 million in the first quarter of 2008, down from $8.8 million from a year earlier.

Excluding revenues from the Company's Signature line, retail revenues rose 143% to $8.5 million from $3.5 million in the first quarter of 2007, representing the continued growth at the ENZO Division.

Net income for the first quarter of 2008 was $1.1 million, or $0.05 per diluted share, up from $0.6 million, or $0.03 per diluted share, in the first quarter of 2007.

Net income during the first quarter of 2008 included a $2.2 million gain on the sale of investment property, offset by one-time charges of approximately $0.9 million in litigation expenses and $0.6 million relating to the write-off of bad debt from one of LJI's wholesale customers, a major U.S. jewelry chain that filed for bankruptcy protection.

Excluding these one-time events, net income for the first quarter of 2008 would have been $0.4 million, or $0.02 per diluted share.

Chairman and CEO Expects Significant Earnings Improvements in 2009

Yu Chuan Yih, Chairman and CEO of LJ International, commented, "The drop in revenue that we experienced during the first quarter of 2008 was a rare event for us, and we do not expect it to establish a trend.

It does, however, indicate how difficult it is to improve our financial performance in the current harsh economic environment.

In the U.S., still far and away our largest market, this quarter continued to be impacted by high gas prices and tightening credit prices, which are severely hitting consumers with full force and greatly dampening their ability and inclination to spend on luxury items such as jewelry.

Mr. Yih continued, "Although we expect the global economic weakness will continue to impact our performance through the remainder of 2008, we remain confident that we will still be able to achieve profitability for the full year.

Looking ahead towards 2009, we have already implemented a number of initiatives that are designed to capitalize on the current weak environment in order to build the proper foundation for next year.

We are confident that this foundation will enable us to return to a healthy growth rate and significant earnings improvements next year.

This expectation is based on our belief that China's economy will continue its rapid growth, with our ENZO stores taking full advantage of this trend, regardless of the economic situation in the U.S.


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