Zuoan Fashion Q1 revenue up by 32%

Chinese men fashion retailer Zuoan Fashion Ltd.

released Tuesday revenue for the first three months of 2012 up by 32.3% to RMB279.9 million ($44.5 million), compared to last year´s RMB211.5 million ($33.6 million).

“We are very pleased that 2012 is off to a good start and believe we remain well-positioned to deliver on our strategic and financial objectives this year. Our solid first quarter performance reflects our ability to further penetrate China’s domestic market for fashion casual menswear.  First quarter revenue was within our forecasted range and net income exceeded our estimates,” James Hong, Founder, Chairman of the Board and Chief Executive Officer, commented.

The increase in revenue was driven by both distributor and direct store sales volume, explained the company.  First quarter distributor sales increased 23.1% to RMB260.4 million compared to RMB211.5 million in the first quarter of 2011. First quarter 2012 self-operated direct store and flagship store sales were RMB19.6 million in the first quarter 2012.

Gross profit in the first quarter increased 49.1% year over year to RMB131.1 million ($20.8 million) from RMB88.0 million ($14.0 million) in the same period of 2011. First quarter 2012 gross profit margin was 46.8% compared to 41.6% in the same period last year.  First quarter 2012 gross margin increased primarily due to the increase of wholesale price to distributors from 35% to 38% since the third quarter 2011 and the higher margin contributed by sales of the Company’s self-operated direct stores and flagship stores. Gross margin at the Company’s self-operated direct stores was 59.9% and 70.8% at its flagship store, respectively.  Combined gross margin at Company self-operated locations was 70.1%.

“We believe our marketing efforts over the past year have led to increased brand recognition and greater customer demand.  Much of this success stems from our international initiatives which include our active participation in several international trade shows and our collaborations with Paris-based Nelly Rodi, and Japan fashion designer, Mr. Okada Hiroyuki, which together have culminated in a more fashionable and complete collection with greater variety and style.”

Net income for the first quarter increased 40.9% to RMB67.4 million ($10.7 million) from RMB47.8 million ($7.6 million) in the same period last year.  First quarter net income as a percentage of revenue was 24.1% compared to 22.6% in the prior year period.

Diluted earnings per ordinary share was RMB0.61 ($0.10) in the first quarter of 2012, equivalent to RMB2.42 ($0.38) per ADS, compared to diluted earnings per ordinary share RMB0.49 ($0.08) in the first quarter of 2011, equivalent to RMB1.95 ($0.31) per ADS.