Zuoan Fashion Q3 revenue down 20.1 percent

Zuoan Fashion third quarter revenues showed a decrease

of 20.1 percent over the same period last year. Gross profit decreased 30.3 percent year-over-year compared to the third quarter of 2012.

Third quarter 2013 gross margin was 40.9 percent compared with 46.9 percent in the same quarter of 2012. The decrease in gross margin was primarily due to the decrease in the company's wholesale price discount that was implemented in the third quarter of 2013. Third quarter net margin was 6 percent compared to 19.5 percent in the third quarter of 2012. Net income showed a decrease of 75.3 percent. During the quarter, distributor sales decreased by 16 percent. For the fourth quarter of 2013, the company anticipates a gross margin of approximately 40 to 42 percent.

Zuoan Fashion is based in Shanghai. It offers men’s casual apparel, footwear and lifestyle accessories, primarily targeting urban males between the ages of 20 and 40. As of September 30, 2013, Zuoan had 1,074 stores located in China. James Hong, founder, chairman and Chief Executive Officer, commented, “The softening retail environment in China this year resulted in more challenging market conditions in the third quarter. During the first half of the year, there was a build-up of inventory at the distributor level due to softer market conditions, which resulted in cancelled orders from our distributors. To offset this situation, we enacted several initiatives including heavier discounting at the retail level. We believe our marketing efforts, which include targeted campaigns in ten major cities in China, are an effective use of our resources and we are hopeful we’ll experience a gradual improvement in consumer spending in the quarters ahead.”