Zuoan Fashion Q2 revenue up by 5.3 percent

Chinese menswear fashion company Zuoan Fashion announced

its second quarter results, which ended on June 30th, 2013. Net profit increased by 2.2 percent from 66.2 million yuan (10.8 million US dollar) last year to 67.6 million yuan (11 million US dollar) in the second quarter due to a higher sales volume and lower selling and distribution costs.

The company’s revenue increased by 5.3 percent from 301.6 million yuan (49.2 million US dollar) during the same time period of 2012 to 317.6 million yuan (51.7 million US dollar) in the second quarter of 2013. The gross profit decreased by 3.7 percent from 145.5 million yuan (23.7 million US dollar) in 2012 to 140.1 million yuan (22.8 million US dollar) in 2013. Gross margin decreased from 48.2 percent in the second quarter 2012 to 44.1 percent in the same period in 2013, compared with 45.7 percent in the first quarter in 2013.

“We are pleased to announce a healthy second quarter 2013, as our bottom line results exceeded our previous guidance. Our revenue increased from the previous quarter despite a noticeable drop in average selling prices thanks to the strong growth in sales through our distributors and direct stores. Selling and distribution costs were further reduced, as we continued our store model transition to improve our operational efficiency and infrastructure,“ said Zuoan founder, chairman and CEO James Hong.

He added that the company opened 21 new stores in the second quarter, of which 20 are operated by distributors or sub-distributors and one is self-operated. Distributor sales increased in the second quarter by 15.3 percent to 312.8 million yuan (51.1 million US dollar) and self-operated direct store sales by 46.9 percent to 4.7 million yuan (767,000 US dollar).

Diluted earnings per ordinary share were 0.61 yuan (0.10 US dollar) in the second quarter and the company expects earnings per share between 0.28 and 0.31 yuan (0.045 and 0.05 US dollar) in the third quarter. Revenues are expected to be between 370 and 390 million yuan (60.4 and 63.7 million US dollar).

"In the back half of the year, we expect to experience more challenging market conditions due to a cancellation of orders by certain distributors, a 3 percent decrease in wholesale prices offered to our distributors and increased advertising costs as we ramp up marketing efforts to capture greater market share. In spite of these near-term challenges, we remain comfortable with our ability to strengthen our brand presence and grow our profits over the long-term," concluded Hong.

Zuoan Fashion Limited is one of China’s leading fashion casual companies offering men’s casuals, footwear and accessories for urban males between 20 and 40 years of age. Zuoan Fashion sells its garments in all but one of China’s 32 provinces and municipalities and operates 1,383 stores in China (as of June 30, 2013).