Ever-Glory International Group, Inc. (EVK) Earnings Call Transcript & Summary
March 30, 2020
Earnings Call Speaker Segments
Operator
operatorGood day and welcome to the Ever-Glory International Group Fourth Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Wilson Bow. Please go ahead.
Wilson Bow
executiveThank you, operator. Hello, everyone, and welcome to Ever-Glory International Group's Fourth Quarter 2019 Earnings Conference Call. The company distributed its earnings press release earlier today via Newswire services. You can also download it from Ever-Glory's website at www.everglorygroup.com. With us today is Ever-Glory's Chief Financial Officer, Mr. Jason Wang. Mr. Edward Kang, Ever-Glory's Chairman, President and Chief Executive Officer, is on a business trip today and unable to join this call. Mr. Wang will read the prepared remarks on behalf of Mr. Kang. Before we get started, I will review the safe harbor statement regarding today's conference call. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company's results will differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's annual report on Form 10-K for the fiscal year ended December 31, 2019, and in other documents filed with the U.S. Securities and Exchange Commission. Ever-Glory does not assume any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference call is being recorded. In addition, an audio webcast of this conference will be available on Ever-Glory's Investor Relations website. I will now turn the call over to Mr. Wang.
Jason Wang
executiveThank you, Wilson. Good morning to those in the U.S. and good evening to those participants in Asia. Thank you for joining our full year 2019 earnings conference call. The sales for the 2019 full year decreased both in retail business and wholesale business. This decrease was mainly due to the pressure of the economic downturn and the China-U.S. trade tension. We will actively respond to the changes in the external economic environment. During the third quarter, we maintained our focus on developing the retail business through our multi-brand strategy and store network optimization initiative while improving our wholesale business by upgrading customer portfolio and enhancing our account receivables. Retail side. Our brands continue to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management strategy continually improved the balance between inventory turnover and our diligent cost control measures, further strengthening the profitability of our business. All of our efforts have contributed to the solid results for the past year. In order to create more visible and accessible locations, we remodeled or relocated 117 stores during 2019. As of December 31, 2019, we operated a nationwide network of 1,101 stores compared with 1,381 stores as of December 31, 2019 -- 2018. While we still see strong demand for our products at our retail stores, we continue to see opportunities in the e-commerce area. Mobile platforms, such as our La go go stores on Tmall and Dangdang.com are used as a strategic and effective way for us to drive customer engagement, encourage cross-channel shopping, reduce out-of-season inventory and create a unique and...
Wilson Bow
executiveDifferentiated.
Jason Wang
executiveDifferentiated customer experience to grow our loyal customer base. At the whole (sic) [ wholesale ] business, the company enhanced our extensive product development and the supply chain management...
Wilson Bow
executiveExpertise.
Jason Wang
executiveExpertise as well network of high-quality, reliable and cost-efficient sourcing channels and manufacturing. In addition, our market research center provides our wholesale customers with in-depth research and analysis in the areas including brand positioning, fashion trends, new material development and new style design. Going forward, we will continue to focus on enhancing our product development capabilities and optimizing the customer base with our longer-term vision of being a leading supply chain solution provider for middle-to-high end apparel brands, both in Mainland China and worldwide. The company's results were adversely affected by general conditions in the global economy, including conditions that are outside of its control such as the impact of health and safety concerns from the outbreak of COVID-19. Although, China has already begun to recover from the outbreak of COVID-19, the epidemic continues to spread on a global scale, and there is the risk of the...
Wilson Bow
executiveEpidemic.
Jason Wang
executiveEpidemic returning to China in the future, thereby causing future -- further business interruption. This concludes Mr. Kang's comments. I will now walk through our financial results for the full year 2019. Please note that all numbers discussed today are in U.S. dollars, unless otherwise noted. Full year 2019 financial results. Total sales for the full year of 2019 were $383.1 million, a 14.6% decreased from $448.5 million in the full year of 2018. This decrease was mainly due to a 10.7% decrease in wholesale sales and an 18.2% decrease in retail sales. Total sales from the company's wholesale business decreased by 10.7% to $195.2 million for the full year of 2019 compared with $218.6 million for the full year of 2019 (sic) [ 2018 ]. This decrease was mainly due to the decreased sales in Mainland China, United Kingdom, Hong Kong China, Germany and the Europe-Other, partially offset by increasing sales in Japan and United States. Retail sales for the company's branded fashion apparel retail division decreased by 18.2% to $187.9 million for the full year of 2019 compared with $229.9 million for the full year of 2018. This decrease was mainly due to the decrease in same-store sales. Total gross profit for the full year of 2019 decreased by 19.4% to $118.8 million compared with $147.4 million for the full year of 2018. Total gross margins for the full year of 2019 decreased to 31% from 32.9% for the full year of 2018. Gross profit for wholesale business decreased by 4.6% to $39.9 million for the full year of 2019 compared with $41.8 million for the full year of 2018. Gross margin for the full year of 2019 increased to 20.4% compared with 19.1% for the full year of 2018. Gross profit for retail business decreased by 25.2% to $78.9 million for the full year of 2019 compared with $105.6 million for the full year of 2018. Gross margin for the full year of 2019 decreased to 42% from 45.9% for the full year of 2018. Selling expenses for the full year of 2019 decreased by 12.3% to $80.2 million or 20.9% of total sale compared with $91.4 million or 20.4% of total sales for the full year of 2018. The decrease was attributable to lower retail sales. General and administrative expenses for the full year of 2019 decreased by 11.8% to $35.1 million or 9.2% of total sales compared with $39.8 million or 8.9% of total sales for the full year of 2018. The decrease in absolute amount was mainly attributable to the decline in number of stores. Income from operations for the full year of 2019 decreased by 76.5% to $3.5 million compared with $15 million for the full year of 2018. Net income attributable to the company for the full year of 2019 decreased by 89.4% to $1.3 million compared with $12 million for the full year of 2018. Basic and diluted earnings per share were $0.09 and $0.81 for the full year of 2019 and 2018, respectively. As of December 31, 2019, Ever-Glory had approximately $48.6 million of cash and cash equivalents compared with approximately $47 million as of December 31, 2018. Ever-Glory had working capital of approximately 38 -- $39.8 million as of December 31, 2019, and outstanding bank loans of approximately $29.9 million as of December 31, 2019. Our relentless efforts have been paying off with 2019 full year results, and we look forward to further strengthening the fundamentals and increasing operating leverage to support the long-term profitability of our business. Thank you for participating in Ever-Glory's 2019 full year earnings call. We look forward to talking with you next quarter. If you have additional questions, please feel free to contact our IR department. Goodbye. Thank you.
Operator
operatorThat concludes today's presentation. Thank you for your participation. You may now disconnect.
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