Ever-Glory International Group, Inc. (EVK) Earnings Call Transcript & Summary
November 13, 2020
Earnings Call Speaker Segments
Operator
operatorLadies and gentlemen, good day, and welcome to the Ever-Glory International Group Third Quarter 2020 Earnings Conference Call. Today's call is being recorded. And at this time, I would like to turn the conference over to Mr. Wilson Bow. Please go ahead, sir.
Wilson Bow
executiveThank you, operator. Hello, everyone, and welcome to Ever-Glory International Group's Third Quarter 2020 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. Now with us today is Ever-Glory's Chief Financial Officer, Mr. Jiansong Wang. Mr. Yihua Kang, Ever-Glory's Chairman, President and Chief Executive Officer, now is on a business trip today and unable to join the call, so 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 may differ materially from the views expressed today. Further information regarding these and other risks and uncertainties are included in the company's quarterly report on Form 10-Q for the third quarter ended September 30, 2020; 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 investors relations website. I will now turn the call over to Mr. Wang.
Jason Wang
executiveThank you. Thank you, Wilson. Good morning to those in the U.S., and good evening to those participants in Asia. Thank you for joining our third quarter 2020 earnings conference call. We are very pleased to announce the 2020 third quarter results with 10.3% year-over-year increase in retail sales. Notably, we achieved year-over-year improvement in gross profit of 2.7% for our retail business. This increase was primarily due to an increase in the e-commerce sales. But our wholesale business decreased 44.9% in sales compared with the 3 months ended September 30, 2019. The company's wholesale business is significantly affected as the company is facing a sharp decline in its order quantities in the spread of COVID-19 around the world and the pressure of the economic downturn. 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 our customers, continue and improving our accounts receivables connections. On the retail side, our brands continue to attract new customers and retain existing customers by focusing on design, quality and the value. Our inventory management strategy continually improved the balance in inventory turnover, and our diligent cost control measures further strengthened the profitability of our business in order to create more feasible and accessible locations. We remodeled or relocated 38 stores during the third quarter of 2020. As of September 30, 2020, we operated a nationwide network of 923 stores compared with 1,157 retail stores as of September 30, 2019. While we're still seeing strong set 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 a [ strategic ] and effective way for us to drive customer engagement, encourage cross-channel shopping, reduce out-of-season inventory and create a meaningful and differentiated customer experience to grow our loyal customer base. As for our wholesale business, the company has enhanced its intensive product development and supply chain management...
Wilson Bow
executiveExpertise.
Jason Wang
executiveExpertise as well as network of high-quality, reliable and cost-efficient sourcing channels and manufacturers. In additional, our market research center provided our wholesale customers with an in-depth research and the technologies in the areas including brand positioning, exciting new chains, new material development and new product 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 mid- to high-end apparel brands, both in Mainland China and worldwide. The company's result of operating could be adversely affected by general conditions in the global economy, including conditions that are outside of its control, such as the impact of health and the 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 step on the -- on global scale and there is a risk of the epidemic returning to China in the future, thereby causing further business interruption. This concludes Mr. Kang's comments. I will now walk through our financial results for the third quarter of 2020. Please note that all numbers discussed here are in U.S. dollars, unless otherwise noted. Third quarter 2020 financial results for the period -- for the third quarter of 2020 were $79.9 million, a decrease of 29.5% from $113.3 million in the third quarter of 2019. This decrease was mainly due to a 44.9% decrease in our wholesale business, partially offset by a 10.3% increase in retail business. Sales for the company's brands fashion apparel retail division increased by 10.3% to $34.8 million for the third quarter of 2020 compared with $31.6 million for the third quarter through 2019. This increase was mainly due to an increase in the e-commerce sales. The company had 923 retail stores as of September 30, 2020 compared with 1,157 stores as of September 30 2019. Sales for the company's wholesale division decreased by 44.9% to $45.1 million for the third quarter of 2020 compared with $81.7 million for the third quarter of 2019. This decrease was primarily attributable to a decrease in sales in Mainland China, Hong Kong, Germany, Europe-Other, Japan, United States and United Kingdom. Total gross profit for the third quarter of 2020 decreased by 2.8% to $23.7 million compared with $24.4 million for third quarter of 2019. Total gross margin increased to 29.6% from 21.5% for the third quarter of 2019. Gross profit for the retail business increased by 2.7% to $14.5 million for the third quarter of 2020 compared with $14.1 million for the third quarter of 2019. Gross margin was 41.6% compared to 44.7% for the third quarter of 2019. Gross profit for the wholesale business decreased by 10.4% to $9.2 million for the third quarter of 2020 compared with $10.3 million for the third quarter of 2019. Gross margin increased to 20.4% from 12.6% for the third quarter of 2019. Selling expenses for the third quarter of 2020 decreased by 27.6% to $13 million or 16.3% of total sales compared with $17.9 million or 15.8% of total sales for the third quarter of 2019. The decrease was attributable to the lower traveling expenses. General and administrative expenses for third quarter of 2020 increased by 3.1% to $7.8 million or 9.8% of total sales compared with $7.6 million or 6.7% of total sales for the third quarter of 2019. The increase was attributable to the foreign currency transition gain. Income loss from operations for the third quarter of 2020 increased by 344.5% to $2.8 million compared with negative $1.2 million for the third quarter of 2019. Net income loss attributable to the company for the third quarter of 2020 was $2.2 million compared with negative $1.1 million for the third quarter 2019. Basic and diluted earnings loss per share was $0.15 for the third quarter of 2020 compared with negative $0.07 for the third quarter of 2019. As of September 30, 2020, Ever-Glory had approximately $70 million of cash and cash equivalents compared with approximately $48.6 million as of September 2019. Ever-Glory had working capital of approximately $53.3 million as of September 30, 2020, and outstanding bank loans approximately $48.4 million as of September 30, 2020. Our relentless efforts have been paying off with the 2020 third quarter results, and as 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 2020 third quarter 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.
Wilson Bow
executiveThank you, operator.
Operator
operatorThank you. Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Wilson Bow
executiveThank you, operator.
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