Ever-Glory International Group, Inc. (EVK) Earnings Call Transcript & Summary

Good day, and welcome to the Ever-Glory International Group's First Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Wilson Bow. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to Ever-Glory International Group's First Quarter 2021 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. Jiansong Wang. Mr. Yihua Kang, Ever-Glory's Chairman, President and Chief Executive Officer, today is on a business trip and is 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 annual report 10-K and 10-Q for the first quarter ended March 31, 2021 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, the 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.

Thank you, Wilson. Good morning to those in the U.S. and good evening to those participants in Asia. Thank you for joining our first quarter 2021 earnings conference call. We are very pleased to announce the 2021 first quarter results with 21.4% quarter-on-quarter increase in total sales. Firstly, we achieved quarter-on-quarter improvement in gross margin of 39.9%. On retail side, our brands continue to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management strategy continue improve the balance between inventory turnover, and our diligent cost control measures further strengthened the profitability of our business. We remodeled or relocated 2 stores during the first quarter of 2021. At March 31, 2021, we operated a nationwide network of 921 stores compared with 1,038 stores as of March 31, 2020. During 2021, we complete with a celebrity as a spokesman of La go go. The effect of the celebrity will enhance our brand influence. 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 Jing Dong are used as a strategic and effective way for us to drive customer engagement, encourage cross-channel shopping, reduce out-of-season inventory and created a unique and differentiated customer experience to grow our loyal customer base. The company's wholesale business is still affected by COVID-19 as the pressure of the economic downturn. We will have actively respond to the changes in the external economic investment as our wholesale business, the company has enhanced its extensive product development and supply chain management expertise as well as network of high-quality, reliable and cost-efficient sourcing channels and manufactures. 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 product design. Going forward, we will continue to focus on enhancing our product development capabilities and optimizing the customer base with our long-term vision of being a leading supply chain solution provider for mid- to high-end apparel brands both in Mainland China and worldwide. This includes Mr. Kang's comments. I will now walk through our financial results for the first quarter of 2021. Please note that all numbers discussed today are in U.S. dollars unless otherwise noted. Total sales for the first quarter of 2021 were $90.8 million, an increase of 21.4% from $58.4 million in the first quarter of 2020. This increase was primarily driven by a 4.2% increase in our wholesale business and 32% increase in retail business. Sales for the company brand fashion apparel retail division increased by 32% to $47.6 million for the first quarter of 2021 compared with $36.1 million for the first quarter of 2020. This increase was primarily due to the increase in same-store sales. The company had 921 retail stores as of March 31, 2021, compared with 1,038 retail stores as of March 31, 2020. Sales for the company wholesale division increased by 4.2% to $23.2 million for the first quarter of 2021 compared with $22.3 million for the first quarter of 2020. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, the United Kingdom and the European market particularly offset for decreased sales in Japan and the United States. Total gross profit for the first quarter of 2021 increased by 39.9% to $22.4 million compared with $15 million for the first quarter of 2020. Total gross margin for the first quarter of 2021 increased to 31.7% from 27.5% for the first quarter of 2020. Gross profit for the retail business increased by 42.5% to $17.9 million for the first quarter of 2021 compared with $12.5 million for the first quarter of 2020. Gross margin for the first quarter of 2021 was 37.6% compared to 34.8% from the first quarter of 2020. Gross profit for the wholesale business increased by 30.5% to $4.6 million for the first quarter of 2021 compared with $3.5 million for the first quarter of 2020. Gross margin for the first quarter of 2021 increased to 19.6% from 15.7% for the first quarter of 2020. Selling expenses for the first quarter of 2021 increased by 15.4% to $15.5 million or 22% of total sales compared with $13.5 million or 23.1% of total sales for the first quarter of 2020. The increase was attributable to the increased sales. General and administrative expenses for the first quarter of 2021 increased by 35.7% to $7.9 million or 11.1% of total sales compared with $5.8 million or 9.9% of total sales for the first quarter of 2020. The increase was mainly attributable to the decreased business trips and social benefit by the PRC government in 2020. Loss from operations was $1 million for the first quarter of 2021 compared to $3.2 million for the first quarter of 2020. Net loss attributable to the company for the first quarter of 2021 was $1.2 million compared with $2.7 million for the first quarter of 2020. Basic and diluted loss per share was $0.08 for the first quarter of 2021 compared with $0.18 for the first quarter of 2020. As of March 31, 2021, Ever-Glory had approximately $78.1 million of cash and cash equivalents compared with approximately $81.9 million as of December 31, 2020. Ever-Glory had a working capital of approximately $43.7 million as of March 31, 2021, and outstanding bank loans of approximately $31.5 million as of March 31, 2021. Our relentless efforts has been paid off with 2021 first quarter results, and we look forward to further strengthening the fundamental and increasing operation leverage to support the long-term profitability of our business. Thank you for participating in Ever-Glory's 2021 first quarter's 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.

Thank you, operator.

This concludes today's call. Thank you for your participation. You may now disconnect.