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

Good morning, and welcome to the Ever-Glory International Group Second Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to turn the conference over to Jason Wang, CFO. Thank you and you may begin, sir.

Thank you operator. Hello everyone, and we're come to Ever-Glory International Group Second Quarter 2022 Earnings Conference Call. The company distributed its earnings press release earlier today via Newswire service. You can download the from Ever-Glory's website at www.everglorygroup.com. With us today is Ever-Glory's Chief Financial Officer, Mr. Jason Wang. Mr. Yihua Kang, Ever-Glory's Chairman, President and the Chief Executive Officer, is out on a business trip today and unable to join the call. Mr. Wang will read 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 this question today, will contain forward-looking statements made under the safe harbor provision of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties, such as the company's results may differ materially from the views expressed today. Further information regarding this and other risks and uncertainties are included in the company's annual report on Form 10-Q for the second quarter ended June 30, 2022, 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 on the applicable law. As I 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'll now turn the call over to Mr. Wang.

Thank you. Good morning for those in the U.S., and good evening for those participants in Asia. Thanks for joining our second quarter 2022 earnings conference call. We are very pleased to announce that 2022 second quarter resulted with a 5.4% quarter-on-quarter increase into sales. Notably, we achieved quarter-on-quarter improvement in gross profit of 122.1% for our wholesale business, but our retail business decreased 16% in gross profit compared to 3 months ended June 30, 2021. The increase was mainly due to just a large amount of raw materials where price are [ unknown ]. On retail side, our brands continue to adjust new consumers and the retain its existing customers by focusing on design, quality and value. Our main inventory management strategy continually improve the brand between inventory turnover, and our diligent cost control measures for the change in the profitability of our business. We opened 11 stores and closed 75 stores in the first half year of 2022. As of June 30, 2022, we operated a nationwide network of 815 stores compared to 931 stores as of June 30, 2021. During 2022, we operated with a celebrity as spokesperson of La go go. The effect of the celebrity will enhance our brand influence. While we still see strong demand for our product at our retail stores, we continue to see opportunities in the e-commerce are. Mobile platforms such as our La go go stores on Tmall and JingDong.com are used a strategic and effective for us to drive customer engagement, encourage cross-channel shopping, reduce out-of-season inventory and create a unique and differentiated consumer experience to grow our loyal customer base. As for our wholesale business, the company had enhanced its extensive product development and supply chain management, expertise as well as network of high-quality, reliable and cost-efficient sourcing channels and manufacturing. In addition, our market and 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 designs. 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 concludes Mr. Kang's comments. I will now walk through our financial results for the second quarter of 2022. Please note that all numbers discussed today are in U.S. dollars, unless otherwise noted. Total sales for the second quarter of 2022 were $63.8 million, an increase of 5.4% from $60.6 million in the second quarter of 2021. This increase was mainly due to a 60.5% increase in our wholesale business, offset by a 37.3% decrease in our retail business. Sales for the Company’s branded fashion apparel retail division decreased by 37.3% to $21.4 million for the second quarter of 2022, compared to $34.1 million for the second quarter of 2021. This decrease was primarily due to outbreak of COVID-19. The outbreak in China resulted in the reduction of customer traffic and temporary closures of shopping malls as mandated by the provincial governments in various provinces of China, which had adversely affected our retail business with a decline in sales. Sales for the Company’s wholesale division increased by 60.5% to $32.4 million (sic) [ $42.4 million ] for the second quarter of 2022, compared to $26.4 million for the second quarter of 2021. This increase was primarily attributable to an increase in sales in Mainland China, Hong Kong, the United Kingdom, Europe-Other and the United States, partially offset by a decrease in sales in Japan. Total gross profit for the second quarter of 2022 increased by 11% to $20.4 million compared to $18.4 million for the second quarter of 2021. Total gross margin for the second quarter of 2022 increased to 32.% from 30.4% for the second quarter of 2021. Gross profit for the retail business decreased by 16% to $12.4 million for the second quarter of 2021 (sic) [ 2022 ] compared to $14.8 million for the second quarter of 2021 (sic) [ 2021 ]. Gross margin for the second quarter of 2022 was 58.1% compared to 43.4% for the second quarter of 2021. Gross profit for the wholesale business increased by 122.1% to $8 million for the second quarter of 2022, compared to $3.6 million for the second quarter of 2021. Gross margin for the second quarter of 2022 increased to 18.8% from 13.6% for the second quarter of 2021. Selling expenses for the second quarter of 2022 decreased by 19.5% to $11.7 million or 18.3% of total sales compared to $14.5 million or 24% of total sales for the second quarter of 2021. The decrease was attributable to the decreased average salaries and decreased business trips. General and administrative expenses for the second quarter of 2022 decreased by 27.9% to $5.5 million or 8.7% of total sales compared to $7.7 million or 12.7% of total sales for the second quarter of 2021. The decrease was attributable to the decreased publicity expenses and the depreciation of RMB. Income loss from operations was $3.2 million for the second quarter of 2022, compared to negative $3.8 million for the second quarter of 2021. Net income loss attributable to the company for the second quarter of 2022 was $2.4 million compared to negative $1.8 million for the second quarter of 2021. Basic and diluted loss per share was $0.16 for the second quarter of 2022 compared to negative $0.12 for the second quarter of 2021. As of June 30, 2022, Ever-Glory had approximately $32.9 million of cash and cash equivalents, compared to approximately $56.6 million as of December 31, 2021. Ever-Glory had working capital of approximately $51.3 million as of June 30, 2022, and outstanding bank loans of approximately $65.6 million as of June 30, 2022. Our relentless efforts has been paying off with 2022 second quarter results. Thank you for participating in Ever-Glory's 2022 second quarter earnings call. If you have additional questions, please feel free to contact our IR department. Goodbye. Thank you. Thank you, operator.

Thank you very much, sir. Ladies and gentlemen, this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.