Ever—Glory reports first quarter 2016 financial results

by Flora Zhao

Ever-Glory International Group， Inc. （the “Company” or ‘EverGlory”） （NASDAQ-GM： EVK）， a retailer of branded fashion apparel and a leading global apparel supply chain solution provider， reported its financial results for the first quarter ended March 31， 2016.

Mr. Yihua Kang， Chairman， President and Chief Executive Officer of Ever-Glory， said， “Our first quarter results reflect the continued challenging retail environment in China. Despite soft domestic consumption and lower-than-expected retail sales in the first quarter， we unveiled a new store design for our first brand， La go go. With a stylish， simple layout and new product displays， we aim to provide a fresh shopping experience for customers while improving same-store sales. Moreover， our new brands Sea To Sky， Velwin and idole continue to be well received by our consumers.”

“First quarter wholesale sales remained at a stable level compared with the same period of prior year， benefiting from our strong supply chain management and product development capabilities. While our outlook for the apparel industry this year remains conservative due to the weak retail environment， we are confident about our long-term strategy to build a profitable and sustainable business，” concluded Mr. Kang.

Mr. Jason Jiansong Wang， Chief Financial Officer of Ever-Glory， added， “As we advance our strategic initiatives to optimize the retail store network and tailor the management teams for each brand， our operating expenses increased during the first quarter. As a disciplined accounting measure， we also increased the provision on inventory of out-ofseason products， which negatively impacted our bottom line. However， with a healthy balance sheet and strong cash position， we remain optimistic about the growth opportunities in our overall business. We believe our combined efforts will enhance our competitive position and enable growth and profitability as business conditions improve.”

First Quarter 2016 Financial Results

Total sales for the first quarter of 2016 were $91.7 million， a decrease of 6.3% from $97.9 million in the first quarter of 2015. This decrease was primarily attributable to an 8.5% decrease in sales in our retail business and a 2.2% decrease in our wholesale business.

Retail sales for the Companys branded fashion apparel retail division decreased by 8.5% to $59.1 million for the first quarter of 2016， compared with $64.6 million for the first quarter of 2015. This decrease was primarily due to the decrease in same-store sales. The Company had 1，171 retail stores as of March 31， 2016， compared with 1，206 retail stores as of March 31， 2015.

Sales for the Companys wholesale division decreased by 2.2% to $32.6 million for the first quarter of 2016， compared with $33.3 million for the first quarter of 2015. This decrease was primarily due to decreased sales in China， Germany and the United Kingdom， partially offset by increased sales in other European markets， Japan and the United States.

Total gross profit for the first quarter of 2016 decreased by 7.4% to $28.3 million， compared with $30.6 million for the first quarter of 2015. Total gross margin decreased by 40 basis points to 30.9% from 31.3% for the first quarter of 2015.

Gross profit for the retail business decreased by 5.7% to $22.1 million for the first quarter of 2016， compared with$23.5 million for the first quarter of 2015. Gross margin increased by 110 basis points to 37.4% from 36.3% for the first quarter of 2015.

Gross profit for the wholesale business decreased by 12.8% to $6.2 million for the first quarter of 2016， compared with $7.2 million for the first quarter of 2015. Gross margin decreased by 240 basis points to 19.1% from 21.5% for the first quarter of 2015.

Selling expenses for the first quarter of 2016 increased by 3.2% to$20.9 million， or 22.8% of total sales， compared with $20.3 million， or 20.7% of total sales for the first quarter of 2015. The increase was mainly attributable to increased average salaries as well as increased store decoration and marketing expenses associated with the promotion of our retail brands.

General and administrative expenses for the first quarter of 2016 increased slightly to $6.9 million， or 7.6% of total sales， compared with $6.9 million， or 7.1% of total sales for the first quarter of 2015.

Income from operations for the first quarter of 2016 decreased by 86.0% to $0.5 million compared with$3.4 million for the first quarter of 2015.

Net loss attributable to the Company for the first quarter of 2016 was$0.4 million compared with net income attributable to the Company of $2.4 million for the first quarter of 2015. Basic and diluted loss per share was$0.02 for the first quarter of 2016 compared with basic and diluted earnings per share of $0.16 for the first quarter of 2015.