Ever-Glory International Group, Inc. (EVK) on Q1 2022 Results - Earnings Call Transcript

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Ever-Glory International Group, Inc. (NASDAQ:EVK) Q1 2022 Earnings Conference Call May 13, 2022 8:00 AM ET

Company Participants

Jiansong Wang - Chief Financial Officer

Conference Call Participants

Operator

Please go ahead.

Unidentified Company Representative

Thank you, operator. Hello, everyone, and welcome to Ever-Glory International Group's First Quarter 2022 Earnings Conference Call. The company distributed its earnings press release earlier today via news service. You can also download it from Ever-Glory's website at www.everyglorygroup.com.

With us today is our Ever-Glory's Chief Financial Officer, Mr. Jason Wang. Mr. Yihua Kang, Ever-Glory's Chairman, President and Chief Executive Officer, is out on a business trip today and unable to join the call. Mr. Wang will read the prepared remarks on behalf of Mr. Kang.

Before we get started, I will review the Harbor statement regarding today's conference call. Please note that the discussion 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. As such, the company's results may differ materially from the views expressed today.

Further information regarding risks and other risks and uncertainties are included in the company's annual report on Form 10-K for the first quarter ended March 31, 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 in the applicable law.

As a reminder, this company call is being recorded. In addition, an audio webcast of this conference will be available on Ever-Glory's Investor Relations website.

And I will now turn the call over to Mr. Wang.

Jiansong Wang

Thank you, Joanna. Good morning to those in the U.S., and good evening to those participants in Asia. Thank you for joining our first quarter 2022 earnings conference call.

We are very pleased to announce the 2022 first quarter results, with a 28.7% quarter-on-quarter increase in sales for our wholesale business. Notably, we achieved quarter-on-quarter improvement in gross profit for the wholesale business of 25.2%. On retail side, our brands continue to attract new customers and extending existing customers by focusing on design, quality and value. Our inventory management strategy continually improve the balance between inventory turnover, and our diligent cost control measures further strengthened the profitability of our business.

We plan to relocated or remodel 50 to 100 stores in 2022. As of March 31, 2022, we operated a nationwide network of 848 stores compared with 921 stores as of March 31, 2021. During 2022, we cooperated with a celebrity as a spokesperson in La go. The effect of the celebrity will enhance our brand influence.

The company's wholesale business is still affected by COVID-19 and the pressure of the economic downturn. We will actively respond to changes in external economic environment. As for our wholesale business, the company has enhanced its intensive product development and supply chain management expertise and network of high-quality, reliable and cost-efficient sourcing channels and manufacturers. 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 -- of our amazing customer base. With our long-term vision of being a leading supply chain solution provider for mid- to high and apparel brands, both in Mainland China and worldwide. This concludes Mr. Kang's comments.

I will now walk through our financial results for the first quarter of 2022. Please note that all numbers discussed are here are in U.S. dollars unless otherwise noted.

First quarter 2022 financial results. Total sales for the first quarter of 2022 was $64.8 million, a decrease of 8.5% from $70.8 million in the first quarter of 2021. This decrease was primarily attributable to a 28.7% increase in our wholesales business and 26.7% decrease in our retail business.

Sales for the company's branded fashion apparel retail division decreased by 26.7% to $34.9 million for the first quarter of 2022 compared with $47.6 million for the first quarter of 2021. This decrease was primarily due to the decrease in same-store sales. The company had 848 retail stores as of March 31, 2022, compared with 921 retail stores at March 31, 2021.

Sales for the company's wholesale division increased by 28.7% to $29.9 million for the first quarter of 2022 compared with $23.2 million for the first quarter of 2021. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, Japan and the United States and other European market, partially offset by decreased sales in the United Kingdom.

Total growth profits for the first quarter of 2021 [ph] decreased by 22.6% to $17.4 million compared with $22.4 million for the first quarter of 2021. Total gross margin for the first quarter of 2022 decreased to 26.8% from 31.7% for the first quarter of 2021.

Gross profit of retail business decreased by 34.8% to $11.7 million for the first quarter of 2022 compared with $17.9 million for the first quarter of 2021. Gross margin for the first quarter of 2022 was 33.4% compared to 37.6% for the first quarter of 2021.

Gross profit for the wholesale business increased by 25.2% to $5.7 million for the first quarter of 2022 compared with $4.6 million for the first quarter of 2021. Gross margin for the first quarter of 2022 decreased to 19.1% from 19.6% for the first quarter of 2021.

Selling expenses for the first quarter of 2022 decreased by 12% to $13.7 million or 21.1% of total sales compared with $15.5 million or 22% of total sales for the first quarter of 2021. The decrease was due to the decreased salaries.

General and administrative expenses for the first quarter of 2022 decreased by 10.9% to $7 million or 10.8% of total sales compared with $10.9 million or 11.1% of total sales for the first quarter of 2022. The decrease was attributable to the decreased salaries.

Loss from operations was $3.3 million for the first quarter of 2022 compared to $1 million for the first quarter of 2021. Net loss attributable to the company for the first quarter of 2022 was $5.1 million compared with $1.2 million for the first quarter of 2021. Basic and diluted loss per share were $0.34 for the first quarter of 2022 compared with $0.08 for the first quarter of 2021.

As of March 31, 2022, Ever-Glory had approximately $41.7 million of cash and cash equivalents compared with approximately $56.6 million as of December 31, 2021. Ever-Glory had a working capital of approximately $42.3 million as of 31 -- March 31, 2022, and outstanding bank loans of approximately $69.3 million as of March 31, 2022.

Our latest efforts have been paying off with the 2022 first quarter results, and we look forward to further strengthening the fundamentals and increasing operation leverage to support the long-term profitability of our business.

Thank you for participating in Ever-Glory's 2022 first 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.

Thank you, operator.

Question-and-Answer Session

Q -

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