Mecox Lane Limited ( NASDAQ: MCOX ) Announces First Quarter 2011 Results. Company's
Net Revenues from Internet Platform Increased to $26.3 Million in the First Quarter of 2011. Company has reported 153% loss of $3.9 million than a year earlier ( $1.5 million ). Result worsen the sentiment amongst the investors, as stock slumped more than 23% to $ 3.79.
Below is the press release:
(GLOBE NEWSWIRE) -- Mecox Lane Limited ("Mecox Lane" or the "Company") (Nasdaq:MCOX), which operates one of China's leading online platforms for apparel and accessories as measured by revenues in 2010, today announced its unaudited financial results for the first quarter ended March 31, 2011.
First Quarter 2011 Highlights
Internet net revenues increased by 25.9% year-over-year
-Net revenues decreased by 2.4% year-over-year to $48.1 million from $49.3 million in the year-ago period.
-Net loss increased by 153.0% year-over-year to $3.9 million from $1.5 million in the year-ago period
-Gross profit1 decreased by 16.7% year-over-year to $17.4 million from $20.8 million in the year-ago period
"In the first quarter of 2011, we continued to see growth in our Internet platform business as our number of orders grew by 40% year-over-year during the quarter. While our Internet sales rose steadily, an increasingly competitive environment in China's e-commerce industry has led us to offer coupon giveaways and other promotions in order to drive traffic to our website and aid in customer acquisition. This, in conjunction with delivery disruptions we experienced due to the labor shortage in courier service providers during the Chinese New Year holiday, offset some of the growth in our revenues from our Internet platform business. Nonetheless, as a testament to our ability to execute on our strategies of enhancing our online marketing efforts and providing our Internet customers with a compelling product offering, traffic to our m18.com website increased significantly with daily unique visitors growing by 54.3% year-over-year for this quarter. Going forward, we will continue to build upon this growth and acquire new customers," said Mecox Lane's Director and Chief Executive Officer Alfred Gu.
Mr. Gu added, "With a goal of building our competitive advantage in our Internet business, we are exploring strategic options in relation to our physical retail store operations in order to focus on enhancing our operational strength and customer service capabilities."
Mr. Gu concluded, "With strategic focus on our Internet platform and our consistent emphasis on improving customer service and increasing our warehouse and logistic capacity, we are well-positioned to expand our market share, grow our top line and deliver shareholder value in the future."
First Quarter 2011 Results
Due to the seasonal nature of its business, the Company presents its financial results on a year-over-year basis between the first quarter of 2011 and the first quarter of 2010 as in the following paragraphs.
Total Net Revenues
Total net revenues were $48.1 million in the first quarter of 2011, representing a decrease of 2.4% from $49.3 million in the first quarter of 2010.The decrease in the Company's net revenues was primarily attributed to the decline in orders placed through the Company's call center due to the growth in China's e-commerce sector accompanied by a corresponding change in customer preference for Internet shopping and a decline in the Company's catalog circulation.
Internet Platform
Net revenues from the Internet platform were $26.3 million in the first quarter of 2011, representing an increase of 25.9% from $20.9 million in the first quarter of 2010. The growth in net revenues was primarily attributed to an increase in the number of active customers due to greater online advertising and marketing efforts, partially offset by coupon give-aways and discount promotions that were offered to customers and a decrease in the fulfillment rate caused by a greater disruption in courier services during the Chinese New Year holiday than was previously anticipated.
Call Center
Net revenues from the call center were $11.5 million in the first quarter of 2011, representing a decrease of 26.9% from $15.8 million in the first quarter of 2010. The decrease in net revenues was primarily attributed to a decline in orders placed through the call center due to the growth in China's e-commerce sector accompanied by a corresponding change in customer preference for online shopping and a decline in the Company's catalog circulation.
Directly Operated Stores & Franchised Stores
Net revenues from directly operated stores were $5.9 million in the first quarter of 2011, representing a decrease of 31.9% from $8.6 million in the first quarter of 2010. The decrease was primarily due to a decline in the number of directly operated stores from an average of 175 stores in the first quarter of 2010 to an average of 119 stores in the first quarter of 2011.
Net revenues from franchised stores were $4.3 million in the first quarter of 2011, representing an increase of 10.1% from $3.9 million in the first quarter of 2010. The growth in net revenues was primarily due to an increase in the number of franchised stores in operation from an average of 260 stores in the first quarter of 2010 to an average of 325 stores in the first quarter of 2011.
Cost of Goods Sold2
Cost of goods sold was $30.7 million in the first quarter of 2011, representing an increase of 8.0% from $28.4 million in the first quarter of 2010. The increase was primarily due to an increase in the cost of goods sold attributable to the Internet platform, corresponding to the increase in its sales.
Gross Profit1 and Gross Margin
Gross profit was $17.4 million in the first quarter of 2011, representing a decrease of 16.7% from $20.8 million in the first quarter of 2010. Gross margin was 36.1% in the first quarter of 2011, compared to 42.3% in the first quarter of 2010. The decrease in gross margin was primarily due to the combined effects of (i) the increase in weighting of the Internet business in total net revenues, which generated a lower margin than other segments; (ii) the increase in net revenues from third-party branded products, for which the profit margin is lower than for the products under the Company's own proprietary brands; and (iii) the increase in the number of franchised stores in operation, where the Company offered a higher average discount rate to its franchisees.
Operating Expenses
Total operating expenses were $22.9 million in the first quarter of 2011, remaining substantially unchanged from $22.8 million in the first quarter of 2010.
Selling, general and administrative expenses were $22.6 million in the first quarter of 2011, representing an increase of 4.1% from $21.7 million in the first quarter of 2010.
Depreciation and amortization expenses were $1.0 million in the first quarter of 2011, representing a decrease of 17.8% from $1.3 million in the first quarter of 2010.
Loss from Operations
Loss from operations was $5.5 million in the first quarter of 2011, representing an increase of 180.2% from $2.0 million in the first quarter of 2010.
Net Loss and Loss per ADS
Net loss was $3.9 million in the first quarter of 2011, representing an increase of 153.0% from $1.5 million in the first quarter of 2010. Non-GAAP net loss3 was $3.4 million in the first quarter of 2011, representing an increase of 364.7% from $0.7 million in the first quarter of 2010. Basic and diluted loss per American depositary share ("ADS") attributable to Mecox Lane shareholders was $0.07 in the first quarter of 2011. One ADS represents seven ordinary shares.
Cash and Cash Equivalents
As of March 31, 2011, Mecox Lane had cash and cash equivalents totaling $101.0 million, compared to $86.0 million as of December 31, 2010.
Recent Business Updates
In March 2011, the Company announced that SINA Corporation and China DongXiang had entered into separate agreements to acquire an aggregate of 117,505,755 ordinary shares (equivalent to 16,786,535 ADSs) of Mecox Lane from two major shareholders of the Company, Maxpro Holdings Limited and Ever Keen Holdings Limited, both wholly owned by Sequoia Capital.
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