LJ International Inc. (LJI) (NASDAQ: JADE), a leading jewelry
manufacturer and retailer, today reported financial results for the
first quarter ended March 31, 2010.
Revenues for the first quarter of 2010 totaled $26.9 million, up
18% from $22.7 million in the first quarter of 2009. This
year-over-year revenue increase is largely due to stabilization in
the global economy and strong pent-up demand by Chinese
middle-class clientele.
The increase was driven by a year-over-year rise of 38% at LJI's
ENZO chain of retail stores in China, Hong Kong and Macau. ENZO
revenue in the first quarter of 2010 was $16.4 million, up from
$11.9 million in the first quarter of 2009.
Revenues from LJI's wholesale operations totaled $10.4 million
in the first quarter of 2010, down 3% from $10.8 million a year
earlier. Based on previous quarters, this figure points towards
future growth in the wholesale division.
Companywide revenues and retail revenues exceeded earlier
guidance of approximately $26 million and $15.5 million,
respectively. Wholesale revenue guidance was $10.5 million.
Retail Growth Boosts Margins and Net Income
Gross profit in the first quarter of 2010 was $11.1 million, up
27% from $8.7 million a year earlier. Gross margin (gross profit as
a percentage of revenues) was 41%, up from 39% in the first quarter
of 2009. The increase margin reflects the increasing share of
higher-margin revenues generated by the ENZO division. During the
first quarter of 2010, ENZO gross margin was 53% compared to 22%
for the wholesale division.
Selling, general and administrative (SG&A) expenses for the
latest quarter totaled $8.5 million, compared to $7.9 million in
the first quarter of 2009. After SG&A expenses, depreciation
and net gain on derivatives, operating income in the first quarter
of 2010 was $2.0 million, up from $0.4 million a year earlier.
Income before taxes and non-controlling interest was $2.1
million, or $1.8 million excluding gain on the sale of securities.
This compares to $0.1 million a year earlier.
Net income attributable to common shareholders was $1.9 million
in the first quarter of 2010, up from $0.1 million a year earlier.
Earnings per fully diluted share rose year-over-year to $0.07 from
$0.01.
Comparable Sales Register Double-Digit Gain
Comparable ENZO sales -- at the 75 stores open 12 months or more
at the start of the first quarter of 2010 -- were up 14%
year-over-year. A total of 95 ENZO stores were in operation by the
end of the first quarter. The average revenues per store in the
comparable-store group rose to an annual rate of $636,000.
Results Mark Recovery and Start of New Growth Phase -- CEO
Yu Chuan Yih, LJI's Chairman and CEO, commented, "Today's report
confirms that LJI is on the growth track within the global jewelry
market and especially within the Chinese market. Two trends are
especially notable and encouraging. First, the continued
double-digit growth in comparable-store sales shows that the
branding strategy for ENZO and its product lines is a success.
Without the significant addition of new stores, ENZO has been able
to sustain robust growth through increasing consumer demand in its
existing store network. We believe that ENZO products are an ideal
fit for the tastes of China's newly affluent women, and ENZO's
financial results suggest we are right. The comp-store numbers also
reflect our success in developing an effective operational model
for ENZO stores (nearly all of which are now profitable). As we
begin an aggressive expansion in the coming months, we are
confident that this model will be equally successful as it is
deployed in new locations."
Mr. Yih continued, "The other encouraging trend is the recovery
in our wholesale business. We continue to work with our global
customers and support their growing operations as the worldwide
economy shifts into growth mode. In the current quarter, we expect
wholesale revenues to show a healthy increase above year-earlier
levels. Though retail is now the primary growth driver at LJI, our
wholesale operations will continue to play an important role in our
vertically integrated business model and as one source of cash
flows to finance future expansion. Now, with our wholesale revenues
stabilized and a substantial number of new ENZO stores due to be
opened this year, the Company is entering a new and exciting growth
phase."
Cash Level Reflects Inventory Build-Up
On the balance sheet, cash and cash equivalents totaled $5.3
million on March 31, 2010, compared to $11.3 million on December
31, 2009. The decrease was largely due to a build-up of inventory
during the first quarter in preparation for the opening of new ENZO
stores in the second quarter and beyond. Inventories rose to $87.1
million on March 31, 2010 from $81.4 million at the end of
2009.
Working Capital Rises, Long-Term Debt Reduced
LJI's working capital rose during the quarter to $79.2 million,
or approximately 115% of market cap, on March 31, 2010 from $77.6
million on December 31, 2009. The Company's long-term debt
decreased during the first quarter of 2010 to $1.8 million from
$2.3 million.
Revenue Seen Rising 30% in Q2 to $29 Million
In guidance for the second quarter ending June 30, 2010, LJI
projects total revenues of approximately $29 million. The projected
overall revenue would be approximately 30% above the $22.4 million
reported in the second quarter of 2009. By segment, the projected
year-over-year revenue increase would be approximately 40% for
retail and 21% for wholesale. Net income is expected to reach
between $1.9 million to $2.0 million, or approximately $0.08 per
fully diluted share, in the second quarter of 2010, up from $0.1
million or $0.01 per fully diluted share a year earlier.
About LJ International Inc.
LJ International Inc. (LJI) (NASDAQ: JADE) is engaged in the
designing, branding, marketing and distribution of its full range
of jewelry. It has built its global business on a vertical
integration strategy, and an unwavering commitment to quality and
service. Through its China-based ENZO retail chain stores, LJI is
now a major presence in China's fast-growing retail jewelry market.
As a wholesaler, it distributes to fine jewelers, department
stores, national jewelry chains and electronic and specialty
retailers throughout North America and Western Europe. Its product
lines incorporate all major categories, including earrings,
necklaces, pendants, rings and bracelets. For more information on
the Company, visit the Company's website at www.ljintl.com.
Cautionary Note Regarding Forward-Looking Statements:
This press release contains "forward-looking statements" within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995. Forward-looking statements can be identified by words such as
"anticipates," "intends," "plans," "believes," "estimates,"
"projects," "expects" and similar references to future periods.
Examples of forward- looking statements include, but are not
limited to, statements we make regarding our guidance relating to
our operating results for the second quarter ending June 30, 2010,
including total revenues and earnings per fully diluted share. The
foregoing is not an exclusive list of all forward-looking
statements we make.
Forward-looking statements are based on our current expectations
and assumptions regarding our business, the global economy and
other future conditions. Because forward-looking statements relate
to the future, they are subject to inherent uncertainties, risks
and changes in circumstances that are difficult to predict. Our
actual results may differ materially from those contemplated by the
forward-looking statements. They are neither statements of
historical fact nor guarantees or assurances of future performance.
We caution you therefore against relying on any of these
forward-looking statements. Important factors that could cause
actual results to differ materially from those in the
forward-looking statements include global political, economic,
business, competitive, market and regulatory conditions and the
following: the current global financial crisis and economic
conditions; changes in consumer spending patterns and consumer
preferences; the effects of political and economic events and
conditions in the U.S., China and worldwide; the impact of
competition and pricing; market price of key raw materials;
political instability; currency and exchange risks and changes in
existing or potential duties, tariffs or quotas; availability of
attractive store locations; our ability to develop new merchandise;
and our ability to hire, train and retain associates. The risk
factors that are presented in Item 3.D. of our Report on Form 20-F
for the fiscal year ended December 31, 2009, as well as the
disclosures contained in our other public filings which we have
filed with the Securities and Exchange Commission.
Any forward-looking statement made by us in this press release
speaks only as of the date on which it is made. Factors or events
that could cause our actual results to differ may emerge from time
to time, and it is not possible for us to predict all of them. We
undertake no obligation to publicly update any forward-looking
statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Three months ended
March 31,
----------------------
2010 2009
---------- ----------
US$ US$
Operating revenue 26,853 22,689
Costs of goods sold (15,744) (13,964)
---------- ----------
Gross profit 11,109 8,725
Operating expenses
Selling, general and administrative expenses (8,540) (7,867)
Net gain on derivatives 35 197
Depreciation (594) (705)
---------- ----------
Operating income 2,010 350
Other revenue and expense
Interest income 6 18
Gain on sale of securities 258 -
Interest expenses (207) (239)
---------- ----------
Income before income taxes and noncontrolling
interest 2,067 129
Income taxes expense (206) -
---------- ----------
Net income 1,861 129
Net (income) loss attributable to noncontrolling
interest (1) 1
---------- ----------
Net income attributable to LJ International Inc.
common shareholders 1,860 130
========== ==========
Earnings per share:
Basic 0.08 0.01
Diluted 0.07 0.01
Weighted average number of shares used in
calculating diluted earnings per share 25,290,523 23,268,678
========== ==========
LJ INTERNATIONAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
As of As of
March 31, December 31,
2010 2009
----------- ------------
(Unaudited)
US$ US$
ASSETS
Current assets
Cash and cash equivalents 5,298 11,282
Restricted cash 9,341 6,425
Trade receivables, net of allowance for doubtful
accounts 20,545 21,679
Derivatives 41 -
Available-for-sale securities 2,290 2,360
Inventories 87,105 81,401
Prepayments and other current assets 4,853 1,861
----------- ------------
Total current assets 129,473 125,008
Properties held for lease, net 708 717
Property, plant and equipment, net 6,357 6,400
Deferred tax assets 111 111
Goodwill, net 1,521 1,521
----------- ------------
Total assets 138,170 133,757
=========== ============
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts 2,933 2,908
Notes payable 8,337 5,551
Capitalized lease obligation, current portion 100 98
Letters of credit, gold loan and others 17,192 13,481
Trade payables 14,383 18,545
Accrued expenses and other payables 5,672 5,354
Income taxes payable 1,312 1,147
Deferred taxation 310 310
----------- ------------
Total current liabilities 50,239 47,394
Notes payable, non-current portion 1,787 2,244
Capitalized lease obligation, non-current portion 52 78
----------- ------------
Total liabilities 52,078 49,716
----------- ------------
Equity
Common stocks, par value US$0.01 each,
Authorized 100 million shares;
Issued 24,680,172 shares as of March 31, 2010
and 23,768,672 shares as of December 31, 2009 247 238
Additional paid-in capital 57,184 56,675
Accumulated other comprehensive (loss) gain (227) 102
Retained earnings 28,717 26,857
----------- ------------
Total LJ International Inc. shareholders' equity 85,921 83,872
Noncontrolling interest 171 169
----------- ------------
Total equity 86,092 84,041
----------- ------------
Total liabilities and equity 138,170 133,757
=========== ============
Contacts Corporate: Mr. Ringo Ng Chief Financial Officer LJ
International Inc. Tel: 011-852-2170-0018 Email Contact
www.ljintl.com Investor Relations: Ms. Jennifer K. Zimmons /
Richard Cooper Managing Director/Chairman Strategic Growth
International, Inc. Tel: 212-838-1444 Email Contact / Email Contact
www.sgi-ir.com
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