Ever-Glory International Group, Inc. (NASDAQ:EVK) Q4 2021 Earnings Conference Call April 13, 2022 8:00 AM ET
CompanyParticipants
Jiansong Wang – Chief Financial Officer
Conference Call Participants
Operator
[Call starts abruptly]
Yes, please go ahead. Your line is open.
Unidentified Company Representative
Thank you, operator. Hello, everyone and welcome to Ever-Glory International Group’s Fourth Quarter 2021 Earnings Conference Call. The company distributed it’s earnings press release earlier today via Newswire service. You can also download it from Ever-Glory’s website at www.everglorygroup.com. With us today is Ever-Glory’s Chief Financial Officer, Mr. Jiansong Wang; Mr. Yihua Kang, Ever-Glory’s Chairman, President and Chief Executive Officer, is out on 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 safe harbor statement regarding today’s conference call. Please note that the discussion today will contain forward-looking statement made under the safe harbor provision of the U.S. Private Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, the company’s results may differ materially from the view expressed today. Further information regarding this and other risks and uncertainties are included in the company’s quarterly report on Form 10-Q for the third [ph] quarter ended September 13, 2021, annual report on Form 10-Q for the year ended December 31, 2021 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 under applicable law.
As a 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 will now turn the call over to Mr. Wang.
Jiansong Wang
Thank you for joining us. Good morning to those in the U.S. and good evening to those participants in Asia. Thank you for joining our fourth quarter 2021 earnings conference call. We are very pleased to announce the 2021 fourth quarter results with 10.7% year-over-year increase in gross profit. Notably, we achieved year-over-year improvement in gross profit of 25.4% for our wholesale business. Our retail business increased 3.6% in gross profit compared with the full year ended December 31, 2021.
On retail side, our brands continue to attract new customers and retain existing customers by focusing on design, quality and value. Our inventory management strategy continually improved the balance between inventory turnover and our diligent cost control measures further strengthen the profitability of our business. As of December 31, 2021, we operated a nationwide network of 880 stores compared with 936 stores as of December 31, 2020. During 2021, we operated — we celebrated with the spokesperson of La go go. The effect of celebrating will enhance our brand influence. While we still see stronger demand for the products at our retail stores, we continue to see opportunities in the e-commerce area, viable platforms such as our La go go stores on Tmall and Dangdang.com are used as a strategic and effective way for us to drive customer engagement, encourage cross-channel shopping, reduce out-of-season inventory and created a unique and differentiated customer experience to grow our loyal customer base.
The company’s wholesale business is still affected by COVID-19 and the pressure of the economic downturn. We will actively respond to the changes in the internal economic environment. As for our wholesale business, the company has enhanced its extensive product development and supply chain management enterprise as well as network of high-quality, reliable and cost efficient sourcing channels and manufacturers.
In addition, our market research center provides our wholesale customers with evidence research and notice [ph] in the areas, including brand positioning, fashion trends, new material development and new site design. 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 fourth quarter of 2021. Please note that all numbers discussed today are in U.S. dollars unless otherwise noted.
Full year 2021 financial results. Total sales for the full year of 2021 was $331 million, an increase of 23.8% from $267.4 million in the full year of 2020. This increase was primarily driven by a 57.8% increase our wholesale business, partially offset by a 2.7% decrease in retail business. Sales for the company’s branded fashion apparel retail division decreased by 2.7% to $146.1 million for the full year of 2021 compared with $150.1 million for the full year of 2020. This decrease was primarily due to a decrease in same-store sales. The company operated 880 retail stores as of December 30, 2021 compared with 936 retail stores as of December 31, 2020. Sales for the company’s wholesale division increased by 57.8% to $184.9 million for the full year of 2021 compared with $117.2 million for the full year of 2020. This increase was primarily attributable to increased sales in Mainland China, Hong Kong, China, Europe-Other, Japan and United States.
Total gross profit for the full year of 2021 increased by 10.7% to $101 million compared with $91.2 million for the full year of 2020. Total gross margin for the full year of 2021 decreased to 30.5% from 34.1% for the full year of 2020. Gross profit for the retail business increased by 3.6% to $63.7 million for the full year of 2021 compared with $61.5 million for the full year of 2020. Gross margin for the full year of 2021 was 43.6% compared to 40.9% for the full year of 2020. Gross profit for the wholesale business increased by 25.4% to $37.3 million for the full year of 2021, compared with $29.7 million for the full year of 2020. Gross margin for the full year of 2021 decreased to 20.2% from 25.4% for the full year of 2020.
Selling expenses for the full year of 2021 increased by 12.8% to $64.1 million [ph] or 19.1% of total sales, compared with $55.9 million or 20.9% of total sales for the full year of 2020. The increase was attributable to the higher traveling expenses. General and administrative expenses for the full year of 2021 increased by 23.2% to $38.4 million or 11.6% of total sales compared with $31.2 million or 11.7% of total sales for the full year of 2020. The increase was attributable to the increased salaries. Loss income from operations was negative $0.5 million for the full year of 2021 compared to $4.1 million for the full year of 2020.
Net loss attributable to the company for the full year of 2021 was negative $0.09 million compared with $3.3 million for the full year of 2020. Basic and diluted loss per share was negative $0.01 for the full year of 2021, compared with $0.22 for the full year of 2020. As of December 31, 2021, Ever-Glory has approximately $59.9 million [ph] of cash and cash equivalents compared with approximately $81.9 million of December 31, 2020, Ever-Glory had working capital of approximately $51 million as of December 31, 2021 and outstanding bank loans of approximately $69 million as of December 31, 2021.
Our relentless efforts have been paying off with the 2021 fourth quarter results and we look forward to further strengthening the fundamentals and increasing operating leverage to support the long-term profitability of our business.
Thank you for participating in Ever-Glory’s 2021 fourth 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.
Operator
That will conclude today’s conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
Question-and-Answer Session
End of Q&A
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