Mecox Lane Limited Announces Third Quarter 2012 Results

Mecox Lane Limited Announces Third Quarter 2012 Results

Gross Profit Margin Up 10.0% Year Over Year

SHANGHAI, China, Nov. 20, 2012 (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, today announced its unaudited
financial results for the third quarter ended September 30, 2012.

Third Quarter 2012 Highlights

  *Internet platform net revenues decreased 42.8% year over year to $17.2
    million, compared to $ 30.0 million in the third quarter of 2011
  *Net revenues decreased 32.3% year over year to $36.0 million, compared to
    $53.1 million in the third quarter of 2011
  *Gross profit margin increased 10.0% year over year to 36.4%, compared to
    26.4% in the third quarter of 2011
  *Gross profit^1 decreased 6.6% year over year to $13.1 million, compared to
    $14.0 million in the third quarter of 2011
  *Net loss was $6.1 million, compared to net loss of $14.4 million in the
    third quarter of 2011

Mr. Alfred Gu, Mecox Lane's director and chief executive officer, commented,
"Despite the challenges of what continues to be a fiercely competitive
e-commerce sector in China, we improved our overall efficiency in the third
quarter of 2012 and increased our gross margin 10.0% year over year, primarily
through better management of our inventory turnover. Also, our Wujiang
Logistics Center is now fully operational, serving as the backbone of our
Internet platform operations and providing an essential component of our
customer service. Few of our competitors can match our order-fulfillment
capability of over 100,000 parcels per day. As such, we will continue to
explore ways to monetize any excess capacity in this regard and plan to set up
a new company to serve the logistics and order-fulfillment needs of third
parties.

"At the same time, with online advertising prices still at historically high
levels in the third quarter of 2012, we limited our online ad spend, and our
core Internet business contracted as a result. We remain committed, however,
to a conservative approach of preserving cash given current market conditions.

"We are also excited to announce that our board has approved a joint-venture
agreement with Giosis Pte. Ltd., an operator of online marketplaces in several
countries in Asia, to form and operate an online marketplace on our M18.com
domain. Giosis is led by Mr. Young Bae Ku, the founder of Gmarket Inc., an
online marketplace in Korea and eBay partner in Asia. Leveraging the technical
and operational know-how of Giosis and the China market presence of Mecox
Lane, we are excited by the joint venture's potential in China's B2C and C2C
markets.

"The transaction is subject to the approval of our shareholders at an
extraordinary general meeting to be held next month, and also subject to other
closing conditions. If the transaction is finalized, we would refocus on our
core strength of providing fashionable, value-for-money branded apparel, as
well as health and beauty products, among other categories. Moreover, we would
sell our brands on the new M18.com marketplace, as well as on third-party
e-commerce websites. Mecox Lane will continue to market and sell its
merchandise through its call center and physical stores. In addition, we will
form a new company to serve the logistics and order-fulfillment needs of its
customers and of third parties," added Mr. Gu.

Third Quarter 2012 Results

Due to the seasonal nature of its business, the Company presents its financial
results on a year-over-year basis between the third quarter of 2012 and the
third quarter of 2011 as in the following paragraphs.

Total Net Revenues

Total net revenues were $36.0 million in the third quarter of 2012,
representing a decrease of 32.3% from $53.1 million in the third quarter of
2011. The decrease was primarily due to the decrease in net revenues from the
Company's Internet platform, as well as lower revenues from the Company's call
center and stores.

Internet Platform

Net revenues from the Internet platform were $17.2 million in the third
quarter of 2012, representing a decrease of 42.8% from $30.0 million in the
third quarter of 2011. The decrease was primarily attributed to a 46% decrease
in the number of average monthly unique visitors as a result of the Company's
decision to limit its online advertising.

Call Center

Net revenues from the call center were $11.0 million in the third quarter of
2012, representing a decrease of 8.2% from $12.0 million in the third quarter
of 2011. The decrease was primarily attributed to a decline in orders placed
through the call center, which is consistent with the continuing market-wide
trend in consumer behavior in China toward e-commerce shopping, along with a
reduction in the Company's catalog circulation.

Directly Operated Stores & Franchised Stores

Net revenues from directly operated stores were $3.8 million in the third
quarter of 2012, representing a decrease of 33.9% from $5.8 million in the
third quarter of 2011. The decrease was primarily due to a decline in the
number of directly operated stores from an average of 115 stores in the third
quarter of 2011 to an average of 85 stores in the third quarter of 2012, as
well as a decrease in average store sales.

Net revenues from franchised stores were $4.0 million in the third quarter of
2012, representing a decrease of 25.0% from $5.3 million in the third quarter
of 2011. The decrease in net revenues was primarily due to a decline in the
number of franchised stores from an average of 300 stores in the third quarter
of 2011 to an average of 265 stores in the third quarter of 2012, as well as a
decrease in average store sales.

Cost of Goods Sold^2

Cost of goods sold was $22.9 million in the third quarter of 2012,
representing a decrease of 41.5% from $39.1 million in the third quarter of
2011. The decrease is consistent with the overall decrease in sales.

Gross Profit^1 and Gross Margin

Gross profit was $13.1 million in the third quarter of 2012, representing a
decrease of 6.6% from $14.0 million in the third quarter of 2011. Gross margin
was 36.4% in the third quarter of 2012, compared to 26.4% in the third quarter
of 2011. The increase in gross margin was primarily due to a decrease of
inventory provision from $4.5 million in the third quarter of 2011 to $37.5
thousand in the third quarter of 2012 owing to improvements in managing
inventory turnover, as well as the decrease in the weighting of the Internet
business, which generates a lower margin than other segments, within total net
revenues and selling more high-margin products through the call center.

Operating Expenses

Total operating expenses were $19.6 million in the third quarter of 2012,
representing a decrease of 26.7% from $26.8 million in the third quarter of
2011.

Selling, general and administrative expenses were $18.8 million in the third
quarter of 2012, representing a decrease of 28.7% from $26.4 million in the
third quarter of 2011, which was primarily due to the combined effects of a
decrease in marketing costs, as the Company limited its sales and marketing
activity, and a decrease in head count and labor costs.

Loss from Operations

Loss from operations was $6.5 million in the third quarter of 2012, compared
to loss from operations of $12.8 million in the third quarter of 2011.

Net Loss and Loss per ADS

Net loss was $6.1 million in the third quarter of 2012, compared to net loss
of $14.4 million in the third quarter of 2011. Non-GAAP net loss^3 was $5.8
million in the third quarter of 2012, compared to non-GAAP^3 net loss of $13.5
million in the third quarter of 2011. Basic and diluted loss per American
Depositary Share ("ADS") attributable to Mecox Lane shareholders was $0.11in
the third quarter of 2012. One ADS represents seven ordinary shares.

Cash and Short-term Investments

As of September 30, 2012, Mecox Lane had cash and cash equivalents totaling
$7.4 million, compared to $40.1 million as of December 31, 2011. Short-term
investments on September 30, 2012 were $35.5 million compared to $20.6 million
as of December 31, 2011, all of which were structured term bank deposits.

Giosis Mecoxlane

In November 2012, the Company's board of directors approved an agreement with
Giosis Pte. Ltd. ("Giosis"), which operates online marketplaces in several
countries in Asia, to subscribe for the shares of, and contribute certain
assets to, a new company, Giosis Mecoxlane Ltd. ("Giosis Mecoxlane"), in order
for it to operate an online marketplace in China on the M18.com domain.

As contemplated in the transaction documents, the initial capital
contributions from Giosis and Mecox Lane to Giosis Mecoxlane would be $15
million and $5 million in cash, respectively. Giosis would also contribute a
non-exclusive license to its online marketplace technology and related
intellectual property, as well as assemble the management team. Mecox Lane
would contribute certain non-cash assets, including the domain name M18.com,
along with certain trademarks.

The consummation of the transaction is subject to the satisfaction of certain
conditions to closing as described in the transaction documents, including but
not limited to the approval of Mecox Lane's shareholders. Upon the closing of
the transaction, Giosis would initially hold 60% and Mecox Lane would
initially hold 40% of the outstanding equity interests of Giosis Mecoxlane,
assuming the conversion of the Series A Preferred Shares of Giosis Mecoxlane.

Mecox Lane plans to hold an extraordinary general meeting ("EGM") on December
19, 2012 at 10:00 AM (Hong Kong time) on the 18th Floor of One Exchange
Square, 8 Connaught Place, Central, Hong Kong to consider entering into
binding agreements to complete the transaction.

Conference Call Information

Mecox Lane management will hold an earnings conference call at 8 p.m. U.S.
Eastern Time on November 20, 2012 (9 a.m. Shanghai/Hong Kong Time on November
21, 2012) to discuss results and highlights from the quarter and answer
questions. A brief presentation to accompany the earnings call will be
available on the Company's website, http://ir.m18.com/events.cfm, at 6:30 p.m.
U.S. Eastern Time on November 20, 2012 (7:30 a.m. Shanghai/Hong Kong Time on
November 21, 2012).

The dial-in numbers and passcode for the conference call are as follows:

U.S. Toll Free: +1-855-500-8701
International: +65-6723-9385
Hong Kong:      +852-3051-2745
Passcode:      68973476

Additionally, an archived webcast of this call will be available on the
Investor Relations section of Mecox Lane's website at http://ir.m18.com.

About Mecox Lane Limited

Mecox Lane Limited (Nasdaq:MCOX) operates one of China's leading online
platforms for apparel and accessories as measured by revenues in 2011. The
Company offers a wide selection of fashion products through its www.m18.com
e-commerce website and physical store network. Product offerings include
apparel and accessories, home products, beauty and healthcare products and
other products, under the Company's own proprietary brands, such as Euromoda
and Rampage, as well as other selected third-party brands, including
established international and Chinese brands in addition to independent and
emerging brands. For more information on Mecox Lane, please visit
http://ir.m18.com.

The Mecox Lane Limited logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=11140

Safe Harbor: Forward Looking Statements

This press release contains forward-looking statements made under the "safe
harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as
amended. These forward-looking statements can be identified by terminology
such as "may," "will," "expects," "anticipates," "future," "intends," "plans,"
"believes," "aims," "estimates," "confident," "likely to" and similar
statements. Among other things, the quotations from management in this press
release, as well as the Company's strategic and operational plans, contain
forward-looking statements. Forward-looking statements involve inherent risks
and uncertainties. A number of factors could cause actual results to differ
materially from those contained in any forward-looking statement, including
but not limited to the following: the Company's business strategies and
initiatives as well as its business plans; the Company's future business
development, results of operations and financial condition; changes in the
Company's revenues and certain cost or expense items; the Company's
expectations with respect to increased revenue growth and its ability to
sustain profitability; the Company's products under development or planning;
the Company's ability to attract customers and further enhance its brand
recognition; trends and competition in the e-commerce and apparel and
accessories industry; the e-commerce and apparel and accessories industry in
China may not grow at the rates projected by market data, or at all; the
failure of the markets to grow at the projected rates may have a material
adverse effect on the Company's business and the market price of its ADSs; in
addition, the rapidly changing nature of the e-commerce and apparel and
accessories industry in China subjects any projections or estimates relating
to the growth prospects or future condition of the Company's market to
significant uncertainties. If any one or more of the assumptions underlying
the market data turns out to be incorrect, actual results may differ from the
projections based on these assumptions. You should not place undue reliance on
these forward-looking statements.Further information regarding these and
other risks is included in the Company's annual report on Form 20-F as well as
in its other filings with the Securities and Exchange Commission. All
information provided in this press release is current as of the date of the
press release, and the Company undertakes no duty to update such information,
except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Mecox Lane's consolidated financial results presented in
accordance with United States Generally Accepted Accounting Principles
("GAAP"), Mecox Lane uses in this press release non-GAAP net income (loss),
which excludes share-based compensation expenses. The presentation of the
non-GAAP financial measure is not intended to be considered in isolation or as
a substitute for the financial information prepared and presented in
accordance with GAAP.

Mecox Lane believes that the non-GAAP financial measure facilitates investors'
and management's comparisons to Mecox Lane's historical performance and
assists management's financial and operational decision making. A limitation
of using the non-GAAP financial measure is that share-based compensation
expenses are recurring expenses that will continue to exist in Mecox Lane's
business for the foreseeable future. Management compensates for these
limitations by providing specific information regarding the GAAP amounts
excluded from the non-GAAP measure. The accompanying table has more details on
the reconciliation between the non-GAAP financial measure and its most
directly comparable GAAP financial measure.

^1Gross profit excludes the impact of depreciation and amortization expenses.

^2Cost of goods sold excludes depreciation and amortization expenses.

^3Non-GAAP net loss and non-GAAP net income exclude share-based compensation
expenses. The non-GAAP measures and related reconciliations to GAAP measures
are described in the accompanying sections of "About Non-GAAP Financial
Measures" and the accompanying table of "Mecox Lane Limited – Consolidated
Statement of Operations Information – Reconciliations of Non-GAAP Financial
Measures to Comparable GAAP Measures" at the end of this press release.

Mecox Lane Limited
Unaudited Consolidated Balance Sheet Information
                                                               
                                                  December 31, September30,
                                                  2011          2012
                                                  $             $
ASSETS                                                         
Current assets:                                                
Cash and cash equivalents                          40,097,545   7,358,424
Short-term investments                             20,631,910   35,483,400
Accounts receivable, net of allowances of $64,063
and $64,063as of December 31, 2011 and September  1,993,962    1,226,219
30, 2012, respectively
Amount due from related party                      356,090      260,212
Other receivables                                  6,921,738    4,969,496
Advances to suppliers and prepaid expenses         2,138,815    1,605,870
Merchandise inventories                            31,286,353   29,466,366
Deferred tax assets—current portion                323,911      --
Total current assets                              103,750,324  80,369,987
Property and equipment, net                        43,236,593   48,220,719
Prepaid land use right                             6,234,620    6,102,863
Intangible assets, net                             1,450,220    1,461,627
Other non-current assets                           833,427      492,102
                                                               
TOTAL ASSETS                                       155,505,184  136,647,298
                                                               
LIABILITIES, MEZZANINE EQUITY AND EQUITY                        
Current liabilities:                                           
Accounts payable (including accounts payable of
the consolidated VIEs without recourseto Mecox
Lane Limited of 4,886,576 and                      23,867,229   21,793,451
4,407,704 as of December 31, 2011 and September
30, 2012, respectively)
Advances from customers (including advances from
customers of the consolidated VIEs without
recourse to Mecox Lane Limited of                  4,723,687    4,428,962
1,790,998 and 1,323,505 as of December 31, 2011
and September 30, 2012, respectively)
Accrued expenses (including accrued expenses of
the consolidated VIEs withoutrecourse to Mecox
Lane Limited of 5,378,698 and                      8,725,738    5,229,464
382,435 as of December 31, 2011 and September 30,
2012, respectively)
Other current liabilities (including other current
liabilities of the consolidated VIEs
withoutrecourse to Mecox Lane Limited of          5,694,457    7,131,669
4,142,652
and 1,973,639 as of December 31, 2011 and
September 30, 2012, respectively)
Income tax payable (including income tax payable
of the consolidated VIEs withoutrecourse to Mecox
Lane Limited of 107,032 and                        1,793,016    1,812,667
6,639 as of December 31, 2011 and September 30,
2012, respectively)
Total current liabilities                         44,804,127   40,396,213
                                                               
Equity:                                                         
Ordinary shares ($0.0001 par value; 10,000,000,000
shares authorized, 405,192,227 and 405,250,544
shares issued, and 405,192,227                     40,519       40,525
and 401,309,894 shares outstanding as of December
31, 2011 and September 30, 2012)
Additional paid-in capital                        163,806,117  165,542,139
Treasury Stock                                     --          (489,923)
Accumulated deficit                                (59,447,134) (74,785,130)
Accumulated other comprehensive income             6,201,555    5,843,474
Total Mecox Lane Limited equity                   110,601,057  96,151,085
Noncontrolling interests                           100,000      100,000
Total equity                                       110,701,057  96,251,085
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY     155,505,184  136,647,298



Mecox Lane Limited
Unaudited Consolidated Statement of Comprehensive Income
                                                         
                                   Three-month Periods Ended September 30
                                   2011                   2012
                                   $                      $
                                                         
Net revenues:                                             
Internet platform                   30,016,282             17,156,559
Call center                         11,986,791             10,998,828
Directly operated stores            5,793,511              3,827,856
Franchised stores                   5,331,126              3,998,585
Total net revenues                  53,127,710            35,981,828
                                                         
Cost of goods sold (excluding                             
depreciation and amortization)
Internet platform                   26,302,520             13,679,419
Call center                         5,840,881              4,326,696
Directly operated stores            3,044,969              2,271,703
Franchised stores                   3,933,602              2,620,502
Total cost of goods sold (excluding 39,121,972            22,898,320
depreciation and amortization)
                                                         
Operating expenses:                                       
Selling, general and administrative 26,416,679             18,833,646
expenses
Depreciation and amortization       1,079,672              895,668
Other operating income, net         (735,119)             (120,385)
                                                         
Total operating expenses            26,761,232            19,608,929
                                                         
Loss from operations                (12,755,494)          (6,525,421)
Interest income                     569,937                491,363
Other income, net                   757,313                (110,566)
                                                         
Loss before income taxes and        (11,428,244)          (6,144,624)
noncontrolling interests
Income tax benefit/(expense)        (3,009,721)           --
                                                         
Net loss                            (14,437,965)          (6,144,624)
Accretion of noncontrolling         --                   77,287
interest
Net loss attributable to            (52,247)              (77,287)
noncontrolling interests
Net loss attributable to Mecox Lane (14,385,718)          (6,144,624)
Limited shareholders
                                                         
Loss per ordinary share:                                  
Basic & Diluted                     (0.04)                (0.02)
                                                         
Loss per ADS                                              
Basic & Diluted                     (0.25)                (0.11)
                                                         
Weighted average ordinary shares                          
used in per share calculation
Basic & Diluted                     405,192,233           402,566,371
                                                         
Weighted average ADS used in per                          
share calculation
Basic & Diluted                     57,884,604            57,509,482
                                                         
Other comprehensive income, net of                        
tax
Change in cumulative foreign        1,617,641             (79,618)
currency translation adjustment
Other comprehensive income, net of  1,617,641             (79,618)
tax
                                                         
Comprehensive income attributable   (12,768,077)          (6,224,242)
to Mecox Lane Limited shareholders
                                                         
Reconciliations of Non-GAAP Financial Measures to          
Comparable GAAP Measures
Non-GAAP net loss (1)               (13,539,096)          (5,780,215)
                                                         
Note (1) We define non-GAAP net income (loss), a non-GAAP financial measure,
as net income (loss) excluding share-based compensation expenses. We review
non-GAAP net income (loss) together with net income (loss) to obtain a better
understanding of our operating performance. We also believe it is useful
supplemental information for investors and analysts to assess our operating
performance without the effect of non-cash sharebased compensation expenses,
which have been and will continue to be significant recurring expenses in our
business. However, the use of non-GAAP net income (loss) has material
limitations as an analytical tool. One of the limitations of using non-GAAP
net income (loss) is that it does not include all items that impact our net
income (loss) for the period. In addition, because non-GAAP net income (loss)
is not calculated in the same manner by all companies, it may not be
comparable to other similar titled measures used by other companies. In light
of the foregoing limitations, you should not consider non-GAAP net income
(loss) in isolation from or as an alternative to net income (loss) prepared in
accordance with U.S. GAAP.
                                                         
The following table sets forth the reconciliation of non-GAAP net income
(loss), a non-GAAP financial measure, from net income (loss), our most
directly comparable financial measure presented in accordance with U.S. GAAP,
for the periods indicated.
                                                         
                                   Three-month Periods Ended September 30
                                   2011                   2012
                                   $                      $
Net loss                            (14,437,965)          (6,144,624)
Add back: Share-based compensation  898,869               364,409
expenses
Non-GAAP net loss                   (13,539,096)          (5,780,215)

CONTACT: For investor and media inquiries please contact:

         In China:

         Phili Xu
         Mecox Lane Limited
         Tel: +86-21-6495-0500 or +86-21-5464-9900 Ext. 8161
         Email: ir@m18.com

         Nicholas Manganaro
         Ogilvy Financial, Beijing
         Tel: +86-10-8520-3073
         Email: mcox@ogilvy.com

         In the U.S.:

         Jessica Barist Cohen
         Ogilvy Financial, New York
         Tel: +1-646-460-9989
         Email: mcox@ogilvy.com

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