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Mecox Lane Limited Announces Second Quarter 2013 Results



Mecox Lane Limited Announces Second Quarter 2013 Results

Gross Profit Margin Up 2.8% Year over Year to 37.2%

SHANGHAI, China, Aug. 13, 2013 (GLOBE NEWSWIRE) -- Mecox Lane Limited ("Mecox
Lane" or the "Company") (Nasdaq:MCOX), a leading brand and multi-channel
retailer of apparel and accessories in China, today announced its unaudited
financial results for the second quarter ended June 30, 2013.

Second Quarter 2013  Highlights

  * Net revenues decreased 44.1% year over year to $21.8 million, compared to
    $39.0 million in the second quarter of 2012
  * Gross profit^1 decreased 39.6% year over year to $8.1 million, compared to
    $13.4 million in the second quarter of 2012
  * Gross margin was 37.2% in the second quarter of 2013, compared to 34.4% in
    the second quarter of 2012
  * Net loss was $6.2 million, compared to net loss of $4.9 million in the
    second quarter of 2012

Mecox Lane's Director and Chief Executive Officer Mr. Alfred Gu said, "We
remained conservative in our overall execution in the second quarter while we
explored the best ways of leveraging our new JV, Giosis Mecoxlane. At the same
time, macroeconomic headwinds in China continued to be a challenge and the
slowdown in China's economy has negatively influenced the fast-changing and
hyper-competitive industry of Chinese e-commerce and apparel and accessories.
In the second quarter, we decreased our inventory and overhead costs to
preserve cash and increase operating efficiency. Despite much lower revenues
compared to the same quarter last year, net loss from operations was
relatively constant, reflecting the effectiveness of our cost-cutting
initiatives. Although our e-commerce revenues continued to be negatively
impacted by the transformation of M18.com to a non-exclusive, multi-channel
platform, we saw increased sales on independent e-commerce platforms such as
TMall.com in the second quarter and have refocused on our core strength of
providing value-for-money, fast-fashion products to China's consumers. Looking
forward, we will remain prudent with regard to our costs and cash expenditures
and will continue to make efforts to position ourselves as a multi-brand and
multi-channel fast fashion apparel company."

Second Quarter 2013 Results

Due to the seasonal nature of its business, the Company presents its financial
results on a year-over-year basis for the second quarter of 2013 and the
second quarter of 2012 as follows.

Total Net Revenues

Total net revenues were $21.8 million in the second quarter of 2013,
representing a decrease of 44.1% from $39.0 million in the second quarter of
2012. The decrease was primarily due to the decrease in net revenues from the
Company's e-commerce channel, as well as the decrease in net revenues from the
Company's call center and physical stores.

E-commerce Channel^2

Net revenues from the Company's e-commerce channel were $6.7 million in the
second quarter of 2013, representing a decrease of 65.8% from $19.6 million in
the second quarter of 2012. The decrease was primarily attributed to the
decrease in the Company's sales on M18.com during the period after the website
was operated by the management of Giosis Mecoxlane and re-launched as a
brand-neutral open platform, partially offset by the increase in the Company's
sales on independent e-commerce platforms, including TMall.com and JD.com.

Call Center

Net revenues from the call center were $10.5 million in the second quarter of
2013, representing a decrease of 7.8% from $11.4 million in the second quarter
of 2012. The decrease was primarily attributed to a decline in orders placed
through the call center as a result of a reduction and discontinuation of the
Company's catalog circulation since January 2013.

Directly Operated Stores & Franchised Stores

Net revenues from directly operated stores were $3.1 million in the second
quarter of 2013, representing a decrease of 36.8% from $4.9 million in the
second quarter of 2012. The decrease was primarily due to the decline in the
number of directly operated stores from an average of 109 stores in the second
quarter of 2012 to an average of 60 stores in the second quarter of 2013,
partially offset by an increase in average store sales.

Net revenues from franchised stores were $1.5 million in the second quarter of
2013, representing a decrease of 51.7% from $3.2 million in the second quarter
of 2012. The decrease in net revenues was primarily due to the decline in
average store sales and the decline in the number of franchised stores from an
average of 267 stores in the second quarter of 2012 to an average of 256
stores in the second quarter of 2013.

Cost of Goods Sold^3

Cost of goods sold was $13.7 million in the second quarter of 2013,
representing a decrease of 46.5% from $25.6 million in the second quarter of
2012. The decrease is consistent with the overall decrease in revenues.

Gross Profit and Gross Margin

Gross profit was $8.1 million in the second quarter of 2013, representing a
decrease of 39.6% from $13.4 million in the second quarter of 2012. Gross
margin was 37.2% in the second quarter of 2013, compared to 34.4% in the
second quarter of 2012. The increase in gross margin was mainly due to the
increase in the weighting of the call center in total net revenues, which
generated a higher margin than that of other segments, partially offset by an
inventory provision of $0.9 million recorded during the period for the
Company's physical stores as the Company tested new brands and products.

Operating Expenses

Total operating expenses were $13.8 million in the second quarter of 2013,
representing a decrease of 26.7% from $18.8 million in the second quarter of
2012, primarily due to the decrease of selling, general and administrative
expenses in the period.

Selling, general and administrative expenses were $13.0 million in the second
quarter of 2013, representing a decrease of 30.1% from $18.6 million in the
second quarter of 2012, primarily due to a decrease in headcount and related
labor costs, the termination of certain warehouse leases as a result of the
Company's centralized logistics network, and a shift to Giosis Mecoxlane of
advertising costs and IT expenses associated with the operation of M18.com.

Loss from Operations

Loss from operations was $5.7 million in the second quarter of 2013, compared
to loss from operations of $5.4 million in the second quarter of 2012.

Loss from Equity in an Affiliate

Loss from equity in an affiliate was $1.2 million in the second quarter of
2013, compared to nil in the second quarter of 2012.

Net Loss and Loss per ADS

Net loss was $6.2 million in the second quarter of 2013, compared to net loss
of $4.9 million in the second quarter of 2012.Non-GAAP net loss^4 was $5.2
million in the second quarter of 2013, compared to non-GAAP net loss of $4.3
million in the second quarter of 2012. Basic and diluted loss per American
depositary share ("ADS") attributable to Mecox Lane shareholders was $0.53 in
the second quarter of 2013. One ADS represents thirty-five ordinary shares.

Cash and Short-term Investments

As of June 30, 2013, Mecox Lane had cash and cash equivalents totaling $7.2
million, compared to $13.3 million as of December 31, 2012. Restricted cash as
of June 30, 2013 totaled $17.9 million, compared to nil as of December 31,
2012. Short-term investments on June 30, 2013 were $10.5 million, compared to
$20.7 million as of December 31, 2012, all of which were structured term bank
deposits.

Secured Short-term Borrowing

As of June 30, 2013, Mecox Lane had secured short-term borrowing totaling
$15.4 million, compared to nil as of December 31, 2012, all of which was
secured by restricted cash of $17.9 million.

Conference Call Information

Mecox Lane management will hold an earnings conference call at 9 p.m. U.S.
Eastern Time on August 13 (9 a.m. Shanghai/Hong Kong Time on August 14) to
discuss results and highlights from the quarter, as well as to answer
questions. A brief presentation to accompany the earnings call will be
available on the Company's website, http://ir.mecoxlane.com/events.cfm, at
7:30 p.m. U.S. Eastern Time on August 13 (7:30 a.m. Shanghai/Hong Kong Time on
August 14).

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:       29368366

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

About Mecox Lane Limited

Mecox Lane Limited (Nasdaq:MCOX) is a leading brand and multi-channel retailer
of apparel and accessories in China. The Company offers a wide selection of
affordable fashion products through e-commerce channels including the M18.com
website, which is operated by the Company's joint venture, Giosis Mecoxlane
Limited, and other independent e-commerce platforms, as well as through the
Company's physical store network and call center. Product offerings include
apparel and accessories, beauty and healthcare products and other items under
Mecox Lane's own proprietary brands,and select domestic and international
third-party brands. For more information on Mecox Lane, please visit
http://ir.mecoxlane.com.

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. 

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

^2 Since January 2013, one of the Company's reportable segments, i.e. Internet
platform segment, has been renamed as E-commerce channel to reflect the fact
that the M18.com website has been operated by Giosis Mecoxlane and re-launched
as a brand-neutral and open marketplace platform to attract a number of
independent sellers and brands while the Company's branded merchandise has
also been offered on other third-party e-commerce websites in China.

^3 Cost of goods sold excludes depreciation and amortization expenses.

^4 Non-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
                                                                  
                                                   December 31,  June 30, 
                                                   2012          2013
                                                   $             $
ASSETS                                                            
Current assets:                                                   
Cash and cash equivalents                           13,291,063    7,166,961
Restricted cash                                     --            17,868,508
Short-term investments                              20,682,480    10,519,990
Accounts receivable, net of allowances of $55,660
and $55,660 as of December 31, 2012 and June 30,    1,452,864     2,279,954
2013, respectively
Amount due from a related party                     --            292,717
Other receivables                                   5,149,844     3,604,333
Advances to suppliers and prepaid expenses          6,297,463     1,078,626
Merchandise inventories                             27,349,540    21,647,885
Total current assets                                74,223,254    64,458,974
Property and equipment, net                         46,528,057    45,520,287
Prepaid land use right                              6,125,104     6,166,630
Intangible assets, net                              1,263,644     1,113,648
Investment in an affiliate                          --            8,928,742
Other non-current assets                            249,903       959,382
TOTAL ASSETS                                        128,389,962   127,147,663
                                                                  
LIABILITIES AND EQUITY                                            
Current liabilities:                                              
Secured short term borrowing                        --            15,375,370
Accounts payable (including accounts payable of
the consolidated VIEs without recourse to Mecox     19,063,827    13,382,765
Lane Limited of $3,101,935 and $2,712,605 as of
December 31, 2012 and June 30, 2013, respectively)
Advances from customers (including advances from
customers of the consolidated VIEs without
recourse to Mecox Lane Limited of $1,345,714 and    4,570,595     3,940,128
$1,063,758 as of December 31, 2012 and June 30,
2013, respectively)
Amount due to a related party                       547,478       1,431,032
Accrued expenses (including accrued expenses of
the consolidated VIEs without recourse to Mecox     5,153,056     3,208,462
Lane Limited of $281,152 and $209,419 as of
December 31, 2012 and June 30, 2013, respectively)
Other current liabilities (including other current
liabilities of the consolidated VIEs without
recourse to Mecox Lane Limited of $1,955,777 and    7,358,589     6,329,660
$1,774,163 as of December 31, 2012 and June 30,
2013, respectively)
Income tax payable (including income tax payable
of the consolidated VIEs without recourse to Mecox  1,779,978     1,782,479
Lane Limited of $34,718 and $33,100 as of December
31, 2012 and June 30, 2013, respectively)
Total current liabilities                           38,473,523    45,449,896
                                                                  
                                                                  
Ordinary shares ($0.0001 par value; 10,000,000,000
shares authorized, 408,727,673 and 424,591,756
shares issued, and 403,790,426 and 413,535,851      40,873        42,459
shares outstanding as of December 31, 2012 and
June 30, 2013)
Additional paid-in capital                          165,934,265   167,970,969
Treasury Stock                                      (572,168)     (1,273,364)
Accumulated deficit                                 (82,811,023)  (93,220,188)
Accumulated other comprehensive income              6,292,753     7,146,152
Statutory reserve                                   931,739       931,739
Total Mecox Lane Limited equity                     89,816,439    81,597,767
Noncontrolling interests                            100,000       100,000
Total equity                                        89,916,439    81,697,767
TOTAL LIABILITIES AND EQUITY                        128,389,962   127,147,663

 
Mecox Lane Limited
Unaudited Consolidated Statements of Comprehensive Income (Loss)
                                                           
                                   Three-month Ended June 30
                                   2012                   2013
                                   $                      $
Net revenues:                                              
E-commerce channel                  19,640,275             6,724,532
Call center                         11,357,889             10,474,386
Directly operated stores            4,861,486              3,070,277
Franchised stores                   3,165,999              1,528,167
Total net revenues                  39,025,649             21,797,362
Cost of goods sold (excluding                              
depreciation and amortization)
E-commerce channel                  15,968,374             5,354,614
Call center                         4,854,816              4,796,296
Directly operated stores            2,336,039              2,316,726
Franchised stores                   2,445,535              1,224,904
Total cost of goods sold
(excluding depreciation and         25,604,764             13,692,540
amortization)
Operating expenses:                                        
Selling, general and                18,570,423             12,978,980
administrative expenses
Depreciation and amortization       1,040,516              1,214,508
Other operating income, net         (823,330)              (426,243)
Total operating expenses            18,787,609             13,767,245
Income (Loss) from operations       (5,366,724)            (5,662,423)
Interest expense                    --                     (136,980)
Interest income                     622,081                279,497
Other income (expense), net         (204,261)              508,444
Loss before income taxes, equity
in affiliates and noncontrolling    (4,948,904)            (5,011,462)
interests
Income tax expense                  --                     -- 
Loss before equity in affiliates    (4,948,904)            (5,011,462)
and noncontrolling interests
Loss from equity in an affiliate    --                     (1,173,074)
Net loss                            (4,948,904)            (6,184,536)
Accretion of noncontrolling         91,884                 23,307
interest
Net loss attributable to            (91,884)               (23,307)
noncontrolling interests
Net loss attributable to Mecox      (4,948,904)            (6,184,536)
Lane Limited shareholders
Loss per ordinary share:                                   
Basic                               (0.01)                 (0.02)
Diluted                             (0.01)                 (0.02)
Loss per ADS (1)                                           
Basic                               (0.43)                 (0.53)
Diluted                             (0.43)                 (0.53)
Weighted average ordinary shares                           
used in per share calculation
Basic                               405,074,604            410,384,335
Diluted                             405,074,604            410,384,335
Weighted average ADS used in per                           
share calculation (1)
Basic                               11,573,560             11,725,266
Diluted                             11,573,560             11,725,266
                                                           
(1) ADS amounts adjusted for a change in the ratio of the Company's American
Depositary Shares ("ADSs") to ordinary shares ("Shares") from 1:7 to 1:35
("Ratio Change"), effective as of February 1, 2013.
                                                           
Other comprehensive income, net of                         
tax of nil
Change in cumulative foreign        (336,189)              663,892
currency translation adjustment
Other comprehensive income, net of  (336,189)              663,892
tax
                                                           
Comprehensive income attributable   (5,285,093)            (5,520,644)
to Mecox Lane Limited shareholders
                                                           
Reconciliations of Non-GAAP Financial Measures to Comparable GAAP Measures
Non-GAAP net income (loss) (1)      (4,343,617)            (5,198,002)
                                                           
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 June 30
                                   2012                   2013
                                   $                      $
Net loss                            (4,948,904)            (6,184,536)
Add back: Share-based compensation  605,287                986,534
expenses
Non-GAAP net loss                   (4,343,617)            (5,198,002)

CONTACT: For investor and media inquiries please contact:
        
         In China:
        
         Ryan Shi
         Mecox Lane Limited
         Tel: +86-21-6495-0500 or +86-21-5464-9900 Ext. 8161
         Email: ir@mecoxlane.com
        
         Nicholas Manganaro
         Ogilvy Financial, Beijing
         Tel: +86-10-8520-3073
         Email: mcox@ogilvy.com
        
         In the U.S.:
        
         Justin Knapp
         Ogilvy Financial, U.S.
         Tel: +1-646-460-9989
         Email: mcox@ogilvy.com

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