SHANGHAI, China, Nov. 29, 2010 (GLOBE NEWSWIRE) -- Mecox Lane Limited ("Mecox Lane" or the "Company") (Nasdaq:MCOX), which operates China's leading online platform for apparel and accessories as measured by revenues in 2009, today announced its unaudited financial results for the third quarter ended September 30, 2010.
Third Quarter 2010 Highlights
- Net revenues increased 36.0% year-over-year to $55.3 million from $40.7 million in the year-ago period
- Gross profit increased 23.8% year-over-year to $22.0 million from $17.8 million in the year-ago period
- Income from operations increased 410.2% year-over-year to $0.9 million from $0.2 million in the year-ago period
- Net income increased 246.4% year-over-year to $0.8 million from $0.2 million in the year-ago period
- Non-GAAP net income increased 59.5% year-over-year to $1.6 million from $1.0 million in the year-ago period
"The B2C e-commerce business is entering a period of rapid growth and we believe Mecox Lane is well positioned to benefit from this trend," said Mecox Lane's Director and Chief Executive Officer Alfred Gu. "On the back of a successful IPO, we have seized the opportunity to capitalize on China's growing e-commerce industry as well as the rise of consumption levels in China, as evidenced by our strong third quarter results. Going forward, we will continue to build up our leading market position by expanding our product offering, growing our customer base and enhancing our customer service platform to deliver an exceptional online shopping experience."
Third Quarter 2010 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 2010 and the third quarter of 2009 as in the following paragraphs.
Total Net Revenues
Total net revenues were $55.3 million in the third quarter of 2010, an increase of 36.0% from $40.7 million in the third quarter of 2009.The increase in the Company's net revenues was primarily due to an increase in net revenues from the online platform and to a lesser extent due to an increase in net revenues from franchised stores. This was partially offset by a decrease in net revenues from directly operated stores during the third quarter of 2010.
Net revenues from the online platform were $43.9 million in the third quarter of 2010, an increase of 53.1% from $28.7 million in the third quarter of 2009. The growth in net revenues was mainly due to a 70.2% increase in online orders, which resulted primarily from greater marketing activity during the third quarter of 2010.
Directly Operated Stores
Net revenues from directly operated stores were $6.5 million in the third quarter of 2010, a decrease of 22.3% from $8.4 million in the third quarter of 2009. The decrease was primarily due to a decline in the number of directly operated stores from an average of 162 stores in the third quarter of 2009 to an average of 143 stores in the third quarter of 2010. This was primarily due to 11 directly operated stores being converted into franchised stores during the third quarter of 2010.
Net revenues from franchised stores were $4.9 million in the third quarter of 2010, an increase of 35.9% from $3.6 million in the third quarter of 2009. The growth in net revenues was primarily due to an increase in the number of operating franchised stores from an average of 99 stores in the third quarter of 2009 to an average of 317 stores in the third quarter of 2010.
Cost of Goods Sold
Cost of goods sold was $33.3 million in the third quarter of 2010, an increase of 45.5% from $22.9 million in the third quarter of 2009. The increase was primarily due to an increase in goods sold through the Company's online platform, which was primarily driven by a rise in the number of online orders placed.
Gross Profit and Gross Margin
Gross profit was $22.0 million in the third quarter of 2010, an increase of 23.8% from $17.8 million in the third quarter of 2009. Gross margin was 39.7% in the third quarter of 2010, compared to 43.7% in the third quarter of 2009.
Total operating expenses were $21.1 million in the third quarter of 2010, an increase of 19.8% from $17.6 million in the third quarter of 2009.
Selling, general and administrative expenses were $20.1 million in the third quarter of 2010, an increase of 20.4% from $16.7 million in the third quarter of 2009. The increase was primarily due to an 11.6% increase in marketing and advertising expenses, and a 40.2% increase in compensation and benefit expenses.
Depreciation and amortization expenses were $1.1 million in the third quarter of 2010, an increase of 5.1% from $1.0 million in the third quarter of 2009.
Income from Operations and Operating Margin
Income from operations was $0.9 million in the third quarter of 2010, an increase of 410.2% from $0.2 million in the third quarter of 2009. Operating margin was 1.7% in the third quarter of 2010, compared to 0.4% in the third quarter of 2009.
Net Income and Earnings per ADS
Net income was $0.8 million in the third quarter of 2010, an increase of 246.4% from $0.2 million in the third quarter of 2009. Non-GAAP net income was $1.6 million in the third quarter of 2010, an increase of 59.5% from $1.0 million in the third quarter of 2009. Diluted earnings per American depositary share ("ADS") attributable to Mecox Lane shareholders was $0.013 in the third quarter of 2010. One ADS represents seven ordinary shares.
As of September 30, 2010, Mecox Lane had cash and cash equivalents totaling $21.9 million, compared to $18.8 million as of December 31, 2009.
The Company estimates for the fourth quarter of 2010, net revenues for the online platform segment to be in the range of $43.7 million to $46.2 million; net revenues for the directly operated stores segment to be in the range of $7.8 million to $8.2 million; and net revenues for the franchised stores segment to be in the range of $5.7 million to $6.0 million. This is the Company's preliminary view and is subject to change.
Conference Call Information
Mecox Lane management will hold an earnings conference call at 8:00 p.m. Eastern Standard Time on November 29, 2010 (9:00 a.m. Beijing/Hong Kong Time on November 30, 2010) to discuss results and highlights from the quarter and answer questions.
The dial-in numbers and passcode for the conference call are as follows:
Additionally, an archived web-cast 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 China's leading online platform for apparel and accessories as measured by revenues in 2009. The Company offers a wide selection of fashion products through its 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 under 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 .
The Mecox Lane Limited logo is available at
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 Financial Outlook section and quotations from management in this press release, as well as Mecox Lane's strategic and operational plans, contain forward-looking statements. Mecox Lane may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Mecox Lane's beliefs and expectations, are 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; expected 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 clients 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 Mecox Lane's registration statement on Form F-1 filed with the Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Mecox Lane 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, 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 depreciation and amortization expenses.
2 Non-GAAP net income excludes 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.
3 Cost of goods sold excludes depreciation and amortization expenses.
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