CHINA: Economic downturn hits Zuoan's Q1
- Q1 profit falls 62.2%
- Sales drop 36.1%
- Gross margin narrows to 39.9%
The ongoing downturn in China's retail industry has hit earnings and sales for casual men's wear retailer Zuoan Fashion in the first quarter.
Net income plummeted 62.2% to CNY27.9m (US$4.5m) in the three months to the end of March, from CNY73.8m in the same quarter of 2013.
Gross margin narrowed to 39.9% from 45.7% in the year ago period, primarily due to a 3% decrease in wholesale pricing.
Revenues dropped 36.1% to CNY189.2m due to a drop in sales volumes from distributors due to China's economic downturn since 2013 as well as the fall in wholesale pricing.
"The ongoing downturn in China's retail industry has had an impact on many retailers and their supply chain partners, including Zuoan," said CEO James Hong. "Although the general market environment is not expected to improve in the short term, we believe that many of the macro challenges that impacted our business over the last year are slowly abating.
"As our growth returns to improved levels, we will remain prudent with spending and ensure our resources are applied to the most relevant areas of our business to ensure revenue and profit growth ahead."
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