• Q2 net profit up 28% to CNY45.6m
  • Sales rose 53.4% to CNY156m
  • Gross profit up 53.3% to CNY98.1m

Chinese men's wear chain Zuoan posted a sharp increase in second-quarter net income as the company increased both volumes and selling space.

The company said yesterday (22 August) that for the quarter ended 30 June, net income increased 28% to CNY45.6m as revenue increased 53.4% to CNY156m. The company attributed the growth to an increase in distributor sales volume, which increased 59.1% to CNY237m.

Gross profit increased 53.3% to CNY98.1m, with margin flat at 41%. The company said that margins remained flat on the back of its efforts to effectively control the unit cost of its products as well as maintaining the same cost-based pricing strategy.

Over the quarter 37 distributor stores and seven self-operated flagship outlets were opened, resulting in a total of 1,167 outlets at the end of the quarter.

Commenting on the results, James Hong, founder, chairman, CEO and chief designer, said: "At our distributor store locations, we experienced double digit increases in several areas. Average wholesale selling prices per unit increased nearly 13.8% to CNY104 compared to CNY92 in the second quarter of 2010.

"The total number of units sold to our distributors increased 39.8% to 2.3 million compared to 1.6 million in the second quarter of 2010 and average wholesale revenue per distributor-operated store increased 32.3% to CNY198,000 compared to CNY150,000 in the second quarter of 2010. We also recently raised our wholesale prices at the distributor level for our Fall/Winter collection which we expect will result in improved gross profit margin in the second half of 2011."