• Q2 profit up 45.3% to CNY66.2m 
  • Revenue up 26% to CNY301.6m
  • Gross margin reaches 48.2%  

Chinese men's wear retailer Zuoan Fashion today (30 August) posted a better-than-expected increase in second-quarter net profit on the back of rising revenue and higher wholesale prices.

Net income jumped 45.3% to CNY66.2m (US$10.4m) for the three months ended 30 June.

Gross margin was 48.2% compared to 41% in the same period last year, primarily due to an increase in wholesale prices to distributors, which was implemented in the third quarter of 2011, and the higher margin contributed by sales of the company's self-operated direct stores and flagship stores.

Revenue increased 26% to CNY301.6m, driven by distributor and direct store sales volume as distributor sales climbed 14.5% to CNY271.2m.

CEO and chairman James Hong said: "We had another strong quarter of top-line revenue and bottom line earnings growth, exceeding our financial second quarter forecast. Our growth was primarily fuelled by an increase in wholesale prices implemented last year as well as higher revenue derived from direct and flagship stores."

The retailer opened 30 distributor and sub-distributor stores, two direct stores and four self-operated flagship stores during the quarter, taking the company's total number of stores to 1,331.

"Despite slower market conditions, we continue to believe that 2012 will result in respectable revenue and net profit growth for Zuoan," Hong added.