LJ Int (JADE) Reports 14% Increase in Comps for April 2010
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LJ International Inc. (Nasdaq: JADE) today reported financial results for the first quarter ended March 31, 2010.
Revenues for the first quarter of 2010 totaled $26.9 million, up 18% from $22.7 million in the first quarter of 2009. This year-over-year revenue increase is largely due to stabilization in the global economy and strong pent-up demand by Chinese middle-class clientele.
The increase was driven by a year-over-year rise of 38% at LJI's ENZO chain of retail stores in China, Hong Kong and Macau. ENZO revenue in the first quarter of 2010 was $16.4 million, up from $11.9 million in the first quarter of 2009.
Revenues from LJI's wholesale operations totaled $10.4 million in the first quarter of 2010, down 3% from $10.8 million a year earlier. Based on previous quarters, this figure points towards future growth in the wholesale division.
Companywide revenues and retail revenues exceeded earlier guidance of approximately $26 million and $15.5 million, respectively. Wholesale revenue guidance was $10.5 million.
Retail Growth Boosts Margins and Net Income
Gross profit in the first quarter of 2010 was $11.1 million, up 27% from $8.7 million a year earlier. Gross margin (gross profit as a percentage of revenues) was 41%, up from 39% in the first quarter of 2009. The increase margin reflects the increasing share of higher-margin revenues generated by the ENZO division. During the first quarter of 2010, ENZO gross margin was 53% compared to 22% for the wholesale division.
Selling, general and administrative (SG&A) expenses for the latest quarter totaled $8.5 million, compared to $7.9 million in the first quarter of 2009. After SG&A expenses, depreciation and net gain on derivatives, operating income in the first quarter of 2010 was $2.0 million, up from $0.4 million a year earlier.
Income before taxes and non-controlling interest was $2.1 million, or $1.8 million excluding gain on the sale of securities. This compares to $0.1 million a year earlier.
Net income attributable to common shareholders was $1.9 million in the first quarter of 2010, up from $0.1 million a year earlier. Earnings per fully diluted share rose year-over-year to $0.07 from $0.01.
Comparable Sales Register Double-Digit Gain
Comparable ENZO sales -- at the 75 stores open 12 months or more at the start of the first quarter of 2010 -- were up 14% year-over-year. A total of 95 ENZO stores were in operation by the end of the first quarter. The average revenues per store in the comparable-store group rose to an annual rate of $636,000.
Results Mark Recovery and Start of New Growth Phase -- CEO
Yu Chuan Yih, LJI's Chairman and CEO, commented, "Today's report confirms that LJI is on the growth track within the global jewelry market and especially within the Chinese market. Two trends are especially notable and encouraging. First, the continued double-digit growth in comparable-store sales shows that the branding strategy for ENZO and its product lines is a success. Without the significant addition of new stores, ENZO has been able to sustain robust growth through increasing consumer demand in its existing store network. We believe that ENZO products are an ideal fit for the tastes of China's newly affluent women, and ENZO's financial results suggest we are right. The comp-store numbers also reflect our success in developing an effective operational model for ENZO stores (nearly all of which are now profitable). As we begin an aggressive expansion in the coming months, we are confident that this model will be equally successful as it is deployed in new locations."
Mr. Yih continued, "The other encouraging trend is the recovery in our wholesale business. We continue to work with our global customers and support their growing operations as the worldwide economy shifts into growth mode. In the current quarter, we expect wholesale revenues to show a healthy increase above year-earlier levels. Though retail is now the primary growth driver at LJI, our wholesale operations will continue to play an important role in our vertically integrated business model and as one source of cash flows to finance future expansion. Now, with our wholesale revenues stabilized and a substantial number of new ENZO stores due to be opened this year, the Company is entering a new and exciting growth phase."
Cash Level Reflects Inventory Build-Up
On the balance sheet, cash and cash equivalents totaled $5.3 million on March 31, 2010, compared to $11.3 million on December 31, 2009. The decrease was largely due to a build-up of inventory during the first quarter in preparation for the opening of new ENZO stores in the second quarter and beyond. Inventories rose to $87.1 million on March 31, 2010 from $81.4 million at the end of 2009.
Working Capital Rises, Long-Term Debt Reduced
LJI's working capital rose during the quarter to $79.2 million, or approximately 115% of market cap, on March 31, 2010 from $77.6 million on December 31, 2009. The Company's long-term debt decreased during the first quarter of 2010 to $1.8 million from $2.3 million.
Revenue Seen Rising 30% in Q2 to $29 Million
In guidance for the second quarter ending June 30, 2010, LJI projects total revenues of approximately $29 million. The projected overall revenue would be approximately 30% above the $22.4 million reported in the second quarter of 2009. By segment, the projected year-over-year revenue increase would be approximately 40% for retail and 21% for wholesale. Net income is expected to reach between $1.9 million to $2.0 million, or approximately $0.08 per fully diluted share, in the second quarter of 2010, up from $0.1 million or $0.01 per fully diluted share a year earlier.
Revenues for the first quarter of 2010 totaled $26.9 million, up 18% from $22.7 million in the first quarter of 2009. This year-over-year revenue increase is largely due to stabilization in the global economy and strong pent-up demand by Chinese middle-class clientele.
The increase was driven by a year-over-year rise of 38% at LJI's ENZO chain of retail stores in China, Hong Kong and Macau. ENZO revenue in the first quarter of 2010 was $16.4 million, up from $11.9 million in the first quarter of 2009.
Revenues from LJI's wholesale operations totaled $10.4 million in the first quarter of 2010, down 3% from $10.8 million a year earlier. Based on previous quarters, this figure points towards future growth in the wholesale division.
Companywide revenues and retail revenues exceeded earlier guidance of approximately $26 million and $15.5 million, respectively. Wholesale revenue guidance was $10.5 million.
Retail Growth Boosts Margins and Net Income
Gross profit in the first quarter of 2010 was $11.1 million, up 27% from $8.7 million a year earlier. Gross margin (gross profit as a percentage of revenues) was 41%, up from 39% in the first quarter of 2009. The increase margin reflects the increasing share of higher-margin revenues generated by the ENZO division. During the first quarter of 2010, ENZO gross margin was 53% compared to 22% for the wholesale division.
Selling, general and administrative (SG&A) expenses for the latest quarter totaled $8.5 million, compared to $7.9 million in the first quarter of 2009. After SG&A expenses, depreciation and net gain on derivatives, operating income in the first quarter of 2010 was $2.0 million, up from $0.4 million a year earlier.
Income before taxes and non-controlling interest was $2.1 million, or $1.8 million excluding gain on the sale of securities. This compares to $0.1 million a year earlier.
Net income attributable to common shareholders was $1.9 million in the first quarter of 2010, up from $0.1 million a year earlier. Earnings per fully diluted share rose year-over-year to $0.07 from $0.01.
Comparable Sales Register Double-Digit Gain
Comparable ENZO sales -- at the 75 stores open 12 months or more at the start of the first quarter of 2010 -- were up 14% year-over-year. A total of 95 ENZO stores were in operation by the end of the first quarter. The average revenues per store in the comparable-store group rose to an annual rate of $636,000.
Results Mark Recovery and Start of New Growth Phase -- CEO
Yu Chuan Yih, LJI's Chairman and CEO, commented, "Today's report confirms that LJI is on the growth track within the global jewelry market and especially within the Chinese market. Two trends are especially notable and encouraging. First, the continued double-digit growth in comparable-store sales shows that the branding strategy for ENZO and its product lines is a success. Without the significant addition of new stores, ENZO has been able to sustain robust growth through increasing consumer demand in its existing store network. We believe that ENZO products are an ideal fit for the tastes of China's newly affluent women, and ENZO's financial results suggest we are right. The comp-store numbers also reflect our success in developing an effective operational model for ENZO stores (nearly all of which are now profitable). As we begin an aggressive expansion in the coming months, we are confident that this model will be equally successful as it is deployed in new locations."
Mr. Yih continued, "The other encouraging trend is the recovery in our wholesale business. We continue to work with our global customers and support their growing operations as the worldwide economy shifts into growth mode. In the current quarter, we expect wholesale revenues to show a healthy increase above year-earlier levels. Though retail is now the primary growth driver at LJI, our wholesale operations will continue to play an important role in our vertically integrated business model and as one source of cash flows to finance future expansion. Now, with our wholesale revenues stabilized and a substantial number of new ENZO stores due to be opened this year, the Company is entering a new and exciting growth phase."
Cash Level Reflects Inventory Build-Up
On the balance sheet, cash and cash equivalents totaled $5.3 million on March 31, 2010, compared to $11.3 million on December 31, 2009. The decrease was largely due to a build-up of inventory during the first quarter in preparation for the opening of new ENZO stores in the second quarter and beyond. Inventories rose to $87.1 million on March 31, 2010 from $81.4 million at the end of 2009.
Working Capital Rises, Long-Term Debt Reduced
LJI's working capital rose during the quarter to $79.2 million, or approximately 115% of market cap, on March 31, 2010 from $77.6 million on December 31, 2009. The Company's long-term debt decreased during the first quarter of 2010 to $1.8 million from $2.3 million.
Revenue Seen Rising 30% in Q2 to $29 Million
In guidance for the second quarter ending June 30, 2010, LJI projects total revenues of approximately $29 million. The projected overall revenue would be approximately 30% above the $22.4 million reported in the second quarter of 2009. By segment, the projected year-over-year revenue increase would be approximately 40% for retail and 21% for wholesale. Net income is expected to reach between $1.9 million to $2.0 million, or approximately $0.08 per fully diluted share, in the second quarter of 2010, up from $0.1 million or $0.01 per fully diluted share a year earlier.
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