China Jo-Jo Drugstores Reports Second Quarter Fiscal Year 2016 Financial Results

HANGZHOU, China, Nov. 12, 2015 /PRNewswire/ -- China Jo-Jo Drugstores, Inc. (NASDAQ CM: CJJD) (the "Company" or "China Jo-Jo"), a leading China-based pharmacy with retail, wholesale and online distributor of pharmaceutical and health care products through its own online and retail pharmacies, today announced financial results for the second-quarter ended September 30, 2015.  

Second Quarter FY 2016 Highlights vs the Comparable Period

• Revenues roughly totaled $22.6 million up 22.4%, consisting of segmental revenue:
  • Revenue from Retail Drugstores roughly totaled $13.1 million, up 5.6% and represents 58.0% of total revenues as compared to 67.2% in the prior year;
  • Revenue from Online Pharmacy roughly totaled $6.6 million, an increase of 122.4% and represents 29.1% of revenues as compared to 16.1% in the prior year;
  • Revenues from the Wholesale Business roughly totaled $2.9 million, a decrease of 5.6% and represents 12.9% of revenues as compared to 16.7% in the prior year.
• Gross profit of roughly $4.0 million an increase of 43.8% comparing to the prior year;
• Gross margin of 17.6% for the second quarter of fiscal 2016 as compared to 15.0% in the prior year;
• Net income of $0.15 million or $0.01 per fully diluted share, compared with net loss of ($0.04) million or ($0.00) per fully diluted share in the year ago period.

6 Months FY 2016 Financial Highlights vs the Comparable Period

• First six months FY 2016 revenue totaled $43.9 million up 25.7% from $34.9 million in the prior year;
• Gross profit of roughly $8.4 million an increase of 58.3% comparing to the prior year;
• Gross margin of 19.0% as compared to 15.1% in the prior year;
• Net income of $0.3 million or $0.02 per fully diluted share, compared with a net loss of ($0.4 million) or ($0.03) per fully diluted share in the year ago period.

Management Comments

"We are pleased with China's Jo-Jo's mid-year progress as the Company continues to focus its efforts in growing the online pharmacy division which experienced triple-digit growth in the period. In large part, due to strategic cooperation with large insurance companies and fast-growing private healthcare insurance programs,our online pharmacy sales have expanded quickly in this quarter. The consumer demand for expanded online pharmacy services continues to play an integral role in the rebalancing of the Company's revenue mix while providing the opportunity to enhance organic sales growth at our physical chain drugstores," said Mr. Lei Liu, Chairman and CEO of China Jo-Jo. 

"China Jo-Jo continues to explore new sales and marketing channels to grow its consumer base including establishing programs to promote "mobile app" shopping with major vendors. The Company also continues to optimize its product mix across its online storefronts and physical stores.  As noted in our last press release, the recent regulation passed by Chinese Congress is aimed at accelerating growth in established pharmacy chains such as China Jo-Jo and will be beneficial to us for the next several years", concluded Mr. Liu.

Segmental Business Update

Retail drugstore sales, accounted for approximately 58.0% of the total revenue for the three months ended September 30, 2015, and increased by $697,097, or 5.6%, to $13,103,135. Same-store sales decreased by approximately $343,219, or 2.9%, while new stores contributed approximately $952,255 in revenue in the three months ended September 30, 2015. Other increase in sales revenue is attributed to growth in clinic sales and our self-branded nutritional supplements sales. The Company continues to optimize store sales strategies catering to local store sales while attracting younger customers with mobile device products search, close monitoring of customers' chronic illness, and close cooperating with vendors to promote sales of branded products.

Online pharmacy sales increased by approximately $3,609,016, or 122.4% for the three months ended September 30, 2015, as compared to the three months ended September 30, 2014. China Jo-Jo continues to operate several online pharmacy storefronts including China Jo-Jo's own official branded store in addition to working with other B2C's online platforms which direct customers back to China Jo-Jo's own websites.

Our own branded website sales in the three months ended September 30, 2015 has increased by 406.2% y-o-y primarily as a result of the active cooperation with large insurance companies in China, to sell online products to customers who have purchased health insurance from them.

Wholesale revenue decreased by $172,552 or 5.6% primarily as a result of discontinuing volume-driven sales strategy.

Herb Farming while not revenue producing, as the Company's crops continue to mature, China Jo-Jo is  evaluating feasibility of planting other herbs with short period of growth..

Financial Summary

Revenue for the three months ended up September 30, 2015 increased by $4,133,561 or 22.4%, as compared to the three months ended September 30, 2014, partially offset by the decline in our wholesale business. The increase in revenue was primarily due to the increased online pharmacy sales.

Gross profit increased by $1,211,750 or 43.8% period over period primarily as a result of an increase in gross margin of retail drugstores and an increase in online pharmacy sale.  At the same time, gross margin increased from 15.0% to 17.6% due to higher retail profit margins. 

Sales and marketing expense increased by $1,484,975 or 76.8% period over period. The increase in absolute dollars is primarily attributable to increase in rental expenses labor cost, increase in service fee based on percentage of sales volume from e-commerce platforms, and increase in service charges from Yikatong which direct insured sales to our own official website. As a result, such expenses as a percentage of our revenue increased to 15.1%, from 10.5% for the same period a year ago. China Jo-Jo expects its future sales and marketing expense will not deviate significantly from the current level.

General and administrative expense increased by $93,667 or 12.6% period over period.  Such expense as a percentage of revenue decreased to 3.7% from 4.0% for the same period a year ago.  The variance in absolute dollars of general and administrative expense reflects accounts receivable and advances to vendors allowance reversal of $850,079 in the three months ended September 30, 2015 as compared to a reversal of $973,696 in the three months ended September 30, 2014. Excluding such an effect, general and administrative expense actually decreased by $29,950, which reflects stricter expense control in the three months ended September 30, 2015. We expect future general and administrative expense to remain at its current level.

Net income increased by $188,587 period over period. Diluted earnings per share is $0.01, as compared to a diluted loss per share of (0.00) a year ago. 

As of September 30, 2015, we had cash of approximately $6,709,585. The Company's total current assets as of September 30, 2015, were $47,600,407 and total current liabilities were $43,930,230, which resulted in a positive net working capital of $3,670,177.

About China Jo-Jo Drugstores, Inc.

China Jo-Jo Drugstores, Inc., through its own retail drugstores, wholesale distributor and online pharmacy, is a leading retailer and wholesale distributor of pharmaceutical and healthcare products in China. As of September 30, 2015, the Company had 59 retail pharmacies in Zhejiang Province, China. The Company's wholesale subsidiary not only supplies its retail stores, but also distributes drug and other healthcare products to other drugstores and drug vendors. The Company routinely posts important information on its corporate websites at www.jiuzhou-drugstore.com (Chinese) and www.chinajojodrugstores.com (English).

Forward Looking Statement

Statements in this press release regarding the Company that are not historical facts are forward-looking statements and are subject to risks and uncertainties that could cause actual future events or results to differ materially from such statements. Any such forward-looking statements, including, but not limited to, financial guidance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "estimate," "may," "will," "should," "project," "plan," "seek," "intend," "anticipate," the negatives thereof, or comparable terminology. Such statements typically involve risks and uncertainties and may include financial projections or information regarding the progress of new product development. It is routine for the Company's internal projections and expectations to change as the quarter and year progresses, and therefore it should be clearly understood that the internal projections and beliefs upon which the Company bases its expectations may change. Although these expectations may change, the Company is under no obligation to inform you if they do. Actual results could differ materially from the expectations reflected in such forward-looking statements as a result of numerous factors, including the risks associated with the effect of changing economic conditions in the People's Republic of China, variations in cash flow, reliance on collaborative retail partners and on new product development, variations in new product development, risks associated with rapid technological change, and the potential of introduced or undetected flaws and defects in products. Readers are referred to the reports and documents filed from time to time by the Company with the Securities and Exchange Commission for a discussion of these and other important risk factors that could cause actual results to differ from those discussed in forward-looking statements. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.

Investor Relations Contact: Christopher Chu, Taylor RaffertyTel: (908) 251-9869Email: [email protected]

Frank ZhaoChief Financial Officer[email protected]Phone: (561) 372-5555           +86-139-6811-8759

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SOURCE China Jo-Jo Drugstores, Inc.