China Xiniya Fashion Limited Reports 2013 Third Quarter Financial Results

XIAMEN, FUJIAN, China, Nov. 19, 2013 /PRNewswire/ -- China Xiniya Fashion Limited ("Xiniya" or the "Company"NYSE:XNY), a leading provider of men's business casual apparel in China, today reported financial results for the third quarter of 2013. The financial statements and other financial information included in this press release have been prepared in conformity with International Financial Reporting Standards ("IFRS").

The Company publishes its financial statements in Renminbi ("RMB").

Third Quarter 2013 Highlights

• Revenue during the third quarter of 2013 decreased 6.7% to RMB389.8 million, from RMB417.9 million in the third quarter of 2012; within the prior guidance range of (7)% to (2)%.
• Gross margin was 29.7% in the third quarter of 2013 as compared to 34.5% in the third quarter of 2012. 
• Profit before taxation during the third quarter of 2013 decreased 88.4% to RMB8.7 million, from RMB74.8 million in the third quarter of 2012.
• Net profit in the third quarter of 2013 decreased 89.4% to RMB6.0 million, from RMB56.4 million in the third quarter of 2012.
• Earnings per ADS were $0.02 in the third quarter of 2013 as compared to $0.16 per ADS in the third quarter of 2012; within the prior guidance range of $0.01 to $0.06 per ADS.
• Xiniya's network of authorized retailers had a net reduction of 23 retail outlets in the third quarter of 2013; consisting of 78 new retail outlets opened and 101 retail outlets closed. As of September 30, 2013 the total number of authorized retail outlets was 1,635. 

Recent developments

• The Company announced the total value of purchase orders for its 2014 Spring/Summer Collection showcased during its biannual sales fair held from September 13 through September 16, 2013 in Xiamen, China decreased by approximately 9.8% compared to the total value of purchase orders placed in the fall of 2012. Delivery of the orders is expected to take place during the first half of 2014.

Guidance

• Revenue in RMB for the fourth quarter of 2013 is expected to decrease by (12)% to (8)% compared to the fourth quarter of 2012.
• Earnings per ADS in the fourth quarter of 2013 are expected to be in the range of $0.05 to $0.09.     

"Our business continued to face significant challenges during the third quarter due to the continued softness of the Chinese economy and the aggressive discounting done by other menswear brands which has reduced the overall profitability of the industry as a whole," commented Mr. Qiming Xu, Xiniya's Chairman and Chief Executive Officer. "Sentiment among our distributors and authorized retailers has improved over the quarter, thanks in part to a new credit initiative that we have implemented that compliments and further supports long and short-term initiatives already in place. The new initiative, which extends additional credit terms, provides an extra incentive to a select group of five distributors to ensure their steady development and encourage the opening of more self-owned retail outlets. With a solid capital position, I'm confident that this initiative will provide the incentive, flexibility and working capital needed to extend our retail network and offer further support to our partners."

"The expected slowdown has allowed us to focus on our core strengths as we take the opportunity to revamp our retail outlets and further adjust our business to ensure sustainable growth. Our long-term efforts to retain existing retailers as well as attract prospective retailers to join us continues to be implemented through shop rack subsidies and efforts to increase the amount of retail space to improve the quality of current stores. With the support of our new credit initiative and the exciting collection we exhibited in September 2013, I am certain that our efforts will pay off. The billboard advertisements we placed in 22 of China's provinces last quarter along with the sales rebates have provided the short-term support needed to maintain momentum. Although the prospects for China's menswear industry remain depressed, we are optimistic about our future development based on our strategy and solid network of distributors and authorized retailers that believe in the Xiniya brand. We will continue to manage our business prudently and leverage our strategy to seize market opportunities and drive future growth."  

Third Quarter 2013 Results

Revenue for the third quarter of 2013 was RMB389.8 million, representing a 6.7% decrease when compared with RMB417.9 million for the third quarter of 2012. The Company delivered approximately 1.63 million units to its distributors during the third quarter of 2013, compared with 1.96 million units during the third quarter of 2012. The total retail outlet count as of September 30, 2013 was 1,635. The table below sets forth the number of retail outlets by outlet type:

Gross profit decreased to RMB115.9 million in the third quarter of 2013 from RMB144.3 million in the third quarter of 2012. Gross margin was 29.7% in the third quarter of 2013 as compared with 34.5% in the third quarter of 2012. The decrease in gross margin was primarily due to the reduced prices the Company offered for its 2013 Fall/Winter Collections as well as the increased rebates offered to distributors and authorized retailers to further enhance their ability to compete in an increasingly challenging retail environment.

Interest and other income was RMB4.7 million in the third quarter of 2013 as compared to RMB5.5 million in the third quarter of 2012. The decrease was mainly due to the lower exchange gain in the third quarter of 2013 as compared to the third quarter of 2012.

Selling and distribution expenses in the third quarter of 2013 increased to RMB104.3 million from RMB71.1 million in the third quarter of 2012. The increase was primarily due to an increase in advertising expenses of RMB28.5 million and an increase of RMB4.7 million in rack expenses for authorized retailers.

The increase in advertising expenses was mainly due to billboard advertisements across 22 provinces during the third quarter of 2013. These billboards are intended to enhance brand awareness of the Company's products and are specifically targeted at travelers and prospective authorized retailers.

As part of its strategy to unify the image of its authorized retail outlets, the Company has been paying for shop rack, signage and various outlet-related accessories for authorized retail outlets opened or refurbished since July 2011. During the third quarter of 2013, the Company paid for shop rack, signage and various outlet-related accessories for 78 new retail outlets and refurbished 120 existing retail outlets, which includes expanding floor space for 23 existing retail outlets, as compared to 79 new retail outlets and 90 refurbished retail outlets during the third quarter of 2012. The refurbishment of existing retail outlets is expected to upgrade an outdated brand image, help attract new consumers and improve the presentation of Xiniya's products, all in an effort to enhance retail outlet sales in the future. These expenses were approximately RMB44.3 million, or 11.4% of revenue, in the third quarter of 2013, compared with RMB39.6 million or 9.5% of revenue during the third quarter of 2012.  

Administrative expenses increased to RMB7.5 million in the third quarter of 2013 from RMB3.9 million in the third quarter of 2012, primarily due to an increase in staff salaries.

Profit before taxation was RMB8.7 million in the third quarter of 2013, compared with RMB74.8 million in the third quarter of 2012.  

Income tax expense in the third quarter of 2013 was RMB2.8 million, compared with RMB18.4 million in the third quarter of 2012.  

Profit after taxation for the third quarter of 2013 was RMB6.0 million, compared with RMB56.4 million in the third quarter of 2012.  Earnings per ADS were $0.02 in the third quarter of 2013, compared to $0.16 per ADS in the third quarter of 2012.

Financial Position

As of September 30, 2013, the Company had cash and cash equivalents of RMB610.1 million, and time deposits of RMB350.0 million held at banks with maturities of more than three months.

As of September 30, 2013, the Company had trade receivables of RMB431.1 million. The increase is primarily due to extending additional credit terms to distributors.

As of September 30, 2013, the Company had inventory of RMB200.5 million. The increase was primarily due to the time lag between receiving finished products from the Company's OEM manufacturers and the timing of delivery to distributors. As a result, the Company may carry significant inventory on its balance sheet at any specific point in time, though it is only temporary as orders are non-cancellable.  

Prepayments to suppliers are prepayments paid to contract manufacturers for orders received from distributors and authorized retailers during the sales fair. The decrease in these prepayments to suppliers from December 31, 2012 is primarily due to offsets with payables to the contract manufacturers during the third quarter of 2013.

Deposits received from distributors are primarily related to payments made by distributors for orders placed with the Company. The decrease in these deposits from December 31, 2012 is primarily due to offsets with trade receivables from these distributors during the third quarter of 2013.

Conference Call

Xiniya will host a conference call and live webcast at 8 a.m. Eastern Standard Time (EST) on November 20, 2013, (9 p.m. Beijing time on the same day).

The toll free dial-in details for the live conference call are as follows:

- USA:  1866 978 9970
- China:   8008 0361 03
- Hong Kong: 3027 5500
- International access: +852 3027 5500
Participant PIN Code: 448615#

A live webcast of the conference call will be available on:  http://www.mzcan.com/cancast/us/index.php?id=usXNY_29&version=e

A telephone replay of the call will be available 2 hours after the end of the conference through November 27, 2013 at 8 a.m. EST.

The dial-in details for the replay are as follows: 

- Hong Kong:   +852 3027 5520
- China: 800 876 5016
- USA: 1866 753 0743
Conference Reference: 168218#

Safe Harbor Statement

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995.  These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

Exchange Rate Information

The United States dollar ($) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the certified exchange rate of $1.00 = RMB6.12 on September 30, 2013 as set forth in the H.10 weekly statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into $ at that rate on September 30, 2013, or at any other date. The percentages stated are calculated based on RMB amounts.

About China Xiniya Fashion Limited

Xiniya is a leading provider of men's business casual apparel in China. The Company designs and manufactures men's business casual and business formal apparel and accessories, which are marketed under the Xiniya brand, and sells through its distribution network that includes 27 distributors. Its products are sold to consumers at over 1,600 authorized retail outlets owned and managed by third parties located in 21 provinces, four autonomous regions, and four municipalities in China. This retail network focuses on second and lower-tier cities, where increasing affluence has led to an improvement in living standards and where most international men's apparel brands do not have a significant presence. The Company's target consumers are male working professionals in China between the ages of 25 and 45 who seek fashionable clothing to suit their working and lifestyle needs. For more information, please visit the Company's website at http://www.xiniya.com.

For additional information, please contact:

China Xiniya Fashion Limited

Mr. Chee Jiong Ng
Chief Financial Officer
Telephone: +86 1365 5939 932
Email: [email protected]

Christensen

Ms. Linda Bergkamp
Phone: +1-480-614-3004 in U.S.A.
Email: [email protected]

Or

Mr. Christian Arnell
Telephone +86 10 5826 4939 in Beijing 
Email: [email protected]

SOURCE China Xiniya Fashion Limited