Ever-Glory reports 2010 full year financial results

Ever-Glory International Group Inc, a leading apparel supply chain manager and retailer based in China, reported its financial results for its fiscal year ended December 31, 2010.

Full Year 2010 Highlights

• Total net sales increased 49.3% to $134.1 million
• Gross profit increased 42.9% to $26.2 million
• Income from operations increased 8.2% to $6.6 million
• Acquired the 40% non-controlling interest in LA GO GO, bringing the Company's ownership of its retail segment to 100%

During the fiscal year ended December 31, 2010, net sales increased 49.3% to $134.1 million from $89.9 million in 2009. The increase in sales was primarily attributable to increased sales in Ever-Glory's retail business as well as its wholesale business in China.

In 2010, retail sales from LA GO GO, the Company's branded retail division, increased 122.1% to $29.3 million, compared to $13.2 million in 2009. This increase was primarily due to the increase of same store sales and new stores opened. Ever-Glory increased the number of LA GO GO stores from 185 at the end of last year to 293 stores as of December 31, 2010.

In 2010, sales generated from the Company's wholesale business increased 36.7% to $104.8 million, compared to $76.7 million in 2009. The increase was mainly attributable to the increased sales in China. In response to the global economic uncertainty and political instability in fiscal year 2010, Ever-Glory shifted its wholesale marketing effort to develop its wholesale business in the Chinese market.

Management believes that Ever-Glory's expertise in supply chain management and years of experience in the wholesale business enabled the Company to quickly obtain significant orders in the Chinese wholesale market.

"In 2010, we were very pleased to see sales increase significantly in both our wholesale and retail segments," commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "On behalf of our board and management, I extend my warmest thanks to our customers for their trust in us, and to our staff for their tireless efforts and devotion to our customers."

In April 2010, Ever-Glory acquired the 40% non-controlling interest in LA GO GO from its joint venture partner, Shanghai La Chapelle, bringing the Company's ownership stake in its retail business to 100%. In connection with such acquisition, and in order to focus on the Company's core businesses, Ever-Glory sold the 10% equity interest in Shanghai La Chapelle which it acquired when Every-Glory and Shanghai La Chapelle originally formed the LA GO GO joint venture in 2008.

Following this acquisition, in 2010, Ever-Glory focused on the full integration of the LA GO GO business and management into the Company and continued to implement the Company's brand strategy. Through these efforts, the retail business achieved strong performance, and management believes that going into 2011 and beyond, Ever-Glory has strong momentum with its retail strategy. The total number of LA GO GO stores in China increased from 185 at the end of 2009 to 293 stores as of December 31, 2010, and Ever-Glory expects to open additional 80-100 stores in 2011.

"In 2011, we plan to continue to develop LA GO GO through perfecting design styles, improving store management efficiency and opening more stores in desired locations," continued Mr. Kang. "We are confident that, through these measures, we can enhance same-store sales, expand LA GO GO’s market penetration and increase its brand influence in China."

Gross profit in Every-Glory’s wholesale business increased 19.6% to $16.1 million from $13.5 million a year ago. Gross margin for the wholesale business decreased to 15.4% in 2010 compared to 17.6% in 2009. The decrease was primarily due to an increase in raw material prices, outsourced production costs, and consequently decreased average margin on overseas orders. In response, the Company adjusted its wholesale strategy and started to vigorously develop the Chinese wholesale market in 2010.

Gross profit in Every-Glory’s retail business increased 107.6% to $10.1 million from $4.8 million a year ago. Gross margin for the retail business decreased to 34.3% in 2010 compared to 36.7% in 2009. The decrease in gross margin was primarily due to the lowered retail tag price that was implemented in an effort to increase sales volume.

Total gross profit in 2010 increased 42.9% to $26.2 million from $18.3 million a year ago. Gross margin decreased to 19.5% in 2010, compared to 20.4% in 2009.

Selling expenses increased 109.5% to $9.8 million in 2010, an increase of $5.1 million compared to 2009. As a percent of sales, selling expense accounted for 7.3% of our total sales in 2010, an increase of 2.1% compared to 2009. The increase was attributable to the enlarged number of retail employees and increased average salary, as well as the increased decoration and marketing expenses associated with the promotion of LA GO GO brand.

General and administrative expenses increased 29.8% to $9.8 million in 2010, an increase of $2.2 million compared to 2009. As a percentage of sales, general and administrative expenses accounted for 7.3% of our total sales in 2010, a decrease of 1.1% compared to 2009.

The total general and administrative expenses increase was attributable to an increase in payroll for additional management and design and marketing staff as a result of our business expansion. The decrease in general and administrative expenses as a percentage of total sales was due to an increase in our sales.

As a result, income from operations in 2010 increased 8.2% to $6.6 million compared to $6.1 million in 2009.

Business Outlook
For the first quarter of 2011, Every-Glory anticipates total net sales of $45 to $55 million and net income of $1.8 to $2.2 million. For full year 2011, Every-Glory anticipates total net sales between $180 and $215 million and net income between $7.3 and $9.0 million. The full year revenue forecast is comprised of $120 to $150 million in expected wholesale revenue and $60 to $65 million in expected revenuefrom retail operations.