Total net sales increase 103.6% at Ever-Glory

Ever-Glory International Group Inc, a leading apparel supply chain manager and retailer based in China, reported its financial results for the first quarter ended March 31, 2011.

During the first quarter of 2011, net sales increased 103.6% to $53.2 million compared to $26.1 million in the first quarter of 2010. The increase was primarily attributable to increased sales in Ever-Glory's retail business as well as its wholesale business in China.

Retail sales from LA GO GO, the Company's branded retail division, increased 86.5% to $12.6 million, compared to $6.8 million in the first quarter of 2010. This increase was primarily due to the increase in same store sales and new stores opened. Ever-Glory had 305 LA GO GO stores as of March 31, 2011, compared to 195 LA GO GO stores at March 31, 2010. LA GO GO stores are located in more than 20 provinces in China.

Sales generated from the Company's wholesale business increased 109.5% to $40.6 million, compared to $19.4 million in the first quarter of 2010. The increase was mainly attributable to the increased sales in China. In response to the global economic uncertainty and political instability, in mid 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 the first quarter of 2011, gross profit was $9.1 million, an increase of 67.8% compared to the same period in 2010. Gross margin decreased 3.7% to 17.1% in the first quarter of 2011, compared to 20.8% in the first quarter of 2010. The decrease was mainly due to increased raw materials prices and outsourced manufacturing costs.

"In the first quarter of 2011, sales increased significantly in both our wholesale and retail segments." commented Mr. Edward Yihua Kang, Chairman of the Board and Chief Executive Officer of Ever-Glory. "We are especially encouraged by our strong performance. The total number of LA GO GO stores in China increased from 293 at the end of 2010 to 305 stores as of March 31, 2011, we expect to open additional 80-100 new stores in 2011 based on the 293 stores we had at the end of 2010.

"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."

Selling expenses increased 112.5% to $3.6 million in the first quarter of 2011 from $1.7 million in the first quarter of 2010. The increase was attributable to the enlarged number of retail employees and increased average salaries, as well as increased store decoration and marketing expenses associated with the promotion of the LA GO GO brand.

General and administrative expenses increased 15.7% to $2.2 million in the first quarter of 2011 from $1.9 million in the first quarter of 2010. As a percentage of total sales, general and administrative expenses decreased to 4.2% of total sales for the three months ended March 31, 2011, compared to 7.3% of total sales for the three months ended March 31, 2010. 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 the increase in our sales.

Income from operations for the first quarter of 2011 increased 81.1% to $3.3 million, compared to $1.8 million in the first quarter of 2010.

For the first quarter of 2011, GAAP net income attributable to the Company was $2.6 million, or $0.18 per diluted share, an increase of 65.8% from $1.6 million, or $0.11 per diluted share in the first quarter of 2010. GAAP net income attributable to the Company results for in the first quarter of 2011 include approximately $0.2 million, or $0.01 per diluted share, of non-cash income related to the change in fair value of a derivative liability compared to approximately $0.1 million, or $0.01 per diluted share, of non-cash income related to the change in fair value of a derivative liability in the first quarter of 2010. Excluding these non-cash items for the first quarter 2011 and 2010, non-GAAP diluted earnings per share were $0.17 in the first quarter of 2011 compared to $0.10 in the first quarter of 2010. (see "About Non-GAAP Financial Measures" below).

Balance Sheet and Cash Flow
As of March 31, 2011, the Company had approximately $9.7 million of cash and cash equivalents, compared to approximately $3.7 million as of March 31, 2010. Ever-Glory had working capital of approximately $27.4 million as of March 31, 2011, and outstanding bank loans of approximately $19.5 million as of March 31, 2011.

Business Outlook
For the second quarter of 2011, the Company anticipates total net sales of $32 to $42 million and net income of $1.3 to $1.8 million. For full year 2011, Ever-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 revenue from retail operations.