Chinese casual menswear designer and retailer Zuoan Fashion has reported a 20.9 per cent slump in third quarter revenues.
The company achieved revenues of just $49.1 million, with gross profit down 45.6 per cent to $13.8 million, year on year and a net loss of $2.3 million. Gross margin was 28.2 per cent, compared with 40.9 per cent a year earlier and 30 per cent in the preceding quarter.
James Hong, founder, chairman and CEO said market conditions at retail store level remain challenging due to an industry downturn and the continued rise of online shopping.
“Customer spending at Zuoan retail stores continues to be restrained while orders from our distributors declined in the third quarter over the prior year period as inventories remain at elevated levels,” he said.
“In response to the current market environment, we continue to offer lower prices to our customers and are increasing our advertising efforts to boost brand awareness. While these efforts resulted in margin pressure this quarter, we believe these actions along with our latest growth initiatives will strengthen our performance and benefit Zuoan as market conditions improve.”
Zuoan will focus on the integration of its supply chain structure to establish a brand new online-to-offline (OTO) business in coming months.
“This October, we conducted a pilot program in which we launched a new and lower priced collection in 12 Zuoan stores. This new collection is tailored according to customer fashion trends and sold at very competitive prices in these stores.
“This new initiative received very positive results during the trial period and we plan to expand the trial program to 40 to 50 stores over the next few quarters.
“When implemented fully, customers will also have the ability to purchase this special collection online on PCs and mobile devices. We believe the OTO business can serve as a model for Zuoan’s future development. This interactive shopping experience will enable Zuoan to attract a new group of target customers that prefer the convenience and low price of online shopping while also seeking a recognised brand and reliable sourcing channel.
“We aim to significantly improve our overall customer experience by seamlessly integrating our online and offline product offerings.”
Some 120 distributor and sub-distributor stores and two of Zuoan’s own stores were closed in the quarter, resulting in a total of 803 stores as at September 30, compared to 1074 at the same time last year.
Zuoan designs and sells a wide range of men’s casual apparel, footwear and lifestyle accessories, primarily targeting urban males between the ages of 20 and 40 who prefer “stylish clothing that represents a sophisticated lifestyle”.
