China Nepstar Chain Drugstore Ltd. Reports First Quarter 2015 Financial Results

May 26, 2015, 03:39 ET from China Nepstar Chain Drugstore Ltd.

SHENZHEN, China, May 26, 2015 /PRNewswire/ -- China Nepstar Chain Drugstore Ltd. (NYSE: NPD) ("Nepstar" or the "Company"), a leading retail drugstore chain in China based on the number of directly operated stores, today announced its unaudited financial results for the first quarter ended March 31, 2015.

Financial Highlights

  • Same store sales increased by 13.6% compared to the first quarter of 2014
  • Revenue increased by 11.9% to RMB759.1 million (US$122.5 million) compared to RMB678.3 million in the first quarter of 2014
  • Net loss decreased to RMB3.4 million (US$0.5 million) from  a net loss of RMB18.2 million in the first quarter of 2014
  • Basic and diluted losses per ADS were RMB0.03 (US$0.006) compared to basic and diluted losses per ADS of RMB0.18 in the first quarter of 2014

Ms. Rebecca Yingnan Zhang, Chief Executive Officer of Nepstar, "We are pleased to report strong growth in same store sales and revenue, as well as significant improvement in reducing administrative expenses compared to the same period of last year. We have leveraged our store network and increased in-store promotions as well as marketing efforts for pharmaceutical products. Enhancement in our operating efficiencies and cost streamlining also contributed to the growth in sales and revenue as well as improvement in administrative expense reduction as compared to the first quarter of 2014."

First Quarter Results

During the first quarter of 2015, the Company opened 26 new stores and closed 37 stores. As of March 31, 2015, the Company had a total of 1,969 directly operated stores.

Revenue for the first quarter of 2015 increased by 11.9% to RMB759.1 million (US$122.5million) from RMB678.3 million for the same period in 2014. Same store sales (for the 1,819 stores opened before December 31, 2013 and which remained in operation as of March 31, 2015) for the first quarter of 2015 increased by 13.6% compared to the same period in 2014. The increases in revenue and same store sales were mainly due to our increased in-store promotional initiatives and marketing of pharmaceutical products.

First quarter revenue contribution by product category was 23.7% from prescription drugs (23.3% for the same period in 2014); 41.2% from over-the-counter ("OTC") drugs (40.3% for the same period in 2014); 12.3% from nutritional supplements (14.8% for the same period in 2014); 4.6% from herbal products (4.5% for the same period in 2014); and 18.2% from convenience and other products (17.1% for the same period in 2014).

First quarter gross profit increased to RMB309.4 million (US$49.9 million) from RMB278.4 million in the same period of 2014. Gross profit margin in the first quarter of 2015 was 40.8%, compared with 41.0% in the same period of 2014.

The Company's portfolio of private label products expanded to 2,146 types of products as of March 31, 2015. Sales of private label products represented approximately 15.4% of total revenue and 22.7% of total gross profit for the first quarter of 2015.

Sales, marketing and other operating expenses slightly increased for the first quarter of 2015 compared to the same period of 2014, but its percentage as of revenue decreased to 36.5% from 39.9%.

General and administrative expenses as a percentage of revenue were 4.3% for the first quarter of 2015 compared to 5.4% for the same period of 2014. This decrease primarily resulted from management's efforts to streamline costs.

Loss from operations in the first quarter of 2015 was RMB0.2 million (US$30.5 thousand) compared with loss from operations of RMB28.8 million in the same period of 2014.The significant reduction in loss was mainly due to increased sales and our cost control measures in the first quarter of 2015.

Interest income for the first quarter of 2015 was RMB1.7 million (US$0.3 million), compared with RMB2.5 million for the same period of 2014.

The Company's income tax expense was RMB6.8 million (US$1.1 million) for the first quarter of 2015, compared with tax credit of RMB3.1 million for the same period in 2014.The effective tax rate for the first quarter of 2015 was 198.6%. The difference in the effective income tax rate and the PRC statutory tax rate of 25% applicable to our major operating subsidiaries was primarily due to non-deductible expenses and the operating losses from certain loss-making subsidiaries, for which full valuation allowances were made on their deferred tax assets, when compared to the overall results of operation of the Company. Shareholders are reminded that in the PRC, losses in companies which are part of a group are not allowed to be off-set against profits arising from other companies in the same group.

Net loss for the first quarter of 2015 was RMB3.4 million (US$0.5 million), or RMB0.03 (US$0.006) basic and diluted losses per ADS, compared to net loss of RMB18.2 million, or RMB0.18 basic and diluted losses per ADS for the first quarter of 2014. As of March 31, 2015, the Company had 197.4 million outstanding ordinary shares. Each ADS represents two ordinary shares of the Company.

In the first quarter of 2015, net cash flow provided by operating activities was RMB51.9 million (US$8.4 million), compared to net cash outflow of RMB22.6 million for the same period in 2014. This reversal of cash outflow was primarily due to improved operating performance during the first quarter of 2015, compared to the same period in 2014.

As of March 31, 2015, the Company's total cash, cash equivalents, bank deposits and restricted cash were RMB327.9 million (US$52.9 million) and its shareholders' equity was RMB828.2 million (US$133.6 million), compared to RMB316.9 million and RMB831.6 million, respectively, as of December 31, 2014.

Business Outlook  

"We are excited by the momentum in our business development in the first quarter of 2015 and will continue to focus on maintaining growth, managing expenses and improving margins.  We believe that our strong store network, optimized product offerings and proactive steps to improve customer experience and loyalty, will continue to drive store traffic and revenue in the near term," commented Ms. Zhang.

Conference Call Information

The Company will host a conference call, to be simultaneously webcasted, on Tuesday, May 26, 2015 at 8:00 a.m. Eastern Time / 8:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-9210 (North America) or +1-201-689-8049 (International) approximately five minutes before the call start time. A live web cast of the call will be available on the Nepstar website at www.nepstar.cn.

A replay of the call will be available shortly after the conclusion of the conference call through June 2, 2015 at 11:59 p.m. Eastern Time. An archived web cast of the conference call will be available on the Nepstar website at http://www.nepstar.cn. Interested parties may access the replay by dialing +1-877-660-6853 (North America) or +1-201-612-7415 (International) and entering conference ID number 13609556.

About China Nepstar Chain Drugstore Ltd.                                                    

China Nepstar Chain Drugstore Ltd. (NYSE: NPD) is a leading retail drugstore chain in China. As of March 31, 2015, the Company had 1,969 directly operated stores across 74 cities, one headquarter distribution center and 15 regional distribution centers in China. Nepstar uses directly operated stores, centralized procurement and a network of distribution centers to provide its customers with high-quality, professional and convenient pharmaceutical products and services and a wide variety of other merchandise, including OTC drugs, nutritional supplements, herbal products, personal care products, family care products, and convenience products. Nepstar's strategy of centralized procurement, competitive pricing, customer loyalty programs and private label offerings has enabled it to capitalize on the continuing economic growth in China and take advantage of the demographic trend in China to achieve a strong brand and leading market position. For further information, please go to http://www.nepstar.cn.

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "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" and similar statements. Among other things, the quotations from management in this press release and the Company's strategic operational plans and business outlook, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. 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 applicable law.

Exchange Rate Information

The United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars were calculated at the certified exchange rate ofUS$1.00 = RMB6.1990 on March 31, 2015 as set forth in the H.10 weekly statistical release of the Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate or at any other date. The percentages stated are calculated based on RMB amounts.

Contacts

Zixin Shao China Nepstar Chain Drugstore Ltd. Chief Financial Officer +86-755-2641-4065 ir@nepstar.cn

Shiwei Yin Grayling Investor Relations +1-646-284-9474 npd@grayling.com

(Tables Follow)

 

China Nepstar Chain Drugstore Ltd. 

Unaudited Condensed Consolidated Statements of Operation

(amounts in thousands – except per-share and per-ADS data)

Three-month period ended

March 31,

2014

2015

2015

RMB

RMB

USD

Revenue

678,281

759,119

122,458

Cost of goods sold

(399,904)

(449,769)

(72,555)

Gross profit

278,377

309,350

49,903

Sales, marketing and other operating expenses

(270,760)

(277,203)

(44,717)

General and administrative expenses 

(36,378)

(32,336)

(5,216)

Loss from operations

(28,761)

(189)

(30)

Interest income

2,529

1,719

277

Dividend income from cost method investments

4,932

1,022

165

Other income

-

890

143

(Loss)/income before income tax expense 

(21,300)

3,442

555

Income tax benefit/(expense)

3,111

(6,835)

(1,103)

Net loss

(18,189)

(3,393)

(548)

Basic losses per ordinary share

(0.092)

(0.017)

(0.003)

Basic losses per ADS

(0.184)

(0.034)

(0.006)

Diluted losses per ordinary share

(0.092)

(0.017)

(0.003)

Diluted losses per ADS

(0.184)

(0.034)

(0.006)

Net loss

(18,189)

(3,393)

(548)

Other comprehensive (loss)/income, net of tax:

Foreign currency translation adjustments

(161)

6

1

Comprehensive loss

(18,350)

(3,387)

(547)

China Nepstar Chain Drugstore Ltd. 

Unaudited Condensed Consolidated Balance Sheets

(amounts in thousands) 

As of

As of

As of

December 31,

March 31,

March 31,

2014

2015

2015

RMB

RMB

USD

ASSETS

Current assets

Cash and cash equivalents

252,174

278,240

44,885

Short-term bank time deposits

24,000

9,000

1,452

Long-term bank time deposits due within one year

3,256

3,256

525

Restricted cash

37,423

37,355

6,026

Short-term investments

-

27,000

4,356

Accounts receivable, net of allowance for doubtful accounts

136,568

126,581

20,420

Bills receivable

400

-

-

Amounts due from related parties

3,366

4,035

651

Prepaid expenses, deposits and other current assets

245,254

207,292

33,439

Inventories

546,312

554,826

89,502

Deferred tax assets

2,038

3,611

582

Total current assets

1,250,791

1,251,196

201,838

Non-current assets

Property and equipment, net

137,750

141,735

22,864

Rental deposits

42,257

41,315

6,665

Cost method investments 

12,638

12,638

2,039

Intangible assets, net

2,509

2,509

405

Goodwill 

51,819

51,819

8,359

Deferred tax assets

16,340

14,990

2,418

Total non-current assets

263,313

265,006

42,750

Total assets

1,514,104

1,516,202

244,588

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Accounts payable

409,428

430,160

69,392

Amounts due to related parties

25,636

24,489

3,950

Accrued expenses and other payables

122,236

102,680

16,564

Income tax payable

25,743

27,792

4,484

Deferred income

25,715

30,704

4,953

Total current liabilities

608,758

615,825

99,343

Non-current liabilities

Deferred income

15,677

14,326

2,311

Deferred tax liabilities

14,711

14,308

2,308

Other non-current liabilities

43,326

43,498

7,017

Total non-current liabilities

73,714

72,132

11,636

Total liabilities

682,472

687,957

110,979

Shareholders' equity

Share capital

158

158

25

Additional paid-in capital

640,341

640,341

103,297

Accumulated other comprehensive loss

(41,746)

(41,740)

(6,733)

Retained earnings

232,879

229,486

37,020

Total shareholders' equity

831,632

828,245

133,609

Total liabilities and shareholders' equity

1,514,104

1,516,202

244,588

 

SOURCE China Nepstar Chain Drugstore Ltd.



RELATED LINKS

http://www.nepstar.cn