KBS Fashion Group Limited Announces First Quarter 2017 Financial Results

SHISHI, CHINA / ACCESSWIRE / June 27, 2017 / KBS Fashion Group Limited ("KBS" or the "Company") (KBSF), a leading fully-integrated casual menswear company in China, today announced its unaudited financial results for the first quarter ended March 31, 2017.

First Quarter 2017 Financial Highlights

  • Net revenues for the first quarter of 2017 decreased by 35% YoY to $5.5 million, compared to $8.99 million in the prior year period.
  • Gross profit was $1.21 million, or 26% of revenue, compared to $2.36 million, or 35%, in the prior year period.
  • Profit for the period was -$2.2 million for first quarter of 2017, compared to $0.66 million for the same period in 2016, representing a decrease of $2.9 million. Net margin was -31% for the quarter period ended March 31, 2017, compared to a net margin of 7.3% during the same period last year. Non-GAAP net income, which excludes the provision of the change in fair value of warrants and non-recurring fees related to NASDAQ listing compliance, was -$1.73 million, compared with $0.4 million for the same period last year.
  • Net income attributable to the Company per fully diluted share was -$0.977, compared to $0.255 in the prior year period. Non-GAAP net income per fully diluted share, which excludes the provision of the change in fair value of warrants and non-recurring fees related to NASDAQ listing compliance, was -$0.977 for the first quarter of 2017, compared with $0.255 for the same period last year.

Mr. Keyan Yan, Chairman and CEO of the Company, commented, "The apparel industry in China remains challenging, and the Company is in the process of implementing new strategies to become more competitive in the current environment. We are currently looking into the development of our own on-line sales platform and will shortly adjust our Distributor/Sales program to provide a more competitive platform for all our distributors to work from. Additionally, we are planning to hold more sales exhibitions for our distributors, from 2 exhibitions currently to 4 exhibitions a year. Our prime objective at this time is the cash preservation to ensure that we are able to meet our investment objectives and return the company to profitability over the next couple of quarters."

First Quarter of 2017 Results

Revenue

A breakdown of revenue, percentage of revenue, and percentage of gross margin by segment is as follows:

By business

Distribution network

Corporate stores

OEM

Consolidated

Q1 ended

March 31,

2017

Q1 ended

March 31,

2016

Q1 ended

March 31,

2017

Q1 ended

March 31,

2016

Q1 ended

March 31,

2017

Q1 ended

March 31,

2016

Q1 ended

March 31,

2017

Q1 ended

March 31,

2016

Segment revenue

4,864,419 7,898,385 212,599 497,191 432,734 602,865 5,509,752 8,998,441

% of Sales

88 % 88 % 4 % 6 % 8 % 7 % 100 % 100 %

Segment gross margins

967,350 1,897,557 117,753 228,321 127,823 234,811 1,212,926 2,360,689

Gross margin rate

20 % 24 % 55 % 46 % 30 % 39 % 22 % 26 %

Segment Sales

For first quarter ended March 31, 2017, total revenue was approximately $5.5 million, decreasing 35% from $8.99 million for the quarter ended March 31, 2016. The Company reports financial and operating results in three segments: distributor network, corporate stores, and ODM.

Distributor Network - Revenue from the Company's distributor network reached approximately $4.86 million for the quarter period ended March 31, 2017, a decrease of 38% from $7.89 million in the prior year. The decrease was mainly due to overstocking of our distributors and high competition of online sales and other brand products.

The distributor segment accounted for 88% of the total revenue for the period, which is the same compared to previous year. Gross profit margin for the Company's distributor network decreased to 20% from 24% for last year. The gross profit rate decreased due to the reduction of unit selling price to area-distributors in the first quarter of year 2017 and the increase in staff expenses.

The Company's distributor network consisted of 32 distributors in 12 provinces during the three month period ending ended March 31, 2017. Most of these distributors, either directly or through their sub-distributors, operate KBS-branded stores. As of the period ended March 31, 2017, distributors operated a total of 52 KBS-branded stores, primarily in second and third tier cities. KBS products distributed to the fourth and fifth tier cities are primarily sold in multi-branded department stores and online shops.

The following table lists by region the number of retail stores operated by distributors and sub-distributors as of March 31, 2017:

Location

As of March 31, 2017

Fujian

9

Guangdong

2

Guangxi

8

Jiangsu

4

Anhui

1

Zhejiang

1

Chongqing

6

Inner Mongolia

1

Tianjin

3

Hebei

5

Heilongjiang

5

Sichuan

7

Total

52

Corporate Stores - Total retail revenue for our corporate stores for the first quarter ended March 31, 2017 decreased to approximately $0.2 million, compared to $0.5 million during the same period last year, representing a decrease of 57%, due to the close of a corporate store in Fujian. As of March 31, 2017, the Company operated 1 corporate store, compared with 2 stores as of March 31, 2016.

The corporate stores' segment contributed 4% of total revenue, compared to 6% in year 2016. Gross profit margin for the Company's corporate stores was 55%, compared to 46% in year 2016. The margin of our corporate stores' segment is dependent on the percentage of promotion products. A higher percentage of promotion products often causes reduction of the gross margin. The gross margin increase for the first quarter ended March 31, 2017 is primarily due to fewer promotions made in the corporate stores compared to same period last year.

ODM - The ODM segment is comprised of products that are designed and sold by our clients, but manufactured by us. Revenue from the ODM segment decreased by 28% to $0.43 million for first quarter ended March 31, 2017, compared to $0.6 million during the same period last year. Gross profit margin decreased to 30% from 39% for same period in 2016. The decrease was mainly due to the loss of some online orders in the first quarter of 2017.