Stock Update (NYSE:DANG): E Commerce China Dangdang Inc (ADR) Announces Unaudited Third Quarter 2015 Results


E Commerce China Dangdang Inc (ADR) (NYSE:DANG), a leading business-to-consumer e-commerce company in China, announced its unaudited financial results for the third quarter ended September 30, 2015.

Third Quarter 2015 Highlights

  • Total net revenues for the third quarter of 2015 were RMB2,371.9 million ($373.2 million), a 22.6% increase from the corresponding period in 2014.Gross Merchandise Value (“GMV”) from the marketplace in the third quarter of 2015 was RMB1,684.4 million ($265.0 million), a 3.4% decrease from the corresponding period in 2014. The combination of product revenue from principal business and GMV from the marketplace reached RMB3,992.1 million ($628.1 million) and grew 11.1% year-over-year.
  • Dangdang had approximately 10.7 million active customers, including approximately 4.4 million new customers, in the third quarter of 2015, representing increases of 12% and 25%, respectively, from the corresponding period in 2014. Total orders for the third quarter of 2015 were approximately 20.1 million, a 7% increase from the corresponding period in 2014.
  • Mobile orders accounted for 42% of total orders for the third quarter of 2015, compared to 24% for the corresponding period in 2014.
  • Net loss for the third quarter of 2015 was RMB28.1 million ($4.4 million), or negative 1.2% of total net revenues, compared to net income of RMB24.5 million in the third quarter of 2014, or 1.3% of total net revenues.

“In the third quarter of 2015, we posted revenue growth, a quarter-over-quarter increase in gross margin and solid increases in both new and active customers at a low acquisition cost. Supported by our successful brand building investments over the last few quarters, we focused on targeted, efficient marketing campaigns and achieved positive results,” said Ms. Peggy Yu Yu, Executive Chairwoman of Dangdang.

“Mobile orders reached 42% of total sales during the quarter. We added a new online community to our reading platform to enhance customer stickiness. This will encourage users to spend more time reading, interacting, shopping and creating content on our platforms, thereby bringing the customer experience full circle. Going forward, we will continue cultivating the synergies between wireless shopping and the digital book business for future growth,” Ms. Peggy Yu Yu concluded.

Third Quarter 2015 Results

Dangdang’s total net revenues in the third quarter of 2015 were RMB2,371.9 million ($373.2 million), a 22.6% increase from the corresponding period in 2014.

Media product revenue for the third quarter of 2015 was RMB1,418.5 million ($223.2 million), representing a 13.3% increase from the corresponding period in 2014. General merchandise revenue for the third quarter of 2015 was RMB889.2 million ($139.9 million), representing a 48.6% increase from the corresponding period in 2014. Other revenue including revenue from third-party merchants for the third quarter of 2015 was RMB64.2 million ($10.1 million), representing a 23.4% decrease from the corresponding period in 2014, primarily due to the decline in GMV from the marketplace, resulting in a reduction in platform commission fees along with lower logistic revenue from third party merchants.

Dangdang had approximately 10.7 million active customers, including approximately 4.4 million new customers, in the third quarter of 2015, representing increases of 12% and 25%, respectively, from the corresponding period in 2014. Total orders for the third quarter of 2015 were approximately 20.1 million, a 7% increase from the corresponding period in 2014.

Gross margin in the third quarter of 2015 was 15.6%, compared to 18.9% in the third quarter of 2014 and 14.8% in the second quarter of 2015. The year-over-year decrease in gross margin was due to a larger contribution of general merchandise sales as a percentage of total net revenues and a decline in revenue from third-party merchants. The quarter-over-quarter increase in gross margin was due to strong gross margin contribution from books and media products.

Fulfillment expenses, which include warehousing, shipping and customer service expenses, were RMB207.6 million ($32.7 million), representing 8.8% of total net revenues, compared to 10.1% in the corresponding period in 2014 and 8.9% in the second quarter of 2015. The year-over-year and quarter-over-quarter decreases in fulfilment expenses as a percentage of total net revenues were primarily due to improved operational efficiency.

Marketing expenses were RMB64.7 million ($10.2 million), representing 2.7% of total net revenues, compared to 5.5% in the corresponding period in 2014 and 3.2% in the second quarter of 2015. The year-over-year and quarter-over-quarter decreases in marketing expenses as a percentage of total net revenues were the result of lower expenditures on advertisements and online marketing programs during the quarter.

Technology and content expenses were RMB61.8 million ($9.7 million), representing 2.6% of total net revenues, compared to 2.8% in the corresponding period in 2014 and 2.6% in the second quarter of 2015. The year-over-year decrease in technology and content expenses as a percentage of total net revenues was primarily due to operating leverage.

General and administrative expenses were RMB46.0 million ($7.2 million), representing 1.9% of total net revenues, compared to 2.0% in the corresponding period in 2014 and 2.1% in the second quarter of 2015. The year-over-year and quarter-over-quarter decreases in general and administrative expenses as a percentage of total net revenues were primarily due to larger scale.

Government grants and value-added tax refunds were RMB7.0 million ($1.1 million) representing 0.3% of total net revenues, compared to 2.2% in the corresponding period in 2014 and 0.1% in the second quarter of 2015. The year-over-year decrease as a percentage of total net revenues was primarily due to a limited amount of government grants and tax refunds.

Share-based compensation expenses, which were allocated to related expense line items, were RMB2.0 million ($0.3 million) in the third quarter of 2015, compared to RMB2.1 million in the corresponding period in 2014,representing a 6.8% decrease.

Dangdang recorded an operating loss of RMB3.3 million ($0.5 million) in the third quarter of 2015, compared to operating income of RMB13.1 million in the corresponding period in 2014.

Operating loss excluding share-based compensation expenses (non-GAAP) was RMB1.3 million ($0.2 million), compared to operating income excluding share-based compensation (non-GAAP) of RMB15.2 million in the corresponding period in 2014.

Other expense, net was RMB38.0 million ($6.0 million), compared to RMB2.2 million in the corresponding period in 2014.  The year-over-year increase was largely attributable to RMB43.4 million in foreign exchange loss associated with the significant depreciation of the Chinese RMB against the US dollar during the third quarter in 2015.

Net loss was RMB28.1 million ($4.4 million), compared to net income of RMB24.5 million in the corresponding period in 2014.

Net loss excluding share-based compensation expenses (non-GAAP) was RMB26.2 million ($4.1 million), compared to net income excluding share-based compensation (non-GAAP) of RMB26.7 million in the corresponding period in 2014.

Net margin was negative 1.2%, compared to 1.3% in the corresponding period in 2014. Non-GAAP net margin was negative 1.1%, compared to a non-GAAP net margin of 1.4% in the corresponding period in 2014.

Diluted loss per ADS was RMB0.35 ($0.05), compared to diluted earnings per ADS of RMB0.29 in the corresponding period in 2014.

As of September 30, 2015, Dangdang had cash and cash equivalents, restricted cash, short-term time deposits, held-to-maturity investments and available for sale investments of RMB1,686.8 million ($265.4 million), compared to RMB1,399.0 million as of December 31, 2014. As of September 30, 2015, Dangdang had no bank loans.

Capital expenditures for the third quarter of 2015 were RMB14.4 million ($2.3 million). (Original Source)

Shares of E-commerce China closed yesterday at $6.88, down $0.07 or -1.01%. DANG has a 1-year high of $12.54 and a 1-year low of $5.56. The stock’s 50-day moving average is $6.74 and its 200-day moving average is $7.39.

On the ratings front, E-commerce China has been the subject of a number of recent research reports. In a report issued on September 3, HSBC analyst Chi Tsang maintained a Buy rating on DANG, with a price target of $12, which implies an upside of 74.4% from current levels. Separately, on September 1, Brean Murray Carret’s Fawne Jiang maintained a Hold rating on the stock .

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Chi Tsang and Fawne Jiang have a total average return of 13.1% and 8.3% respectively. Tsang has a success rate of 61.8% and is ranked #514 out of 3636 analysts, while Jiang has a success rate of 47.6% and is ranked #488.

E-Commerce China Dangdang Inc is a B2C e-commerce company in China. The Company is engaged in selling books online. It is also engaged in other media products and selected general merchandise categories.