LJ International Revenue Up 26%, Profit Up 59%, Led by China Retail Business

The Enzo retail chain in China is a stellar performer for  LJ International.

Hong Kong-based jewelry manufacturer and retailer, LJ International Inc., reported Thursday that operating revenue in the second quarter increased 26 percent to $41.5 million. Gross profit increased 59 percent to $20.6 million. Operating income increased 13 percent to $3.3 million. Net income for the period ended June 30 rose 67 percent to $3.85 million.

It was the company’s retail division in China led the way showing exceptionally strong sales and offsetting a decline in its international wholesale business due the sluggish economy in the U.S. and Europe.

The company, which owns the Enzo store chain in China, reported that second quarter retail sales increased 70 percent year-over-year to $28.4 million. Same store sales for the period increased 61 percent for the period, ended June 30. Enzo added 16 new stores in the second and since then added another 12 stores to boost its branded retail chain to 166 stores. LJ International said it will continue to aggressively expand its retail network in China.

LJ International’s wholesale revenue fell 19 percent to $13.16 million year-over-year. Sales from the U.S. and Europe decreased 26 percent and 6 percent year-over-year, respectively, representing 71 percent and 20 percent of wholesale revenue. Meanwhile, sales from Asia and other markets grew 49 percent and represented 9 percent of wholesale revenue for the period. The company distributes a full complement of jewelry lines under the Lorenzo brand name to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers in North America and Western Europe.

“Our solid financial performance came in ahead of our expectation, mainly driven by the stronger than expected performance of Enzo, the retail business arm targeting affordable luxury segment,” said Yu-Chuan Yih, LJ International chairman and CEO. “Consumer and luxury product markets are widely perceived to be two of the fastest growing sectors in the expanding Chinese economy. Enzo, with solid financial strengths, will continue to expand its retail network, deepening penetration in its affluent first and second tier city network while strengthening its presence in the third tier cities. We are well on track to operate a network of about 200 stores at the end of the year and have scheduled to add approximately 26 stores by the end of the third quarter, bringing the number to about 180 stores.”

Yu-Chuan Yih added, “Amid an intricate macro environment which impacts the wholesale markets, we remain a key partner of our long-standing wholesale customers, which has warranted stable sales throughout the economic cycle. We will focus on strengthening collaboration with core customers to better align product strategy and design with the changing preferences of the end consumers, to add value to our strong relationship with leading wholesale customers; and our high quality of products and services would continue to help us maintain a steady growth in the wholesale business amidst unfavorable market conditions.”

In its outlook the company said it expects a 19 percent to 25 percent increase in gross revenue, year-over-year, to $42.5 million and $44.5 million. This outlook is fueled by an expected 33 to 38 percent increase in retail sales in the range of $28 to $29 million for the period. Wholesale revenue is expected to be $14.5 million to $15.5 million, representing a flat growth rate to an increase of 6 percent for the period.

More financial highlights for the second quarter after the jump:

Enzo Targets Underserved $10 Billion Wedding Market

Chinese jewelry retailer Enzo launched the  “All About Love” jewelry collection that targets China's vast wedding market. The collection, unveiled at Enzo's 20,000 square foot flagship store in Macau, features colored gemstones and diamond products that enable consumers to create personalized jewelry sets for engagements, weddings and anniversaries. 
(Caption: Asian celebrities Aarif Lee and Janice Man model 'AllAboutLove' collection at its unveiling)

The collection is Enzo's first comprehensive line targeted specifically at the wedding market. The retailer says it estimates total sales in China to be about $10 billion, based on an average retail price of $1,000 and 10 million weddings each year. This is just for wedding rings. The potential markets for engagement and anniversary rings are comparably large.

“Most Chinese consumers up to now have had limited choices in wedding, engagement and anniversary items at local jewelers,” said Yu Chuan Yih, chairman and CEO of Enzo's parent company, LJ International. “We think the consumer is ready for this fresh western retailing concept, and Enzo is in an ideal position to profit from it with a full range of offerings not only in wedding rings, but in engagement and anniversary jewelry as well. For these reasons we expect All About Love to be a big winner for both Enzo and the consumer.”

All About Love provides a selection of colored gemstones and a collection of diamond products that, together, make up a comprehensive wedding collection. Customers can mix and match a full range of engagement, wedding and anniversary jewelry pieces to create their personalized wedding jewelry sets of engagement rings and wedding bands made of colored gemstones and diamonds.

LJ International Inc. is engaged in the designing, branding, marketing and distribution of a full range of jewelry. It has built its global business on a vertical integration strategy. As a wholesaler, it distributes to fine jewelers, department stores, national jewelry chains and electronic and specialty retailers throughout North America and Western Europe. Its product lines incorporate all major categories, including earrings, necklaces, pendants, rings and bracelets.

LJ International Revenues Up 36%

LJ International Inc. on Tuesday reported a 36 percent year-over-year increase in revenues for the third quarter ended September 30. Sales and income growth reflected an 83 percent rise in sales at LJI's ENZO retail chain of jewelry stores in China.

The Hong Kong based company makes gold, platinum, and sterling silver jewelry set with diamonds and precious and semi-precious stones at its plant in Shenzhen, China. It markets its jewelry primarily under the Lorenzo brand name to retailers in Europe and North America. It also sells jewelry through fine jewelers, discount chains, department stores, television shopping channels, and in about 100 of its own ENZO retail stores in China, Hong Kong, and Macau.

The company said it expects fourth quarter 2010 sales for ENZO to increase 40 percent year-over-year, offsetting an approximately 15 percent decrease in wholesale revenues.

"Today's results clearly demonstrate how our retail-based growth strategy is succeeding as planned," said Yu Chuan Yih, LJI's chairman and CEO. "Our ENZO division is the primary driver of both sales growth and margin improvements at all levels, from gross to net profit. Retail sales also are rising not just from the opening of new stores but from significantly higher sales on per-store basis. With new financing in place to fund at least 60 new ENZO stores in 2011, LJI is on track to take advantage of continuing economic growth in China while holding its own as a leading jewelry wholesaler in slower-growing global markets."

LJI's company-wide revenues for the third quarter rose 36 percent year-over-year to $35.7 million. Retail revenues were up 83 percent to $21.1 million. Same store retail sales rose 13 percent for the period. Wholesale revenues were down less than 1 percent to $14.6 million.

Rising retail revenues reflected expanded store count (up to 124 at the end of the third quarter from 92 a year earlier) and growing consumer interest in ENZO jewelry lines coupled with the continued rise of disposable income in China's expanding economy.

As in past quarters, gross margins for retail revenues were substantially higher than wholesale. Gross retail profit in the third quarter of 2010 was $10.6 million, or 51 percent of retail revenues. Gross wholesale profit was $3.4 million, or 23 percent of wholesale revenues. Overall gross profit was $14 million, or 39 percent of revenues.

LJI's operating income for the third quarter of 2010 was $3.7 million, or 10 percent of revenues, up 188 percent from $1.3 million, or 5 percent of revenues, a year earlier. The improvement was due both to the sharp rise in higher-margin retail sales along with effective controls on sales, general and administrative expenses, the company said.

Retail operating income was $3.1 million, or 15 percent of retail revenues, up from $1 million, or 8 percent of retail revenues, a year earlier. Wholesale operating income was $1 million, or 7 percent of wholesale revenues, compared to $$500,000, or 4 percent of wholesale revenue, in the third quarter of 2009.