KBS Fashion Stock Plunges 11% on Disappointing Quarterly Results
The stock in KBS Fashion Group Ltd. (Nasdaq: KBSF) dropped 11 percent to $2.85 per American depositary share Monday after the company, which sells menswear, reported a significant decline in revenues in its distribution network in the first quarter.
The company, based in Shishi, China, said in a statement today that during the three months through March its revenue increased 4 percent to $4.6 million, attributed to increased orders from the original equipment manufacturer (OEM) segment.
However, revenue from the company's distribution network decreased 22 percent year-over-year to $3 million in the first quarter, according to the report. Revenue from KBS’ distribution network made up 66 percent of its total revenues in the first quarter. The company said the first quarter is a slow season for e-commerce. Meanwhile, China’s retail market is highly competitive, with giant retailers like Alibaba Group Holding Ltd. (NYSE: BABA) and JD.com Inc. (Nasdaq: JD) taking up the majority of the share.
Net income during the period reached $310,000, or 14 cents per share, compared with a net loss of $1.9 million, or 89 cents per ADS, during the same period a year ago.
The cost of sales decreased during the first quarter by 11 percent to $370,000, KBS said. Distribution and selling expenses decreased 59 percent to $430,000, while administrative expenses were $870,000, down 64 percent from the same period last year.
Gross margin was 34.9 percent compared with 24.2 percent a year ago, which the company attributed to the launch of new products and price advantages.
The chief executive officer of KBS, Keyan Yan, expressed confidence in the company’s future growth: “Looking forward to the remaining of 2019, we are excited about the sales potential from the recently signed contract and integration of our potential acquisition of Tribe which is expected to put us in a prominent position in the smart clothe technology market. We are confident about our ability to outperform in 2019 and beyond.”
Yan concluded, "The management team is working diligently to keep strong momentum by continuing to improve our operational efficiencies and increase our sales from different channels."