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Nova LifeStyle Furniture sees boost from IKEA deal, Alibaba sales
    November 20,2014



 

Nova LifeStyle Inc. (NASDAQ-GM: 'NVFY'), a U.S.-based  designer, manufacturer and distributor of modern furniture, says sales rose 16 percent third quarter, and that it shipped to IKEA and fulfills orders from Alibaba, China's answer to Amazon.

 

Third Quarter Corporate Highlights and Progress on Growth Initiatives:
•Rang Closing Bell at NASDAQ
•Agreement to Furnish Ping An Insurance Group's Expansive Offices
•Purchase Order Fulfilled with IKEA China
•Growth in China Online Sales via Alibaba's B2C Site, TMall and JD.com
•Expanded Franchise Network in Partnership with Franchise Builder, Ablejoy

 

Third Quarter Financial Highlights:
•Third Quarter Net Sales Increased 16% Y-o-Y
•Third Quarter Gross Profit Increase 34% Y-o-Y
•Third Quarter Diluted EPS of $0.15 Y-o-Y

 

Corporate achievements for the third quarter ended September 30, 2014:


 "We began this quarter with a trip to NASDAQ to ring the opening bell and continued on to deliver a strong third quarter," stated Tawny Lam, President of Nova LifeStyle, Inc.  "We were successful on our commitment to grow sales in China with a signed agreement with Ping An, number 62 on Forbes Global 2000 list of the largest companies in the world; in September, we shipped the first of three monthly shipments to IKEA's distribution center in Shanghai; and we expanded our franchise network by partnering with Ablejoy, one of China's largest franchise builders.  We made good on our initiative to grow eCommerce sales and are thrilled with the 200% increase that we experienced for the whole of the third quarter via the online sales venues of Alibaba's B2C site, TMall and JD.com.  We stayed true to our mission to create innovative designs, offer a diversified product line and maintained a leading-edge, fully integrated design-to-production business model, which for us, is the fundamental strength of our business and will allow us to drive long-term shareholder value."

 

•The Company continued to execute on its growth initiative to increase sales in China with the signing of an agreement with Ping An Insurance Group of China, Ltd. ("Ping An") to furnish their new offices in China.  The first shipment of the initial, first-year commitment was received during the third quarter of this year.   Ping An is engaged in providing integrated financial services within three core businesses of life insurance, property & casualty insurance and banking, securities and corporate insurance.  With over 200,000 employees, Ping An is publicly traded on both the Hong Kong, China and the Shanghai Stock Exchanges and is an industry leader, posting consolidated total assets of RMB3.36 trillion as at December 31, 2013.

 

•The Company has commenced production shipments to IKEA under its supply agreement to manufacture IKEA products for sale in China and Asia.  The first of three monthly shipments was received in September at IKEA's distribution center in Shanghai, China.  Production of the furniture is ongoing at the 15,000 square meter production line, which meets IKEA's stringent manufacturing specifications at Nova's factory in Dongguan, China.  In August, the Company reported beginning production and the samples shipment in preparation for September purchase order fulfillment.

 

•The Company continues the development of Nova LifeStyle's dedicated e-Commerce platform, which will exclusively offer furniture and home furnishings of many popular major brands to consumers in China, and still plans for completion of an initial launch by the end of the fourth quarter of 2014.

 

•The Company's plan to launch a new Mobile Device Application remains on track to launch during the fourth quarter 2014.


Financial results for the third quarter ended September 30, 2014:

 

•Net sales were $25.9 million, an increase of 16% compared to $22.3 million from the prior year period, and is primarily the result of a 6% increase in sales volume and 9% increase in average selling price.  North American sales continued to drive growth contributing a 45% increase up from a 43% increase the previous quarter.  Sales to China increased marginally to $4.44 million in the three months ended September 30, 2014 from $4.39 million in the same period of 2013.  Sales to Asia, including Hong Kong, China, and other countries, increased 2.81% to $1.20 million in the three months ended September 30, 2014 compared to $1.17 million in the same period of 2013.  Sales in Europe were $1.9 million and continued a year over year contraction as result of the sluggish European economy. 

 

•Gross profit was $5.9 million, an increase of 34% compared to the prior year.  Gross profit margin increased to 23% in the three months ended September 30, 2014, compared to 20% in the same period of 2013. The increase in gross profit margin resulted primarily from decreased cost of sales as a percentage of net sales, which was due primarily to increased sales and decreased cost of direct materials for self-produced products.  Additionally, the Company attracted more sales orders from large trading company customers by conducting trade shows in United States.

 

•Operating income was $2.6 million compared to $1.7 million in the prior year period, primarily reflecting higher general and administrative expenses including research and development expenses to advance the Company's growth initiatives and amortization associated with the acquisition of Bright Swallow. This was partially offset by a 100 basis point improvement in selling expenses as a percentage of net sales. Overall SG&A expenses as a percentage of net sales declined by 170 basis points.

 

•Net income was $3.1 million, an increase of 156% from $1.22 million for the same period of 2013, or $0.15 per diluted share, based on a weighted average diluted share count of 20.9 million shares. 

 

Results for the first nine months ended September 30, 2014:

 

•Net sales were $69.7 million, an increase of 23% from $56.5 million the prior year period. This growth was primarily driven by a 34% increase in sales volume due to a 9% decrease in average selling price. The increased sales volume of low price products in both the China domestic market and worldwide was a key factor.

 

•Gross profit was $14.1 million, an increase of 23% compared to the prior year period's gross profit of $11.5 million.  The increase in gross profit was primarily the result of increase of net sales. Our gross profit margin stayed the same at 20% in the nine months ended September 30, 2014, compared with the same period of 2013.

 

•Operating income was $4.7 million and was relatively unchanged compared to $4.7 million in the prior year period. 

 

•Net income was $6.8 million, or $0.33 per diluted share, based on a weighted average diluted share count of 20.3 million shares, and included a non-cash, pre-tax gain of $2.8 million due to the change in the fair value of warrant liability. This compares to net income of $3.9 million, or $0.19 per diluted share, on 19.0 million weighted average shares outstanding in the prior year period.

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