China 3C Group Reports Quarterly Figures

China 3C Group, a Chinese electronics retail distributor, says net sales for 2007 totaled US$276 million compared to US$148.2 million for 2006.

The company announced financial results for the fourth quarter and fiscal year ended December 31, 2007, and it says the large increase amount was due to a combination of both organic growth and contribution from subsidiaries acquired in the second half of 2006. Higher sales volume and the addition of new product lines were also factors.

Zhenggang Wang, chairman and CEO commented in a press release, "Our increase in sales benefitted from a combination of strong organic growth, increased retail store penetration, higher sales volume and the introduction of new product lines resulting in record profits for our company. We experienced an 83% year-over-year increase in diluted EPS even as our diluted share count increased 14% in 2007 to 52.67 million shares from 46.18 million shares in 2006."

Cost of sales for 2007 totaled US$226.7 million, or approximately 82.11% of net sales, compared to US$125.4 million, or approximately 84.61% for 2006. The cost of sales as a percentage decreased during 2007 due to the introduction of new product models with higher gross profit margin. Gross profit margin for 2007 increased to 17.9% compared to 15.4% for 2006. The increase was partially due to the inclusion of the newly acquired subsidiaries. The gross profit margin increased as we benefited from increasing economies of scale as the company grew in size and scale. Higher sales of higher margin products such as MP3 and DVD players were also critical factors.

General and administrative expense for 2007 totaled US$13.6 million, or approximately 4.93% of net sales, compared to US$5.5 million, or approximately 3.74% for 2006. Income from operations for 2007 was US$35.8 million, or 12.95% of net sales, as compared to income from operations of US$17.3 million for 2006, or 11.65% of net sales.

The company expects total sales for 2008 to trend between flat to a decrease of approximately 5% compared to 2007 and that gross margin will decrease 4-5 percentage points when compared to 2007 levels. These projections do not take into account any impact related to future acquisitions.