China Nepstar Chain Drugstore Reports Increased Revenue

China Nepstar Chain Drugstore announced its financial results for the quarter and fiscal year ended December 31, 2007 and said revenues increased 9.5% to RMB524.1 million compared to the same period in 2006.

For the fiscal year ended December 31, 2007, revenues increased 12.8% to RMB1.95 billion compared to 2006.

"Our excellent performance in the fourth quarter has brought a strong finish to a milestone year for China Nepstar," commented Jiannong Qian, CEO of China Nepstar. "Going forward, we plan to continue to focus on increasing brand presence and private label offerings, opening new stores, leveraging purchasing strength and operational efficiencies, and capitalizing on our competitive advantages to improve our performance."

Fourth quarter revenue contribution from prescription drugs was 21.8%, over-the-counter drugs was 37.2%, nutritional supplements was 16.6%, herbal products was 3.0%, and other products was 21.4%. Same store sales for fourth quarter increased 1.9% compared to the third quarter of 2007 and decreased 3.7% compared to the same period in 2006, due to a strategic move to improve margins by discontinuing certain low margin products in the third quarter, as well as the timing of the Mid-Autumn festival holiday, a public holiday. The Mid-Autumn festival holiday was in October in 2006, and it was in September in 2007, which resulted in a weaker October compared to the prior year.

Fourth quarter gross profit increased 39.8% to RMB254.1 million compared to RMB181.8 million for the same period last year, and increased 11.3% sequentially over RMB228.2 million in the third quarter of 2007. The increase in gross profit was primarily driven by improved sales contributions from centrally procured merchandise, including private label products. Fourth quarter gross margin was 48.5% compared to 38.0% in fourth quarter 2006 and 47.1% in the third quarter of 2007.

The company's effective tax rate was 15.7% for fourth quarter. Net income for the fourth quarter grew 231.5% to RMB58.5 million compared to RMB17.7 million in the fourth quarter of 2006.