China Xiniya Fashion Ltd (ADR) (XNY) Earnings Call Transcript: 2014 Q3 Results

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Below is the 2014 Q3 earnings call transcript of China Xiniya Fashion Ltd (ADR) (NYSE:XNY). Shah Capital had a large position in China Xiniya Fashion Ltd (ADR (NYSE:XNY) at the end of the third quarter.


Christian Arnell – Christensen

Company Representatives

Qiming Xu – Xiniya’s Chairman and Chief Executive Officer

Chee Jiong Ng – Xiniya’s Chief Financial Officer


Ladies and gentlemen, thank you for standing by and welcome to the China Xiniya Fashion Ltd (ADR (NYSE:XNY) Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. There would be a presentation followed by a question and answer session, at which time, if you wish to queue for question, you will need to press 0 followed by 1 on your telephone. Please note that this conference is being recorded today, December 29, 2014.

I’d now like to hand the conference over to your host, Christian Arnell from Christensen. Thank you, Christian. Please proceed.

Christian Arnell, Christensen

Thank you. Good morning and good evening to all participants and welcome to Xiniya’s third quarter 2014 earnings conference call. You may find a copy of our earnings press release that was issued last night on the IR section of IR website or through PRNewswire.

Joining me on the call is China Xiniya Fashion Ltd (ADR (NYSE:XNY)’s Chairman and CEO, Mr. Qiming Xu and C.J. Ng, Xiniya’s Chief Financial Officer. Please note that we will be making a number of forward-looking statements today and all such statements are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions mentioned today due to a variety of factors that affect the company, including the risks specified in the most recently filed Form 20-F with the U.S. Securities and Exchange Commission.

Let me now turn the call over to Chairman Xu, who would like to make some introductory comments. I will translate for him. Mr. Xu, please go ahead.

Qiming Xu, Chairman and Chief Executive Officer

Good morning and good evening to everyone and thank you for joining us for this call. We moved rapidly to execute our inventory buyback initiative during the quarter as the ongoing downturn in China’s menswear industry continued. I’d like to take the time today to focus on our inventory buyback and explain it in the context of the decrease in total value of purchases made at our Spring/Summer 2015 Sales Fair in September.

As we mentioned last quarter, our inventory buyback would negatively impact our top line to the extent of the amount we spent on the inventory buyback. In order to ensure that our retail network continues to attract customers and display new and innovative products, our buyback focused on removing the most outdated fashion products. The amount we spent was based on the analysis of conversations we had with our distributors on the amount of inventory currently in our sales channels.

Based on these conversations, we estimate that there is approximately RMB 1.1 billion worth of inventory in our sales network that has steadily built up over the past few years. The buildup happened in tandem with the worsening market situation. In 2009, when the situation was good, we managed to sell 98% of our inventory. This steadily decreased over time to 85% in 2010 and 2011 and got even worse decreasing to 79% in 2012 and 68% in 2013. Of the RMB 1.1 billion worth of inventory that was in our sales network, we repurchased approximately one-third during the third quarter of 2014. By working in close cooperation with our distributors and authorized retailers, we plan on selling another one-third through our retail network by offering discounts and promotions over the next year. This should leave a remaining one-third which is composed of more recent products that we believe is more than ample to maintain a healthy and flexible retail network. We may buyback more inventory as the situation evolves over the next year or two to make up for any shortfall or to provide further support to our partners.

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