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China Jo-Jo Drugstores Q3 net revenues down to $20.6 million

Staff Writer |
China Jo-Jo Drugstores announced financial results for its third fiscal quarter ended December 31, 2016.

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Net revenues were $20.6 million compared to $24.7 million in the same quarter a year ago, a decrease of $4.1 million, or 16.6%.

Lower revenue was mainly due to the decline in online pharmacy business, which was partially offset by increase in retail drugstore business.

Retail drugstore sales were $14.1 million compared to $12.9 million in the same quarter last year and $12.8 million in the second quarter of fiscal 2017.

To improve same-store sales, the company continued to optimize product mix, expand mobile payment, roll out in-pharmacy virtual doctor clinics, and work with reputable vendors to promote the sales of third-party brand products.

As a result, same-store sales increased by approximately $728,822, or 6% year-over-year, while new stores contributed approximately $572,876 in revenue in the third quarter. The pharmacy store count increased to 65 as of December 31, 2016, compared to 59 stores a year ago.

Online pharmacy sales were $3.4 million compared to $8.6 million in the same quarter a year ago.

The decrease was mainly due to lower sales through third party e-commerce websites that resulted from the CFDA (China Food and Drug Administration) suspension of OTC drug sales on third party e-commerce websites and the decline in referrals from Yikatong, the popular pharmacy and health insurance benefit card, to the company's online pharmacy.

To address these challenges, the company has been redirecting customer traffic from third party e-commerce websites to its own website to promote the purchase of OTC products, while adding more non-medical health products such as nutritional supplements on such third party e-commerce platforms.

Meanwhile, the company has also been working with alternative referral vendors of pharmacy benefit management services.

Gross profit decreased by $663,462 or 13.7% year-over-year to $4.2 million. Gross margin increased from 19.6% to 20.3% due to higher retail profit margins.

Retail gross margin increased primarily due to higher vendor rebates attributable to our marketing efforts in promoting brand-name products with large pharmaceutical suppliers, efforts to renegotiate prices with our suppliers periodically, and selection of certain higher profit margin products for retail sale.

Sales and marketing expenses increased by $283,545 or 8.6% year over year, primarily due to support to new local wholesale clients such as other local drugstores.

General and administrative expenses decreased by $416,599 or 22.3% year over year, primarily due to accounts receivable and decrease of $331,180 in advances to vendors allowance in the third quarter as compared to allowance addition of $190,472 in the same quarter last year.

The difference was caused by collection on certain remaining aged accounts receivable and advances to suppliers' accounts in the quarter.

Net loss was $834,806 or $0.04 per diluted share compared to last year's third quarter net loss of $617,529 or $0.04 per diluted share.

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