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China Nepstar Chain Drugstore Q2 revenue up 12.9%

Staff writer |
China Nepstar Chain Drugstore announced its unaudited financial results for the second quarter ended June 30, 2015. The company opened 38 new stores and closed 59 stores. As of June 30, 2015, the company had 1,948 directly operated stores in total.

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Revenue for the second quarter of 2015 increased by 12.9% to RMB775.1 million ($125.0 million) from RMB686.6 million for the same period in 2014. Same store sales (for the 1,768 stores opened before December 31, 2013 and which were still operating as of June 30, 2015) for the second quarter increased by 16.7% compared to the same period in 2014.

The increase in same store sales was primarily due to in-store promotional initiatives and marketing of pharmaceutical products.

In the second quarter of 2015, the company's revenue by product contribution was 23.1% attributable to prescription drugs (23.9% for the same period in 2014), 41.4% attributable to over-the-counter (OTC) drugs (39.0% for the same period in 2014), 18.7% attributable to convenience and other products (18.8% for the same period in 2014), 12.1% attributable to nutritional supplements (14.8% for the same period in 2014), and 4.7% attributable to herbal products (3.5% for the same period in 2014).

The company's gross profit increased by 5.7% to RMB309.5 million ($49.9 million) for the second quarter of 2015 from RMB292.9 million for the same period in 2014. Gross margin in the second quarter of 2015 was 39.9%, compared with 42.7% for the same period in 2014. The year-over-year decrease in gross margin was primarily the result of proactive promotional activities on pharmaceutical products.

The company's portfolio of private label products included 2,155 types of products as of June 30, 2015. Sales of private label products represented approximately 14.7% of the company revenue and 22.0% of the gross profit for the second quarter of 2015.

Sales, marketing and other operating expenses as a percentage of revenue decreased to 35.7% for the second quarter of 2015 from 39.0% for the same period in 2014, as the steady growth in revenue outpaced the increases in sales, marketing and other operation expenses.

General and administrative expenses as a percentage of revenue were also reduced to 3.8% for the second quarter of 2015, from 4.6% for the second quarter of 2014. This was primarily due to the improvements in management efficiency.

During the second quarter of 2015, the company recognized an impairment loss of RMB4.6 million ($0.7 million), compared to RMB5.2 million for the same period in 2014, representing the reduction of the carrying amount of the property and equipment of certain underperforming stores.

Loss from operations in the second quarter of 2015 was RMB1.6 million ($0.3 million) compared to loss from operations of RMB11.5 million in the same period of 2014. The loss from operations was mainly due to the lower gross margin.

Interest income for the second quarter of 2015 was RMB1.9 million ($0.3 million), compared to RMB1.9 million for the same period in 2014.

Dividend income from cost method investments for the second quarter of 2015 was RMB2.9 million ($0.5 million) compared to RMB 0.9 million for the same period in 2014.


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