Friday, May 20, 2011

E-Commerce Dang Dang (DANG) - Paying Up for Growth, not Profits

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E-Commerce Dang Dang (DANG) is having a nice day today on the back of its earning report, but has been a broken stock once its IPO came out.  At this point the only people who have made money are insiders, and those who dumped it immediately.  It's a long road for "The Amazon of China".



That said for a paltry 1 cent of earnings, investors are giddy today about DANG's earnings.  Analysts were in for $103.4M and $0.00 EPS.  The company did $105.0M and $0.01.  Cost of revenue jumped (translation - gross margins fell) - as did marketing and fulfillment costs as a percent of revenue.  The only 'profit' was due to the Wall Street game of pretending handing boatloads of options to insiders is not a real expense.  Full report here.

  • Total net revenues in the first quarter of 2011 were RMB687.6 million ($105.0 million), a 53.4% increase from the corresponding period in 2010.  
  • Media product revenue for the first quarter of 2011 were RMB514.0 million ($78.5 million), representing a 34.3% increase from the corresponding period in 2010. General merchandise revenue for the first quarter of 2011 was RMB164.0 million ($25.1 million), representing a 161.6% increase from the corresponding period in 2010. Other revenue including revenue from third-party merchants, for the first quarter of 2011 was RMB9.5 million ($1.5 million), representing a 242.9% increase from the corresponding period in 2010. 
  • Dangdang had approximately 4.2 million active customers in the first quarter of 2011, representing a 42.3% increase from the corresponding period in 2010. Total orders for the first quarter 2011 were approximately 8.0 million, a 40.9% increase from the corresponding period in 2010. 
  • Cost of revenues was RMB553.6 million ($84.5 million), representing 80.5% of total net revenues, as compared to 79.8% in the corresponding period in 2010. Cost of revenues as percentage of total net revenue has increased primarily due to the high growth rate of general merchandise, which has resulted in a changed revenues mix. 
  • Operating profit excluding share-based compensation expenses (non-GAAP) was RMB1.2 million ($0.2 million), a 42.5% decrease from the corresponding period in 2010, primarily due to the revenues mix change and increased marketing expenses.
  • Net income excluding share-based compensation expenses (non-GAAP) was RMB5.5 million ($0.8 million)

Outlook
  • Dangdang expects its total net revenues in the second quarter of 2011 to be in the range of RMB779 million to RMB789 million, representing year-over-year growth in the range of 51% to 53%.

[Dec 8, 2010: Meet China's Newest Billionaire - E-commerce China Dangdang's CEO Peggy Yu Yu]

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