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»26/08/2009 [Company watch]
China Nepstar reports 7% rise in revenue in Q2 2009

China Nepstar Chain Drugstore, the largest retail drugstore chain in China based on the number of directly operated stores, announced that for the quarter ended June 30, 2009, its revenue stood at $78 million reflecting a 7.5% increase compared to revenue of RMB497 million in the second quarter of 2008 on a pro forma basis.

 
China Nepstar Chain Drugstore, the largest retail drugstore chain in China based on the number of directly operated stores, announced that for the quarter ended June 30, 2009, its revenue stood at $78 million reflecting a 7.5% increase compared to revenue of RMB497 million in the second quarter of 2008 on a pro forma basis. Nepstar noted in the release that in the second quarter revenue contribution from prescription drugs was 21.3%, over-the-counter (OTC) drugs was 36.9%, nutritional supplements was 20.8%, traditional Chinese herbal products was 3.7% and other products was 17.3%. Store sales (for the 1,608 stores opened before December 31, 2007) for the second quarter of 2009 has decreased by 1.3% from the same period in 2008. The decline was mainly due to the decline in the general economic environment in Guangdong Province and certain cities in the Yangtze River Delta, where many export oriented businesses have suffered from a drop of global demand due to the economic recession in many key economies around the world. Of the 1,608 stores opened before December 31, 2007, over 1,100 stores are located in Guangdong Province and Yangtze River Delta. Nepstar\'s portfolio of private label products included 1,487 products as of June 30, 2009. Sales of private label products represented approximately 28.7% of revenue and 42.5% of gross profit for the second quarter of 2009. Second quarter gross profit was $38 million, compared to RMB283 million for the same period in 2008 and RMB254 million for the same period in 2008 on a pro forma basis. Gross margin for the second quarter of 2009 was 48.0% compared to 48.3% for the same period in 2008 and 51.1% for the same period in 2008 on a pro forma basis. The decrease in gross margin for the second quarter of 2009 compared with pro forma results was largely due to price adjustments of certain price sensitive products to maintain competitiveness and address the changing consumer consumption pattern as a result of worsened economic environment. Mr. Ian Wade, Chief Executive Officer of Nepstar, said, \"We remain focused on balancing revenue growth and margin improvement as this is our theme of this rather challenging year 2009. Our efforts to adjust product mix and pricing to reflect the changing needs of customers in this environment have enabled us to minimize adverse effects on overall store performance.\" Mr. Wade said, \"Our strategy to increase overall revenues includes opening additional stores in selective areas of China, where economic trends are more favorable, such as northern, western and central China. We are particularly pleased to have taken our first step in Beijing, which we believe is a very promising market. We will continue to open new stores by ourselves as well as seek synergetic acquisition targets in both existing and new markets. \"On the operational side, we have been hiring new mid-level management as well as reformulating the existing team. In particular, we have just completed the restructuring of our merchandise planning and procurement function, which is the heart of any retail business. We believe our effort to bring together a stronger and more cohesive team will be reflected in our financial performances as they are absorbed and their contribution accelerates. In general, we are cautiously optimistic about the economic recovery and are pleased to see some positive elements coming together,\" he added.

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