E-Commerce Dang Dang – Paying Up for Growth, not Profits

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%.

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About Mark Hanna 543 Articles

Affiliation: Hanna Capital, LLC

Mark Hanna is President and Owner of Hanna Capital, LLC, a registered investment advisory firm. Mark has been a follower of markets since the late 80s, with a focus on individual equities since the mid 90s. He has been a well known commentator in the financial blogosphere for the past 5 years, following a career in corpoporate finance and accounting. Mark attended the University of Michigan where he graduated with a degree in Economics.

As an avid reader, Market Montage is the personal blogging site for Mark to share his views on economics, markets, and the like. Occasional cynicism and wit shall be deployed in his postings.

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