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China 3C Group (CHCG.OB) reports blowout preliminary Q2 results
Topics: UncategorizedUnderpromise, overdeliver seems to be the motto for China 3C Group (OTCBB:CHCG)’s second quarter. After raising fears that weather disruptions, fickle consumers and margin issues would dampen the results at this fast-growth Chinese electronics retailer, CHCG today reported blowout preliminary Q2 results. Net sales are expected to be $81.5-$82.5 million (up 26%-28% year-over-year), and net income is expected to be $7.3-$7.4 million (up 33%-35% year-over-year). That amounts to $0.14 per share, fully diluted for the quarter. Not bad considering shares traded at less than ten times that yesterday.
CEO Zhenggang Wang commented:
We are very pleased with our preliminary second quarter results, which exceeded our internal plan. Our sales growth benefitted from a net increase in new doors, healthy demand for electronic products in most of our key categories, a broader product selection from the prior year period as well as from certain, new consumer-oriented programs that focus on service and increasing awareness of our expanding portfolio of brands.
Our net income improved largely due to increased sales results, the exit from unproductive doors as well as a lower tax rate in the second quarter compared to the prior year. We also anticipate a sequential improvement in gross margin for the second quarter. Overall, we are encouraged with our second quarter performance and continue to work aggressively to further enhance our position in China’s electronic consumer industry.
Bottom line: Today’s announcement is great news, and shares are currently up over 30% in reaction. Due to the increased retail traffic and influx of money associated with the Olympics, I expect a strong Q3 as well. There is no reason to believe that today’s ramp marks the end of the move, and I am not selling a single share at today’s prices. With another good quarter, CHCG could easily see $3-$4 this year.
DISCLOSURE: Long CHCG.OB
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