Jerash Holdings (US), Inc. Q4 FY2023 earnings call

• Retail sector faces challenges post-pandemic with rising interest rates and inflation impacting consumer spending. Apparel brands have smaller orders and product mix shift to lower margins.
• Fourth quarter revenue negatively impacted by $3 million of deferred orders. Focus on diversifying customer base via own marketing and joint venture with Busana.
• Joint venture with Busana progressing well, with positive feedback from Busana's customers and discussion on costing/pricing for potential orders.
• Progress in ramping up production for Timberland and working with new European-based apparel brand. Operations maintained full capacity by adding supplementary production for local customers, with strong relationships with customers.

Fourth quarter revenue was $23.8 million, down about 23% from $30.9 million in the same period last year. The decrease was due to lower sales from major U.S. customers and $3 million of orders deferred by customers. Gross profit in Q4 2023 was $2.5 million compared to $4.7 million last year, with a gross margin of 10.3% vs. 15.1% prior year. The company is diversifying its customer base through marketing activities and a joint venture with Busana Apparel Group, with progress on Timberland production and new European brand initiatives. Revenue contribution from different segments was affected by product mix shift to lower margin items.

• Projecting revenue for fiscal 2024 Q1 and full year to be maintained at similar level as fiscal 2023.
• Gross margin goal for full fiscal 2024 is around 15% to 16%.
• Outlook subject to product mix of shipments and order flow from Busana joint venture.

• Challenging retail environment post-pandemic with persistent interest rates and inflation affecting consumer spending.
• Uncertainty in external market conditions impacting revenue and margin expectations.
• Potential delays in joint venture orders and timing of capacity expansion affecting future growth.

Q: Why was the $3 million of revenue deferred?

A: It was due to timing and freight forwarder scheduling issues with Costco orders, which had lower margins.

Q: When can new business from joint venture translate to actual revenues?

A: It may take at least 6 months to a year as it takes time to onboard new customers, get samples approved, and complete certifications.

Q: What's the competitive environment like?

A: Competitors in Jordan are facing layoffs and closures due to losing orders, while Jerash maintained business by taking lower margin but high-volume orders to keep capacity full.