Jerash Holdings (US), Inc. Q1 FY2024 earnings call

• Retail environment showed resiliency despite challenges; revenue up slightly but profitability impacted by product mix shift. - Received new inquiries from global brands, including test runs and sample orders. - Timberland is a significant brand for Jerash; working on Vans branded apparel orders. - New European high-end apparel brand has increasing orders. - Joint venture with Busana Apparel Group is well-received, with plans for meaningful orders in Q4. - Exploring vertical integration with NTX for sustainable textile dyeing, aiming for water and carbon reduction, and shorter fabric sourcing lead times.

Revenue was up slightly in the first quarter. Gross profit for the fiscal 2024 first quarter was $5.6 million compared to $6.6 million in the same quarter last year. Gross margin was 16.0% versus 19.8% a year ago, primarily due to a product mix shift to lower-margin items. Key product segments include Timberland, Vans branded apparel (part of VF Corporation brands), and a newly added European-based high-end apparel brand, with orders from these segments showing growth and progress.

• Project revenue for fiscal 2024 full year to be maintained at similar level as fiscal 2023. - Gross margin goal for full fiscal 2024 is around 15% to 16%. - Board approved a quarterly dividend of $0.05 per share payable on August 23.

• Inflationary pressures and rising interest rates impacting consumer spending. - Product mix shift to lower-margin items affecting profitability. - Uncertainty in final product mix of shipments and order flow from new customers via joint venture.

Q: Regarding the potential JV with vertical integration partner, can you talk about the competitive advantage and timing?

A: The JV with NTX has expertise in sustainable textile dyeing, offering 80% water usage reduction and 50% carbon footprint reduction. Drafting JV agreement, sites looked at, governments on board, tentative first production in June 2024.

Q: What's changed in the last couple of months in terms of end market and orders?

A: Meetings with major customers show market improving, inventory levels down, expecting more orders from key customers. Forecast from first 2 customers shows order projection for whole year slightly more than last year.

Q: Tax rate at 38% this quarter, can you unpack?

A: Tax rate related to losses in Hong Kong subsidiary. Jordanian taxes can't be offset by losses in Hong Kong and U.S. subsidiaries; working on ways to lower effective tax rate by shifting income and controlling expenses in other subsidiaries.