Release Date: June 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jerash Holdings (US) Inc (JRSH, Financial) is experiencing a tangible increase in purchase orders from long-term customers.
- The company is receiving new business from high-profile global brands through its joint venture with Busana.
- Jerash Holdings (US) Inc (JRSH) has successfully identified alternative sources of raw materials from Turkey and Egypt, mitigating logistic costs.
- The company has a strong cash position with $14 million in cash and restricted cash and $36.1 million in net working capital.
- Jerash Holdings (US) Inc (JRSH) projects a revenue increase of 14% to 15% for the fiscal first quarter of 2025 and 15% to 18% for the full year.
Negative Points
- Supply chain disruptions due to the Red Sea crisis have delayed production and impacted financial performance.
- Gross margin decreased significantly due to higher ocean freight and transportation costs.
- Operating expenses increased to $4.5 million in the fiscal 2024 fourth quarter compared to $4.3 million in the same quarter last year.
- Net loss for the fiscal 2024 fourth quarter was $3.1 million, compared to a net loss of $2.0 million in the same period last year.
- The company faces pricing pressure from customers and competitive market conditions, impacting its ability to raise prices and improve margins.
Q & A Highlights
Q: How much of the sales ramp is due to delayed orders versus new customers and legacy customers ramping back up? Is this a sign that your customers, like Timberland or VF Corp, are feeling better and starting to restock shelves?
A: The Busana joint venture is projected to bring in $6 million to $8 million in orders. We are taking orders from new customers like Hugo Boss, Macy's, Dillard's, and Brooks Brothers. Legacy customers like VF Corp are expected to increase orders by about 8%. New Balance's orders are expected to remain stable, while Hugo Boss is projected to increase by 17%. Overall, we anticipate double-digit growth in 2025, especially in the first two quarters. (Gilbert Lee, CFO; Eric Tang, Executive Director)
Q: The gross margin outlook for next year is flat year-over-year but much lower than past years. How much of this is due to permanent changes versus temporary disruptions?
A: We anticipate higher freight costs due to ongoing crises and competitive pricing pressures. New customers initially have lower margins due to development costs. We are being conservative in our margin projections. (Gilbert Lee, CFO)
Q: How is inflation affecting your costs and pricing? Are you able to maintain margins despite inflation?
A: Inflation is affecting costs, including labor and operating expenses. We are implementing cost-saving measures like solar energy systems and automated machines. However, competitive pricing pressures mean we may not be able to raise prices to maintain margins in the near term. (Gilbert Lee, CFO; Eric Tang, Executive Director)
Q: Are you able to raise prices to keep up with inflation, or are you losing margin because of it?
A: Overall, we are losing margin due to inflation. However, margins are increasing for certain customers like Hugo Boss. We are also improving margins for Timberland by sourcing fabrics from Egypt and Turkey. (Gilbert Lee, CFO; Eric Tang, Executive Director)
Q: Is your available capital sufficient for the next six to nine months?
A: We believe we will generate sufficient operating cash. We have no debt and anticipate improved profitability in 2025. We are not planning significant capital expenditures this fiscal year. (Gilbert Lee, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
