Dangdang net revenue in the second quarter of 316.1 million U.S. dollars, an increase of 31.3%

Absrtact: Dangdang today released its second-quarter financial results for the 2014 fiscal year ended June 30, 2014. The report showed that Dangdang net revenue for the second quarter was 1.9608 billion yuan (about 316.1 million U.S. dollars), an increase of 31.3%. Net profit is 28.8 million yuan

Dangdang today announced the unaudited results for the second quarter of the 2014 fiscal year ended June 30, 2014. The report showed that Dangdang net revenue for the second quarter was 1.9608 billion yuan (about 316.1 million U.S. dollars), an increase of 31.3%. Net profit was 28.8 million yuan (about 4.6 million U.S. dollars), compared with a net loss of 63.9 million yuan in the same period last year.

After the earnings release, Dangdang executive chairman Yu and financial reporting director Su Shanzhang (Susan Zhang) convened an analyst conference call to unscramble the earnings points and answer the analyst questions.

The following is the main content of this conference call question and answer session:

Evan Zhou, Credit Suisse analyst Yvan Zhou: The first question about Dangdang's Third-party platform business. What medium-term goals have you set for the business, such as growth targets for the next year or two. Dangdang's third-party platform business has been very strong in the past few quarters, with a growth rate of 80%, please talk about the future trend of the business. In addition, management can introduce the performance of different categories, which category growth fastest.

Yu: The short-term and medium-term growth targets we set for the third party platform business are 80%. As for each category of performance, the largest category is clothing, followed by baby supplies, consumer electronics products and food ranked third and fourth.

Yvan Zhou: Which category grows fastest?

Yu: The clothing category grows fastest. Clothing is the target category of Dangdang (destination category), we put more advertising fees and other resources in the target category to increase the exposure of this category at the mobile end and the Web end. Therefore, Dangdang target category of the fastest growth. The second is baby supplies, because Dangdang has a large number of young mothers and pregnant fans, they have a strong purchasing power for baby supplies, which led to the strong performance of the brand.

Yvan Zhou: The second question concerns the cost of performance. Dangdang's recent investment in the Warehousing logistics network has made it possible to deliver the next day and delivery on the morrow. What impact will this investment have on the cost of performance in the future of total Dangdang revenue? In addition, you also said that Dangdang in Tianjin Warehouse Center also began to operate, then the use of new storage centers will be the future Dangdang performance cost impact?

Yu: Dangdang Tianjin Warehousing Center area of about 100,000 square meters, will give Dangdang a large number of warehousing and distribution functions. Distribution and production center, as well as the largest FDC (forward distribution center), will facilitate our fast from different vendors to get inventory products, and then sent to Dangdang in different areas of storage centers. These warehousing centers help us to deliver parcels to the user more quickly and help Dangdang to receive all orders from a particular place.

In the long run, Tianjin Warehousing Center will become Dangdang Warehousing logistics Network "backbone", but also to help further enhance Dangdang Warehouse Center service level and operational efficiency. As for the performance cost, will gradually become a favorable factor for us, we believe that the expansion of Tianjin Storage Center has a limited impact on the revenue of Dangdang, mainly played a positive role.

As for Dangdang and a three-way logistics company cooperation, a tee can let Dangdang's logistics network more quickly cover different areas. With the three-way agreement on Dangdang is very advantageous, because Dangdang has both their own parcels, there are a large number of parcels from the third party, we do not think that cooperation will not be too much cost pressure. That is my answer to your question.

HSBC analyst Chi TSANG: I'd like to ask a few questions about the media business. Dangdang media business has recently begun to recover, the second quarter of this business revenue soared 43%, please management to talk about specific reasons.

Yu: Dangdang media business in the second quarter was very eye-catching, because we launched in the second quarter of three large-scale quarterly promotional activities. This April is "reading season", May ushered in the "Children's Day", we started in June the annual media product promotion. Therefore, we in the second quarter of the implementation of a strong promotional activities, a boost to the media product sales. I think it's really a hot season for media products.

Chi TSANG: Do you think this will happen next year or more is a special case.

Yu: This is just a special case for a quarter.

Chi TSANG: Second question about Dangdang's Third-party platform business. Can management elaborate on this business, such as expansion plans, how to achieve the 80% growth rate, and the growth of various categories, etc.

Yu: In the second quarter of this year, Dangdang "other" revenue of 80 million yuan, an increase of 26%, we now no longer collect shipping charges to third parties, and previously charged such fees. So, the Commission and advertising fees that we charge to businesses are growing fast. Given the 80% increase in revenue from third-party platforms, this suggests that we help vendors sell more products. I said in the statement, Dangdang in the application to join the Third-party platform for the selection of businesses is very strict, these businesses put forward a variety of requirements.

By using this carefully selected procedure, we want to ensure that businesses can quickly provide the products or services they sell to ensure that our users get good service. By helping them sell more goods, selling more to Dangdang media customers, and selling more goods to Dangdang's proprietary customers, this will be the main driver of revenue growth for third-party platforms. We will also select carefully the companies that apply to join the target category.

Oppenheimer analyst Aira Tie (Ella Ji): My first question has to do with the number of active users on the Dangdang. Dangdang Active users have been two quarters of a small decline in the chain, management can reveal the reason?

Yu: As you said, the number of active users did fall in the second quarter. I think this problem is related to many factors. Many of the old users of the department store new clothing and other categories are unfamiliar. We are trying to use more effective means to attract users to these new categories. I think Dangdang can make progress in this field in the future. But at the same time, we are gratified that the average expenditure on the existing users of Dangdang has increased, which has helped us achieve both revenue and GMV growth.

Aira Tie: The second question is related to Dangdang department store product sales. Sales of the business have recently fluctuated, such as sales growth in the quarter slightly below the previous quarter, and management is asked to talk about the issue. In addition, in the department store product sale, how many is by the existing book product user contribution, how many is the independent sale.

Yu: When it comes to the sales of department stores, we should look at the problem from the perspective of Dangdang's proprietary business sales and Third-party platform business sales. As far as users are concerned, they may have bought a cup, either through Dangdang's proprietary business or through a third-party platform. As for the department store itself, sales rose 54% in the second quarter, which is exactly what we expected. Sales growth of department stores has both the contribution of Dangdang's proprietary business and the contribution of Third-party platforms. In the purchase of Dangdang department stores, many of the users are from the media and book business, and others through our marketing and advertising activities attracted.