Dangdang executives interpret second quarter results

Summary: Check the latest quotes Beijing time, August 15 Evening News, Dangdang (Nyse:dang) today released the end of the 2013 fiscal year ended June 30, the second quarter without the audit results. Earnings showed that the total net operating income in the second quarter of 2013 was RMB 1.4935 billion (243.3 million

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Beijing time August 15 Evening News, Dangdang (Nyse:dang) today released the end of the 2013 fiscal year ended June 30, the second quarter of the unaudited earnings. Earnings showed that the total net operating income in the second quarter of 2013 was RMB 1.4935 billion (USD 243.3 million), an increase of 24% per cent, and a net loss of 63.9 million yuan (10.4 million U.S. dollars), down 48% per cent.

After the earnings release, executive chairman Yu and CFO Shang convened an analyst conference call to unscramble the earnings points and answer questions from analysts.

The following is the main part of the conference call question:

Gee Sung, an analyst at HSBC, said the company's two-quarter marketing costs have risen sharply year-on-year, which means the company will increase its investment in adding users? Or to increase the investment in clothing? How will this trend develop over the next few quarters?

Shang: Yes, when the two quarter did increase the investment in the clothing and fashion business branding, because these two categories of profit margins are relatively high, so the investment is also worthwhile, we will be based on seasonal investment. The point to be stressed is that the company's two-quarter user access costs are falling.

Gee Sung, an analyst at HSBC, said: Could you introduce the company's ebook strategy, which investors believe will eat into the audiovisual business.

Yu: When the number of E-books is added to the platform transaction, we are also collecting data on this. At present, the sales of e-books are relatively small, there is no evidence of encroachment on the audio-visual business. We find that users who are willing to pay to download e-books often buy paper books as well. Unlike in Europe and the United States, China's E-book market is in its infancy and is gradually growing. The company mainly considers how to increase the supply of e-books, allowing more users to experience browsing e-books on mobile phones or tablets.

Shang: E-book downloads have a relatively large increase, although the contribution to our revenue is small, but can provide a lot of cross-selling opportunities. Users who download e-books also buy paper books and other products.

Merrill Lynch analyst Benny Wang: first question, could you tell me about the number of orders to be traded on the market platform? How many orders are there in the third party? Second, I note that the company's sales ratio fell from the 10%,11% of the first quarter to 8% of the two quarter, why? How much is the Commission, logistics and advertising? Will this rate change in the future?

Shang: First answer your second question, the two quarter of our advertising investment in this aspect of the impact of the proportion of sales is declining, this is actually seasonal, there will be fluctuations in the future. In addition, when the market platform to deal with the number of orders to grow quickly, we do not have specific statistics, but from the platform business revenue to the proportion of total revenue is more than the proportion of proprietary business revenue.

Merrill Lynch analyst Benny Wang: There is also a question about logistics, previously mentioned that the company shortened inventory turnover days, refers to the two quarter?

Shang: We've been trying to improve inventory management and personnel efficiency over the last few quarters, so we see a steady improvement in our inventory turnover. In recent quarters, the number of days of inventory turnover has been reduced by 40 days, while the chain has decreased by 15 days.

Yu: When technicians study how to improve the efficiency of logistics, so although China's labor costs are improving, the company's logistics costs and its share in the company's revenue is declining, in addition, because of the increase in technical capabilities, the company's procurement costs have improved.

Merrill Lynch analyst Benny Wang: when each single logistics cost from 12.4 yuan in the first quarter to two quarter of 11.9 yuan, the company does not believe that each single logistics cost will eventually stabilize at 10-11 yuan? Is there any room for improvement?

Shang: You can change the point of view, when every single revenue in the two quarter to 150 yuan, the year-on-year growth of 24%. The ratio of revenue to cost will continue to improve.

Oppenheimer analyst Andy Yang Andy Yeung: What is the reason for every single revenue growth? What are the future trends?

Yu: This has to do with the categories we expand our sales products. The price of a book is only 20 yuan to 30 yuan, and a piece of clothing can sell to 120 yuan; so by operating clothing and fashion business, our order value is increasing. In addition, this is also related to the season, we are very clear about this.

Oppenheimer analyst Andy Yang (Andy Yeung): The company's previous marketing investment is not big, and the two quarter has a relatively substantial growth, this is why? Will the future companies continue to increase marketing input? Will the competitor adopt a similar strategy?

Yu: The increase in marketing costs is related to the company's procurement and expansion of sales categories. When the previous major sales books, and now is trying to become a comprehensive online mall, so we added such as clothing, mother and child products to change when the image in people's minds, to tell users that "we are not five years ago when the". The increase in marketing investment is related to our brand promotion.

Philip Wan, analyst Philippe Wan Morgan Stanley: Ask the company to forecast the profitability of the company and how to achieve it?

Shang: When the profit margins for each category of sales in the two quarter improved. The book and audio business has a good profit margin, which can affect profitability when the revenue from audio and video stores but including third-party platforms rose 91% from the same period of 2012. The increase in profitability is a long-term goal for the company.

Philip Wan, analyst Philippe Wan Morgan Stanley: Can you tell me about the partnership with the cat? How to convert a company's user in the cat to be your own user?

Yu: When the flagship store was opened at the end of last year, the store's revenues accounted for only a fraction of the company's total revenue. When there is a big difference between the client and the cat, when the user is mainly from the first and second tier cities, while the cat users are usually young people in smaller cities, so opening a shop on the day cat can make up for the lack of marketing and increase the number of customers from these areas.

Shang: The data we monitor show that the user from the cat has a high order conversion rate, but the value of each single is lower.

Yu: The user from the cat has a lower value per order than when he or she is a user.

Philip Wan, Morgan Stanley analyst Philippe Wan: which platform has a higher profit margin from the revenue that is being contributed by the user and the user from the cat?

Shang: This doesn't count, but given the cost of getting users on the day cat, we think it's a very efficient way to get users from the sky cat.

Yu: The profit margin of a dealer is usually based on the type of sales, not the user type.

Macquarie analyst Shao (Jiong Shao): Can you tell me about the percentage of users who use when they shop on the mobile side? In addition, micro-letter 5.0 added to the search function, the user can take the cover of the book, and then when the purchase, the company has not to pay for the micro-letter, or the micro-letter to the time when the payment fee?

Shang: Yes, in the two quarter, the company's mobile end of the rapid growth, accounting for the company's total flow of 40%; Although the conversion rate is still relatively low, but the two quarter from the mobile end of the number of orders from the year-on-year growth of nearly three times times. In addition, when and micro-letters there is currently no commercial cooperation.

Yu: We didn't pay anyone any fees.

Macquarie analyst Shao (Jiong Shao): After the launch of the micro-letter, the company from the micro-letter traffic has increased significantly? In addition, does the mobile-end order contribute more than 10% to the company's revenue?

Yu: It is too early to judge whether the flow of traffic from micro-letters or microblogs is clearly growing, and they are in the early stages of commercialization. The contribution of the mobile-end order to the company's revenue we have no figures available at this time.

Macquarie analyst Shao (Jiong Shao): The second question about limited-time snapping, I remember when it came to introducing daily specials on a quarterly basis, could you tell me about this?

Yu: The limited-time snapping business did well in the two quarter, mainly for the clothing and fashion category, which serves the high-end users that the company has accumulated over the years. Limited-period snapping of goods is mainly from third-party sellers of the past season goods, the discount is relatively large. At present the value of these two categories of goods is about half of the value of the company. In this category of clothing, limited snapping has contributed a large portion of the revenue.

Shang: I took a look at the data released by another company that did a limited-time snapping, when the two-quarter performance was much better.

Macquarie analyst Shao (Jiong Shao): I just mentioned that in the category of clothing, limited buying contributed a large part of the revenue, can I understand that over 20%?

Yu: There is no data available in this regard.

Shang: This business has just been officially released in the middle of the quarter, so there is no data.

Alex Yao, analyst at JPMorgan, Alix Lian: Can you tell me about the company's three major jobs over the next year? In addition, the company's mobile end users to obtain costs and PC-side users to obtain the cost of which is higher? What is the strategy for companies to acquire mobile-end users?

Yu: First of all, we will continue to expand sales of commodity categories, improve the target categories, to improve the sales of department stores to contribute; the company's market platform and proprietary business sales in the two quarter year-on-year growth of 86%, of which platform sales contribute more, year-on-year growth of 178%; we will continue to uphold this strategy, Make it a comprehensive online shopping mall. Second, the company will improve its technical capabilities to improve operational efficiency, increase sales, and increase cross sales through data statistics, allowing users to buy more goods when they are in the category. Finally, the layout of our mobile end will focus first on developing users ' shopping habits when they use mobile apps. We're not investing in mobile-end customer access at the moment because users haven't yet formed the habit of shopping on the mobile side, and once that trend has been made, we'll invest more.

Shang: At present the company mobile end user acquisition cost is much lower than the PC end user acquisition cost. In addition, Peggy (Yu), I want to improve the company's financial situation is my main task, of course, this requires your support.

Yu: You're right, June (Shang), our financial situation has improved markedly and will continue to improve in the next few quarters.

Alex Yao, analyst at JPMorgan, Alix Lian: What is the difference in the way users use the PC-side and mobile-side shopping habits? How to train customers to shop on the mobile side of the habit?

Yu: First of all, with different environments, PC-side users may be in the office, usually with a large chunk of time, while mobile-end users may take the subway or queue from ATM to get money, time is usually more fragmented when the design of mobile applications consider this different. We talked about the habit of developing customers to shop on the mobile side also includes client-side design to be different from the PC, to meet the needs of mobile shopping.

Thomas Chong, international research analyst at BOC: when the revenue from audiovisual and department stores, including Third-party platforms, increased by 91% in the second quarter of 2013 over the same period in 2012, and the total number of corporate platform business transactions rose by 178%, could you introduce the difference?

Shang: This is mainly because of the two quarter of a large number of seasonal promotions, Third-party sellers benefited a lot, compared to the two-quarter advertising investment is small.

Yu: Compared to the day cat and other large electric dealers, when the platform business is relatively late, the scale is also smaller, so in order to attract third-party sellers we need to let them gain benefits.

Thomas Chong, international research analyst at BOC: Can you give me a breakdown of the company's two-quarter revenue, from commission, advertising and store-rent ratios?

Shang: Advertising revenue less than One-third, another two-thirds by commission and shop rental contributions.

Days Hao Capital analyst (Tian Hou): This year's electricity quotient competition feeling not in previous years fierce, this is because the whole industry towards rationality? Is this situation temporary or will it continue for a long time?

Yu: I think the electric business industry is more rational than it was 1.5 years ago, and one of the main reasons may be that some electric companies have spent the first 2010 years and 2011 of financing and failed to make new financing to gain greater market share. At present, when the price is very competitive, because the low price strategy is the company always uphold, this is not affected by competitor strategy.

Days Hao Capital analyst (Tian Hou): The second question, when previously with the online pharmacy happy People's Congress to sell drugs, this is the company's intention to increase the new category?

Yu: Drug business has just started, still in the pilot phase, there is no more to introduce. In addition, the company's price competitiveness stems from operational efficiency, which depends on when logistics costs and sales general management expenditure control.

Jaffray Securities Analyst: The first question about the second quarter of new users of the flow conversion rate, can you introduce the two quarter of the month of the monthly number of the chain? The second question is, what is the company's future pricing strategy?

Shang: The company's flow rate of conversion in the two quarter and year-on-year growth, year-on-year growth of 30%. The second quarter of each single revenue of 150 yuan, each user contribution revenue of 293 yuan.

Barclays Capital analyst Alicia Jappe (Alicia Yap): What is the total download volume of the company's mobile clients? In addition to the introduction that the company has 40% of traffic from the mobile end, then how many from the When the app, how much from the WAP page?

Shang: The current traffic from app and WAP pages is almost the same, but the flow from the app contributes most of the orders.

Barclays Capital analyst Alicia Jappe (Alicia Yap): Does each single average consumption differ between the mobile end and the PC side?

Shang: At present the mobile end of the average consumption of less than the PC side, mainly because the mobile end users are scattered time in shopping.

Alicia Yap, Barclays Capital analyst, Alicia Jappe: Does the company's forecasts for third-quarter market transactions include the revenue generated by a timed snapping spree? Are the figures for the second quarter included?

Shang: Yes, all of them.

Analyst of Credit Suisse Securities: How many third party sellers are there when the market is present? How has the growth in recent quarters been? Besides, how many of these Third-party sellers are brand and how many are distributors?

Yu: When there are thousands of sellers in the current partnership, these sellers operate various categories of goods. When the market platform for both brands and distributors, some brands have opened flagship stores. And when the cooperative business has some platform management experience, they are more experienced in the completion of orders and delivery.

Kairui Securities analyst Lin Long (Long Lin): Can you tell me about the trend of commission change when the market platform? What is the commission ratio for major categories of goods? In addition, can you analyse the competitive dynamics of the electric business sector?

Yu: When the Commission on the platform is not the same as the seller, for Low-margin products, such as mobile phones, we charge a minimum commission rate of 0.5%, and for clothing, bags and fashion category, we charge a commission ratio of more than 10%, our Commission ratio in line with market conditions. As for competition, the user base of the electric quotient is different, when the user group is high end, their education level and paying ability is high, mainly distributes in China's biggest 20 cities. The positioning of the company determines the category of goods we provide, so it is not the competition that determines what kind of goods the electric dealer sells, but the user group decides.

Kairui Securities analyst Lin Long (Long Lin): What is the current average commission ratio for the third party platform in the electric business sector?

Yu: This is related to commodity categories, such as clothing sales, our commission ratio will be much lower than the department store, when the commission ratio of other third-party platforms will be compared to reasonable set their own Commission ratio.

Kairui Securities analyst Lin Long (Long Lin): There is a question, how many third-party sellers currently use the logistics services?

Shang: At present, half of the sellers use when the goods to the payment service. In addition, we have just begun to provide sellers with packaging and warehousing services, this part of the contribution of small revenue, but the future may become a new growth point.

Maria Xin, Huaxing Capital analyst: The first question, what is the future of the Chinese book market in the next two years? When is the growth potential of the book business?

Yu: China's audiovisual and book markets will grow at a low rate, with sales of books and audio in the two quarter up 22% per cent as the leading position in the audiovisual market is maintained. Given the slow growth of the audiovisual and book markets, the future sales performance should be better when it is not easy to achieve such growth.

Shang: The volume of audio and book sales for some of the company's competitors has fallen sharply, compared with the dramatic increase in the time.

Hua Xing Capital analyst Maria Xin: How will the cost of new users in the second half of the company change? What is the marketing strategy for the second half of the year?

Shang: The cost of acquiring new users of books and audiovisual goods has fallen in the two quarter; with the increase in sales of apparel and fashion goods, we are willing to invest more in high-margin business, which, of course, is not the same as the seasonality.

Yu: In the two quarter when the brand and television advertising investment is very large, these are to promote the company's clothing and fashion products. (Tian Heng)