Chinese Online Retailer Facing Rough Weather – E Commerce China Dangdang Inc (ADR) (NYSE:DANG)


Dallas, Texas 09/05/2013 (Financialstrend) – The Chinese online retailer “E Commerce China Dangdang Inc” (ADR) (NYSE:DANG) has been facing turbulent times on the browsers post its 2Q2013 results on August 16. Its share prices have plunged almost 32% since then, from 52-week high of $11.7 to its current valuation of $7.86 on September 4, 2013. On the contrary, in the run up to its August 16,earnings call, DANG share prices had seen a steady appreciation. It rose to 207 % from 52-week low of $3.8 in May 2013 to $11.7.

What spooked the markets?

In spite of the thumbs down from the market, in actual terms, Dang has delivered a solid 2Q performance: 35% increase in net new customers and a 28% increase of its total active customer base. Its revenue was up 24%. Its net loss has narrowed to 4.3% of its total revenues and its gross margin has inched up to 17.1%. These numbers are an improvement on DANG YOY comparisons and also beat the pre-earnings consensus analyst expectations. Another healthy indicator of DANG robustness is the178% increase in its gross merchant value in comparison to 2012. In the words of Peggy Yu Yu, Dangdang’s Executive Chairwoman “2QFY2013 marked our best bottom line performance since the third quarter of 2011”. DANG 2Q performance looks even more credible, since the Chinese economy has experienced a slowdown over the past couple of quarters.

Is it going to turn around?

In spite of the robust financial fundamentals, investors have elected to bail out of DANG at this juncture. Incidentally, JPMorgan Chase also downgraded DANG from neutral last week. Some of the negative sentiments playing on the investor minds are the better performance of some of DANG competition like – Vipshop and LightIn The Box – which have managed to grow their customer base at a faster rate and have demonstrated better margins.  DANG management have given a strong positive guidance for rest of 2013 and DANG shares are expected to regain lost ground by the end of this year.