Omnialuo (GREY:OLOU)

In the second and the third quarters of 2011, we continued to adjust the sales strategy to expand the investment and management of the company-owned stores so as to strengthen the market control and promotion. In addition, we made efforts in upgrading the image of our stores by improving the quality of the products, which directly contributed to the increase of revenue. We also emphasized on improving our sales force by providing continuous internal training to our sales representatives. All the efforts we made resulted in the increase of sales revenue, and we will keep the adjustment in the fourth quarter.

GeoTeam Note: Fourth quarter 2010 vs 2009 EPS was nil vs. $(0.14) 

Sales revenue for the year ended December 31, 2010 was $8,486,153, compared with $9,349,878 (among which approximately $2.2 million was from selling the 2008 inventories) for the same-year period in 2009, representing a 9.24% decrease. We accumulated an unusually large amount of inventory as a result of our expansion in 2008 which we were not able to sell due to the economic recession. As part of our aggressive inventory reduction effort, we offered deep discounted prices to sell the 2008 inventories which generated approximately $2.2 million and contributed to our 2009 sales. In 2010, we did not make frequent large-scale promotions because of the economic recovery in the entire domestic consuming market.

Income from operations for the year ended December 31, 2010 was $607,418 compared to a loss of $5,794,023 in 2009. Net income for the year ended December 31, 2010 was $223,254 compared to a loss of $5,303,436 in 2009. In 2009, we extended significant restructuring efforts in removing non-performing stores, adjusting our sales network and disposing historical inventories. As a result of these efforts, we believe our operations have been restored to a relatively healthy condition. We are hopeful that our continued efforts in improving and expanding our operations in 2011 will yield positive results.

Our current target customers are “white-collar” “pink-collar” and “golden-collar” professional urban working females between the ages of 28 to 45.  The annual income of our targeted customers ranges from $3,700 to $45,000.

In China, professional women are generally divided into three categories, “white-collar”, “pink-collar” and “golden-collar”. Pink-collar workers usually work in high-paying industries such as finance, consulting, legal services, or assume senior positions in government agencies. White collar workers usually work in junior or middle positions in an office environment. This includes positions such as secretaries, administrators, operators, IT staff, accounting staff and junior saleswomen. Usually, there is no strict dress code for “white-collar” professionals in the office. “White-collar” professionals can wear “relaxed” business style apparel instead of business suits in their workplaces. In this sense, our fashionable business casual can be worn by “white-collar” females both in and out of the work environment. Currently, “golden-collar” generally refers to the class of professionals that hold executive positions in corporations or operate their own businesses. “Golden-collar” females usually like to wear luxury brands. Our brands will eventually target “golden-collar” females as well.

Prior to 2009, we targeted professional urban working females between the ages of 25 to 35.  Since 2009, we have started to expand our target demographic to 35 to 45 year-old females by offering premium and mature styles of apparel. Since 2007, our designs in the spring/summer wear collection have been gradually reflecting these styles. Tapping into the 35 to 45 year-old female market is also intended to develop a large group of loyal customers as well as increase revenues and profits.

We believe that our currently available working capital should be adequate to sustain our operations at our current levels. Thereafter, based on our current operating plan and our available cash and cash equivalents, we expect that we will need to obtain additional financing in the future through the sale of equity securities, private placements, and loans to fund our cash needs and continue our presently planned operations.

We are coding women's apparel player Omnialuo Inc as a GeoSpecial on the Radar. 2009 and 2008 were tough years for this company. A failed aggressive expansion strategy that began in 2008 resulted in the company not achieving its revenue and profit objectives, culminating in a significant loss of $0.23 EPS in 2009.

While certainly not a slam dunk, we feel OLOU is worth tracking. The stock has been running over the last couple days despite reporting a huge fourth quarter loss of $0.14 and just eclipsed its book value per share of $0.39. 

Please note that: "Sales revenue for the year ended December 31, 2009 was $9,349,878 (among which $2.2 million was from selling the previous year’s inventories)." We are not sure if this occurred in the fourth quarter or if it was spread out over the entire year. The company reported 2009 fourth quarter revenues of $2.9 million vs. $627 thousand in the 2008 fourth quarter.

Is there a silver lining?

The company seems to think so. It claims to have closed all of its underperforming stores, leaving it with what it believes will lead to profitability in 2010.

"One of our growth strategies is expanding store numbers whilst enlarging sales revenue. Since our formation in the third quarter of 2006, we have continued to open new stores. By December 31, 2007, we had opened 184 stores. In 2008, under the make good escrow provisions we were more aggressive in producing more products and opening new stores, by the end of 2008 we had already had 208 stores. However, some of the stores were not well-perfomed.

In 2009, one of the main tasks in front of us was to cut the number of non-performing stores. As such, we closed 100 stores through the year. As of December 31, 2009, we had 108 stores altogether.

We believe that the stores we have now are all well-performing. We will be more cautious in opening new stores in 2010. We plan our store number to be 150 at the end of 2010 in order to keep pace with our business growth speed."

2009 was a challenging year for the management, especially in taking decisive actions in enhancing the continuing operation of the company with emphasis on maintaining the cash flow with measures such as disposing slow moving inventories at deep discounts. With most of the non-performing stores already closed down in 2009, the management has planned for strategic expansion of the operation on both a geographical and product level for 2010. Restructuring of the operation is expected to continue during 2010 with the sole objective of achieving profits and return again for shareholders.

Warrants do exist:

"We currently have issued outstanding warrants to purchase up to 5,704,752 shares of our common stock, of which

• Warrants for up to 5,412,000 shares may be exercised at $1.5625 per share at any time or from time to time until October 9, 2012, including warrants for 492,000 shares which may be exercised on a cashless exercise basis, and
  
• Warrants for up to 292,752 shares may be exercised at $1.25 per share at any time or from time to time for a two-year period commencing December 17, 2007.

OmniaLuo reported revenue of approximately $627,364 for the fourth quarter ended December 31, 2008, compared to approximately $2.7 million for the quarter ended December 31, 2007 -- a 76% decrease. "The revenue decrease in the quarter ended December 31, 2009 is almost entirely attributable to the impact of the global economic recession resulting in the marked decrease in Chinese consumer spending, particularly during that period."