China Jo-Jo Drugstores Reports Third Quarter 2018 Financial Results

HANGZHOU, China, Feb. 14, 2018

Mr. Lei Liu, Chief Executive Officer and Chairman of Jo-Jo Drugstores, Inc., commented, "We are pleased to announce our strong retail sales growth in our most recent financial results. We will continue to pursue retail drugstore growth in Hangzhou as we continue to build strong relationships with our customers, suppliers, and other business partners in one of the highest income urban centers in China. We also remain optimistic regarding our ongoing transformation of our e-commerce business following the industry-wide suspension of OTC drug sales on e-commerce platforms in fiscal year 2017, as our efforts in reorganizing our product line shows further improvements."   

Mr. Liu continued, "In the coming months we are strategically positioned to take advantage of the improving business environment in Hangzhou as the healthcare market continues to grow."  

Third Quarter of Fiscal 2018 Financial Highlights

	For the Three Months Ended December 31,
($ millions, except per share data)		2017 ARIVA.DE Börsen-Geflüster Kurse China Jo-Jo Drugstores -   0,00%		2016		% Change
Revenue		26.81		20.61		30.1%
Retail drugstores		18.29		14.12		29.5%
Online pharmacy		3.40		3.44		(1.2)%
Wholesale		5.13		3.05		68.1%
Gross profit		5.57		4.18		33.2%
Gross margin		20.8%		20.3%		0.5%
Operating income loss		(2.19)		(0.84)		(160.9)%
Operating margin		(8.2)%		(4.1)%		(4.1)%
Net loss attributable to Jo-Jo Drugstores		(1.63)		(0.83)		(94.8)%
Loss per share		(0.07)		(0.04)		(75.0)%

• Revenues increased by 30.1% to $26.81 million for the three months ended December 31, 2017 from $20.61 million for the same period of last year, mainly due to the increase in retail drugstores and wholesale business, partially offset by the decrease in online pharmacy business.
• Gross profit increased by 33.2% to $5.57 million for the three months ended December 31, 2017 from $4.18 million for the same period of last year. Gross margin increased by 0.5 percentage points to 20.8% from 20.3% for the same period of last year.
• Net loss attributable to Jo-Jo Drugstores increased by 94.8% to $1.63 million, or $0.07 per basic and diluted share, for the three months ended December 31, 2017 from $0.83 million, or $0.04 per basic and diluted share, for the same period of last year.

Three Months Ended December 31, 2017 Financial Results

Revenue

Revenue for the three months ended December 31, 2017 increased by $6.20 million, or 30.1%, to $26.81 million from $20.61 million for the same period of last year. The increase in revenue was primarily due to the increase in retail drugstores and wholesale business, partially offset by the decrease in online pharmacy business.

Revenue from the retail drugstores segment increased by $4.17 million, or 29.5%, to $18.29 million for the three months ended December 31, 2017 from $14.12 million for the same period of last year. The increase was primarily due to the increased number of stores, more choices of commodity at lower prices through frequent price negotiation with suppliers, brand-name health product sales campaign in cooperation with brand name suppliers, and value-added customer services such as chronic disease monitoring.

Revenue from the online pharmacy segment decreased by $0.04 million, or 1.2%, to $3.40 million for the three months ended December 31, 2017 from $3.44 million for the same period of last year. The decrease was mainly caused by a decline in our sales via e-commerce platforms. The decline in sales was due to the suspension of OTC drug sales on e-commerce platforms in the second quarter of fiscal year 2017 by the CFDA. The Company is adding more non-medical health products such as nutritional supplements into our sales menu to counteract the decline in sales of OTC drug category via e-commerce platforms.

Revenue from the wholesale segment increased by $2.08 million, or 68.1%, to $5.13 million for the three months ended December 31, 2017 from $3.05 million for the same period of last year. The increase was primarily a result of the Company's ability to resell certain products, which our retail stores made large orders on, to other vendors at competitive prices.

Gross profit and gross margin

Total cost of goods sold increased by $4.81 million, or 29.3%, to $21.24 million for the three months ended December 31, 2017 from $16.43 million for the same period of last year. Gross profit increased by $1.39 million, or 33.2%, to $5.57 million for the three months ended December 31, 2017 from $4.18 million for the same period of last year. Overall gross margin increased by 0.5 percentage points to 20.8% for the three months ended December 31, 2017, compared to 20.3% for the same period of last year.

Gross margins for retail drugstores, online pharmacy and wholesale were 25.2%, 7.7%, and 13.8%, respectively, for the three months ended December 31, 2017. This compared to gross margins for retail drugstores, online pharmacy and wholesale of 25.7%, 10.4%, and 6.5%, respectively, for the same period of last year.

Operating income (loss)

Sales and marketing expenses increased by $1.45 million, or 40.6%, to $5.02 million for the three months ended December 31, 2017 from $3.57 million for the same period of last year, primarily due to commissions payable to wholesale contractors, rent and expenditures for new retail stores, and the reclassification of certain staff salaries to selling and marketing expenses in the wholesale business.

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