Item 2.02
Results
of Operations and Financial Condition
On
October 10, 2007, we, NextMart, Inc., filed a Form 8K to disclose our change in
fiscal year end from March 31 to September 30. We also disclosed that we
expected a significant loss for the transition period ended September 30, 2007
due
the rationalization of certain non-core intangible assets and
adjustments to goodwill relating to past acquisitions.
In
the same 8K, we stated that we
would soon provide an
update on our business strategy for the revised fiscal year.
This 8K provides that update by outlining our business strategy and initiatives
for the revised fiscal year, beginning October 1, 2007.
About NextMarts
Current Operations
NextMart is a China based
womens apparel enterprise with operations in fashion design, brand and apparel
production management, and international apparel sales. The company helps
foreign apparel brands outsource their design and production processes to
China. It generates revenue by earning a commission on wholesale production
orders.
NextMart is currently
expanding its operations to include direct apparel sales to urban professional
women throughout Mainland China. The Company aims to become Chinas leading
direct sales enterprise for womens fashion and apparel.
NextMarts Enhanced Direct Sales Business Strategy for Fiscal 2008
In 2008, NextMarts business
strategy will be to enhance its focus on developing an integrated
online-offline direct sales platform for its womens apparel business. The key
initiatives of this direct sales strategy include:
(1) Expanding the companys
sales channels to include offline mail-order catalogues and TV-shopping;
(2)
Launching sales of the Companys private label apparel brand
Peeress
; and (3) Partnering with offline
shopping malls in China to create online shopping sites that will carry
numerous leading domestic/global fashion brands.
NextMarts
rationale for pursuing an integrated direct sales strategy is two-fold. First,
the Company can achieve higher profit margins by selling womens apparel
directly to consumers rather than selling through high cost, inefficient
third-party distribution channels. Second, NextMart already has the operational
assets and marketing partnerships necessary to realize its direct sales vision.
The company has mature fashion design and apparel production
operations, with a database of several thousand womens clothing designs. It
has strategic marketing and sales partnerships with Her Village, Chinas
leading multimedia womens community with 49 million visitors per month (most
of whom are urban females), and Shanghai Guifuren Garment, a well-known women's
apparel chain with 49 retail points in China.
NextMart
plans to execute its direct sales strategy by reorganizing its operations into
the following three enhanced business units:
(1)
Integrated Direct Sales.
This division will focus on selling womens apparel to
urban female consumers through three online and offline direct sales channels:
(1) Digital E-catalogues/E-Magazines; (2) Print Mail-Order Catalogues; and (3)
TV shopping programs.
For
(1) Digital E-catalogues/E-Magazines, the company will leverage its existing
marketing and sales partnership with Her Village, Chinas largest multimedia
womens community with 49 million visitors per month. This marketing/sales
partnership gives NextMart marketing space within Her Villages e-magazine
properties in exchange for a 10% commission on sales paid to Her Village. In
addition to selling product through Her Villages media products, NextMart is
developing its own
NextMart E-Shopping
Catalogues
to sell apparel to Her Villages online consumer
community.
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For (2)
Print Mail-Order Catalogues and (3) TV-Shopping, the Company intends to partner
with leading mail-order catalogue and TV-shopping partners in Mainland China.
The Company is currently in discussions with partners for strategic partnership
or acquisition. Strategic partnerships would entail NextMart providing low-cost
womens wear to its partners in exchange for ongoing marketing and sales access
to Chinese female customers. The parties would split revenue according to a
pre-negotiated rate.
(2)
Private Labels.
This division will leverage our
existing fashion design and apparel production capabilities to launch private
labels for sale in China and abroad. Our first brand,
Peeress
,
targets mature professional women in Chinas leading cities.
Peeress
already has several thousand womens apparel
designs, which include dresses, business suits, evening wear and lingerie.
In 2008, we plan to launch sales of
Peeress
by leveraging our own direct sales
network (explained above) and partnering with retail chains in Mainland China.
Internationally,
we will work with our current US business partners to sell product in up to 600
retail sales points. Domestically, we plan to sell product through two leading
Chinese retail chains: Shanghai Guifuren Garment Co., a leading womens apparel
chain with 49 stores in Mainland China, and Shanghai 1
st
Department
stores, one of Chinas leading department store chains. Both partnerships have
already been secured.
(3) E-Commerce
Partnerships.
This
division plans to partner with leading
offline shopping malls to
create e-commerce sites that sell women's clothing of several well-known
domestic and international fashion brands. The division will provide e-commerce
and technical services in exchange for a commission on e-commerce
sales. The division will focus mainly on large-scale
projects in order to best utilize its resources and capture scalable business
opportunities.
We believe that
our enhanced focus of building an integrated direct sales platform for our
womens apparel business will position us for strong growth in fiscal 2008. As
such, we have decided to
maintain our earnings guidance of between $4
to 6 million USD for the 2008 fiscal year beginning October 1, 2007.
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