LAS VEGAS, NV, Aug. 14, 2018 (GLOBE NEWSWIRE) -- Her Imports (OTCQB: HHER), a leading retailer of human hair extensions and related beauty products, today reported its financial results for the second quarter and first six months ended June 30, 2018. The Company generated record revenue of $3.1 million and $6.4 million during each period respectively.
Barry Hall, Chief Executive Officer of Her Imports, commented, “During the first half of 2018, we experienced the same challenges that retailers across the U.S. have been challenged with. Anticipating this slow down late in 2017 we closed 12 retail locations last year and another two this quarter. Simultaneously, we continued to focus on online sales which increased by 30.8% when compared to the second quarter of 2017. Additionally, we broadened our marketing channels to include Amazon.comTM as a channel for our OSIworks product line.” Hall continued, “In addition to the studio closings we have re-examined our marketing tactics and continue to shift marketing dollars to areas where we believe we will obtain the greatest return. We are also refining our text marketing programs to more cost effectively convert customers. Included in this approach are lower negotiated rates and more specific customer target marketing. Looking forward, we plan to leverage social media and social influencers in a manner not utilized heretofore.”
Financial Results for the Three Months Ended June 30, 2018:
Revenue totaled $3.1 million for the second quarter 2018, as compared to $4.6 million, a decrease of 32.8%, from the second quarter 2017. The year-over-year decrease of 52.57% in consultation studio revenue was primarily due to the closing of 14 studios. Online sales increased by 30.8% year-over-year. This is primarily due to the launch of new mobile marketing programs as well as the launch of our new cloud-based eCommerce platform.
Cost of products sold for the three months ended June 30, 2018 were $1.8 million, a decrease of 32.9% as compared to cost of products sold of $2.8 million for the three months ended June 30, 2017. Gross margin was up slightly to 40.5% for the second quarter 2018, as compared with 40.3% for the second quarter 2017.
Operating expenses consist of royalty expense, selling expense and general and administrative expense. Total operating expenses for the three months ended June 30, 2018 was $1.4 million, down 22.1% as compared to the three months ended June 30, 2017. Selling expense decreased $455,579 or 29.9% for the three months ended June 30, 2018 when compared to the same 2017 period. This decrease in selling expense was attributable to a decrease in consultation studio operating expenses due to the closing of 12 locations. General and administrative expenses increased by $53,046 or 17.9% for the three months ended June 30, 2018 when compared to the same period last year. This increase was primarily due to non-cash compensation, Board of Directors expenses, and legal fees.
The above resulted in loss from operations of $162,681 for the three months ended June 30, 2018 compared to income from operations of $40,444 for the three months ended June 30, 2017.
During the quarter we recognized a non-cash charge of $3,397,500 based on the estimated value of 4,500,000 shares issued to a related party in exchange for the cancellation of the Media Investor Purchase Agreement (“MIP Agreement”) that the Company entered into in 2014. Contrary to established practice, the MIP Agreement did not contain any adjustments for reverse splits. The MIP Agreement permitted the related party, which acquired its rights in 2017, to purchase up to 9,500,000 at $0.05 per share. The Company engaged in two reverse stock splits which did not reduce the 9,500,000 shares or increase the exercise price which created an unfair conflict for the Company.
Net loss attributable to the Company totaled $3,528,944 during the second quarter of 2018 as compared to net income of $20,336 for the same period the prior year. Net loss to common shareholders totaled $3,708,944, for the second quarter 2018, compared with net loss of $159,664, for the second quarter 2017. The Company paid $180,000 in preferred stock dividends during the three months ended June 30, 2018.
Financial Results for the Six Months Ended June 30, 2018:
Revenue totaled $6.4 million for the six months ended June 30, 2018, as compared to $9.0 million, a decrease of 28.6%, from the six months ended June 30, 2017. Consultation studio revenue decreased 41.0% year-over-year. During the six months ended June 30, 2018 there were 23 consultation studios open compared to 35 consultation studios open for the same period in 2017. Online sales increased by 2.6% year-over-year.
Cost of products sold for the six months ended June 30, 2018 were $3.5 million, a decrease of 29.0% as compared to cost of products sold of $4.9 million for the six months ended June 30, 2017. Gross margin was 45.8% for the six months ended June 30, 2018, as compared with 45.1% for the six months ended June 30, 2017.
Total operating expenses for the six months ended June 30, 2018 was $3.0 million, representing a 27.4% or $423,701 decrease from $3.4 million for the six months ended June 30, 2017. Selling expense decreased $504,731 or 18.1% for the six months ended June 30, 2018 when compared to the same 2017 period. This decrease in selling expense was attributable to an closings of consultation studios and mall kiosks. General and administrative expenses increased by $77,475 or 12.5% for the six months ended June 30, 2018 when compared to the same period last year. This increase was primarily due to non-cash compensation, Board of Directors expenses, and professional fees.
The above resulted in a loss from operations of $36,939 for the six months ended June 30, 2018 compared to income from operations of $688,773 for the six months ended June 30, 2017.
Net loss attributable to the Company for the six months ended June 30, 2018 was $3,738.000 and included non-cash charges of $3,397,500 related to the cancellation of the MIP Agreement and a $384,454 charge related to the abandonment of fixed assets. This compared to net income attributable to the Company of $438,235 for the six months ended June 30, 2017. Net loss to common shareholders totaled $4,098,000, for the six months ended June 30, 2018, compared with net income of $78,235, same period in 2017. The Company paid $360,000 in preferred stock dividends during the six months ended June 30, 2018.
Net cash provided by operating activities totaled $131,749 for the first six months of 2018 as compared to net cash provided by operating activities of $170,357 for the same period the prior year.
About Her Imports:
Her Imports sells human hair extensions and related hair-care and beauty products at retail locations throughout the U.S. and on our Website, www.herimports.com. Additionally, by way of our proprietary ecommerce platform and strategic leveraging of social media buys, we convert prospects into customers while developing long-term personal relationships and loyal customers.
Cautionary Note Regarding Forward Looking Statements:
Statements in this document contain certain forward-looking statements, including our expectations regarding the success of our marketing tactics and use of social media and influencers. These statements are based on many assumptions and estimates and are not guarantees of future performance. These statements may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Her Imports to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause actual results to differ from those in the forward-looking statements include unfavorable reactions from our target market of consumers to our marketing including social media and the risks and uncertainties discussed in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2017. Her Imports assumes no obligation to update any forward-looking statements as a result of new information, future events or developments, except as required by applicable securities laws. For more information, please refer to Her Imports’ financial statements as filed with the Securities and Exchange Commission.