Wednesday, January 15, 2014

LightInTheBox: Growth Slowing, But Margins Improving

LightInTheBox’s growth has slowed significantly as the company, which relies heavily on one product category, is feeling the heat of the competition. Although business has shown improvements in profitability but it could struggle with margins in the future. 

China is the manufacturing hub of the world but there aren't a large number of Chinese companies that can be considered a global retailer of Chinese products. However, a small Chinese e-commerce company listed at the NYSE with a market cap of $367 million is trying to do just that. LightInTheBox (LITB) is a six-and-a-half year old online retailer from China, which delivers products to consumers around the world. The company operates primarily through 2 websites; and, which offer a wide variety of lifestyle products at attractive prices. Its websites can be viewed in 27 different languages and are available to more than 80% of the global internet population. 

LightInTheBox has become the biggest China-based online retailer, which sells third party products, in terms of revenues generated from outside of China.

LightInTheBox came to NYSE in June and was the first Chinese IPO of 2013 after YY's (YY) offering in November. Recently, Chinese companies have shied away from the U.S. markets due to allegations by short-seller firms, such as Muddy Waters.
The company's shares rose 16% in June and continued to rise until mid-August. Then in late August, LightInTheBox was hit with several lawsuits from its investors (such as herehere and here) as its shares plummeted by 40% following earnings, eliminating all gains made in the prior months. In the lawsuit, the investors claimed that LightInTheBox and its management led investors to believe that its growth prospects were at extraordinary levels when in reality, they were not.

Read full article at Seeking Alpha