Sector financial performance:

This company, primarily an online retailer (with more than 10,000 suppliers) of home furnishing products, has been grouped into retailer-domestic merchandise and home furnishing sector in furnishing industry.

Benefited from continuously strong growth in online sales and bouncing back of in-stores demand for the home furnishing products since the second half of 2017, the downward trend that we have seen from companies in sector since 2015 seems to be making a turn in 2017 and continuing gin 2018 as indicted by re-gaining increase in their comparable brand sales (the typical growth for 2018, 2017, 2016 and 2015: 1.5%, 0.6%. 0.5% and 3%). At the same time, sales from e-commerce have been very strong as indicated by the typical comparable brand growth (online only): 10%, 6%, -3%, and 7% for2018, 2017, 2016 and 2015 respectively.

The typical average gross margin (included occupancy costs and shipping costs) of companies has been seen to go down from about 39% to about 36% in 2018 primarily due to promotions resulted from slowing down traffic of stores. In addition to increase in the average SG&A as percentage of sales, we see the average operating margin was down to 4% from 7% since 2014.

The typical average enterprise price/EBI ratio: 20(interest/EBI ratio of 18%) and stock price/sales ratio is 0.6.

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Company performance:

It seems that sales increased fast due to strong growth in customer base and as well increase in customer spending.

The first six months of 2018 compared with 2017

Net sales increased by 47% due to increase in customer base.

Number of active customers increased by 34% and average spending increased 9.5%.

The 2017 compared with 2016

Net sales increased by 40% due to increase in customer base.

Number of active customers increased by 33% and average spending increased 6.8%.

Fiscal 2016 compared with 2015

Net sales increased by 50% due to increase in customer base.

Number of active customers increased by 54% and average spending increased 3.7%.

Fiscal 2015 compared with 2014

Net sales increased by 71% due to increase in customer base.

Number of active customers increased by 67% and average spending increased 11%.

Its gross margin (including products costs, shipping costs and fulfilment costs) has been down slightly to about 23% in 2018. As its SG&A as percentage of sales (including customer service and technology costs) decreased to about 29%, its operating margin thus was improved significantly from -11% to -6% in 2018.

Stock price

This stock currently has a stock price/sales ratio of 2.0 ($128). We think that its stock is being relatively overvalued considering its slowing down growth in customer base and thus sales and the fact that margin did not get improved as sales grew.