i see they lowered their new store opening rate for 2009 from previous expectations.
Mr. Zhenggang Wang, Chairman and Chief Executive Officer, commented, "Our business has been impacted by the effect of the global financial crisis on China which has softened consumer and business electronic equipment demand, reduced the number of new electronic products offered by manufacturers and led to a reduction in purchase rebates and discounts we receive from manufacturers. Many consumers and small and mid-size businesses have become more cautious about purchasing office equipment, which has led to slowdowns in our YongXin and Joy & Harmony segments. Additionally, the competitive environment has also increased and our WangDa segment underperformed because China's planned transition to a 3G wireless network has not yet been completed, leading to a delay in 3G phone purchases and decline in 2G mobile phone products."
The Company had 979 store-in-store locations at the end of the second quarter of 2009 compared to 1,001 in the prior year period and 990 at the end of the first quarter of 2009. The Company expects to reduce its total number of store-in-stores to 950 at the end of the third quarter of 2009 and 900 store-in-stores by year end.
Mr. Wang continued, "Within our store-in-stores, we are taking the necessary steps to exit from unprofitable locations and have an operational plan in place to maximize performance. This includes strengthening our marketing efforts and adding greater product variety to our productive stores to optimize profitability, adjusting the reward and compensation of our sales team to be performance-based, providing high-level training and supervision to the sales people to improve their marketing skills, improving the store layout to attract more customers and providing better after-sales service and support.
We remain focused on the build out of direct and franchise stores to improve our revenue and profit performance. We plan to open 2-4 direct stores and 4-6 franchise stores in the third quarter of 2009 which will be located in smaller cities and towns in the Zhejiang province. We anticipate that Jinhua Baofa, our recently acquired logistics company, will play a significant role in the build out of these new stores and will allow us to more easily expand our distribution network and lower our transportation costs as we service these planned new stores, as well as future stores."
2009 Outlook
For the 2009 third quarter, the Company currently expects sales to be in the range of $40-$50 million and gross margin to be in the range of 10-11%. For the full year, the Company expects revenue to total approximately $200 million and gross margin to be in the range of 9-12%.
"We expect the remainder of 2009 to be challenging as many of the same issues that affected our second quarter results will impact our business in the second half of the year. We have a solid cash position and no debt, which allows us the opportunity to make the necessary adjustments to our store-in- store model and expand our franchise platform. We believe that our franchise model provides us with many unique advantages compared to our core store-in- store business. These include improved control of our brand, a flexible store format and full operational control which allow us to manage our business more effectively and position our new stores to meaningfully contribute to our future revenue and profit. We are excited to introduce our products to a new group of customers and we are hopeful this new business can significantly add to our future financial performance. We look forward to updating you on our progress in the coming months ahead," concluded Mr. Wang.
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