Jerash Holdings (US), Inc. (NASDAQ:JRSH) Q3 2023 Earnings Call Transcript

Gilbert Lee: And then the ramp-up–yes, there will be a ramp-up period, and I think after the first few test orders, they will just continue to bring us new styles, and also Hugo Boss is a long time customer of Busana. In fact, Busana helped us quite a bit to on-board Hugo Boss, even though we first contacted Hugo Boss about a year ago but Busana came in and they assisted us on a lot of the technical areas and how to do business with Hugo Boss. But eventually, Hugo Boss will be part of the joint venture when we start doing business with Busana. Besides Hugo Boss, there are a lot of other premium brands that Busana has been working with and those will come in, but of course it will take time for them to do the sampling, to do the test, and make sure all the quality is up to their standards.

I don’t know, it could be–the timing could be tricky. It also has to do with our capacity and our manpower, but by that time, Busana will be onboard and they will be assisting us, so we feel very optimistic, cautiously optimistic about this coming year.

Aaron Grey: Okay, great. Thank you very much and I’ll jump back in the queue.

Sam Choi: Thanks.

Operator: Your next question for today is coming from Rommel Dionisio with Aegis Capital.

Rommel Dionisio: Yes, good morning. I wonder if you could just expand on your initiative to source additional fabric from local partners in the Middle East. I know you touched upon this in prior quarters, but there are moving parts in gross margin, obviously the customer mix had a shift resulting in a shift in gross margins. But do you then have–does the additional sourcing from local partners have a beneficial impact in the quarter, and what is your outlook is for those initiatives going forward? Thank you.

Gilbert Lee: Yes, sure. We started the sourcing in the Middle East and North Africa region probably more than a year ago – I remember it was December when I first went to Egypt and Turkey to start sourcing efforts. But now, we already are purchasing fabrics from both Turkey and Egypt. For Egypt, I think it’s primarily for the Timberland products. In Turkey, I think it’s also Timberland too, but that–besides giving us much less dependency on the Asia fabric sourcing, especially China, especially during the pandemic there were a lot of shutdowns and interruptions, I think it is more strategic and more long term. I think without going to the MENA region to source, we wouldn’t be doing the Timberland business, at least not so soon.

That really helped us in getting this new customer, Timberland, and then it opens up other opportunities to other European customers or potential customers. The cost for the raw material may not be–may not have a big difference because comparing to China, the Middle East fabrics and the supplies are–the prices are higher, however we save the freight costs, and the most important thing is the shortening of the logistics time from shipping from Asia comparing to shipping from the Middle East. That is the biggest benefit for us, is the quicker turnaround and we don’t have to carry so much inventory–I mean, raw material inventory and so on. But yes, there are pros and cons, but I think there are more pros than cons, and it opens up a lot more opportunities for us to grow our customer base