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Mecox Lane Limited Announces Second Quarter 2012 Results

Directly Operated Stores & Franchised Stores

Net revenues from directly operated stores were $4.9 million in the second quarter of 2012, representing a decrease of 18.9% from $6.0 million in the second quarter of 2011. The decrease was primarily due to a decline in the number of directly operated stores from an average of 118 stores in the second quarter of 2011 to an average of 109 stores in the second quarter of 2012, as well as a decrease in average store sales.

Net revenues from franchised stores were $3.2 million in the second quarter of 2012, representing a decrease of 39.4% from $5.2 million in the second quarter of 2011. The decrease in net revenues was primarily due to a decline in the number of franchised stores from an average of 309 stores in the second quarter of 2011 to an average of 267 stores in the second quarter of 2012, as well as a decrease in average store sales.

Cost of Goods Sold 2

Cost of goods sold was $25.6 million in the second quarter of 2012, representing a decrease of 31.3% from $37.3 million in the second quarter of 2011. The decrease is consistent with the overall decrease in sales.

Gross Profit 1 and Gross Margin

Gross profit was $13.4 million in the second quarter of 2012, representing a decrease of 37.4% from $21.5 million in the second quarter of 2011. Gross margin was 34.4% in the second quarter of 2012, compared to 36.5% in the second quarter of 2011. The decrease in gross margin was primarily due to the combined effects of additional inventory provision of $2.7 million in the second quarter of 2012 and lower gross margin from the Internet platform due to the ongoing pressure from market competition, partially offset by the decrease in the weighting of the Internet and franchised stores business within total net revenues, which generated a lower margin than did other segments, and selling more higher margin products through the call center.

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