Vipshop Holdings Ltd
NYSE:VIPS
Vipshop Holdings Ltd
Vipshop Holdings Ltd., a prominent player in the e-commerce landscape, has carved a distinctive niche for itself by centering its operations around online flash sales. This Chinese-based company, founded in 2008, leverages the allure of limited-time discounts to draw in consumers. By offering branded products at compelling prices, often much lower than their standard retail value, Vipshop creates a sense of urgency and exclusivity. The company's virtual shelves are stocked with a diverse array of products, ranging from apparel and beauty products to home goods and electronics, primarily targeted at the growing middle-class consumers in China. Vipshop's strategic partnerships with suppliers and brands allow it to curate a unique assortment of high-quality goods, capitalizing on the surplus inventory challenges faced by many brands.
The business model of Vipshop is architected around the efficiency and immediacy of its online platform. It generates revenue by purchasing goods in bulk from partner brands, often at a discount, and then selling them at lower-than-market prices during its flash sales. What distinguishes Vipshop is its adept use of technology and data analytics to understand consumer preferences and optimize its supply chain. The company embraces a vertically integrated approach, managing its own warehousing and logistics, which reduces costs and enhances customer satisfaction through timely deliveries. This operational model not only boosts profit margins by minimizing distribution costs but also builds consumer trust through reliable service. As a result, Vipshop's ecosystem thrives on the principles of delivering value and maintaining a robust customer loyalty base, positioning it as a formidable force in the dynamic realm of e-commerce.
Earnings Calls
In the first quarter of 2025, Vipshop reported total net revenues of RMB 26.3 billion, a decline from RMB 27.6 billion a year earlier. Despite the revenue drop, the company maintained solid profitability, with an operating margin of 8.7%. Notably, active Super VIP customers grew by 18%, making up 51% of online spending. For the second quarter, Vipshop anticipates revenues between RMB 25.5 billion and RMB 26.9 billion, reflecting a year-over-year decrease of 5% to 7%. For 2025, the commitment to return at least 75% of 2024's non-GAAP net income to shareholders remains unchanged, reinforcing shareholder value amidst market challenges.
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Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited First Quarter 2025 Earnings Conference Call. At this time, I would like to turn the call to Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.
Thank you, operator. Hello, everyone, and thank you for joining Vipshop's First Quarter 2025 Earnings Conference Call. With us today are Eric Shen, our Co-Founder, Chairman and CEO; and Mark Wang, our CFO.
Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlining our safe harbor statements in our earnings release and the public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop shareholders and non-GAAP net income per ADS are not presented in accordance with the U.S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP measures.
With that, I would now like to turn the call over to Mr. Eric Shen.
Good morning, and good evening, everyone. Welcome, and thank you for joining our first quarter 2025 earnings conference call. Our first quarter results came in largely as expected. We continue to make progress on our path to return to growth. Our team stayed ahead our trend to offer more unique and quality off-price seasonal items that were more relevant to customer preference. We see apparel category achieved positive growth in the first quarter. Super VIP membership extends its double-digit growth in the first quarter, active SVIP customers increased by 18% from a year ago and accounted for 51% of our online spending. This hard coal cohort or customer show clear strength in terms of sales and revenue growth. We are keeping a clear eye on the broadest customer trend. We still see customers choose more wellness to spend on family and seasonal essentials and they are gradually catching up on spending in most discretion categories. We remain anchored to the value proposition of discount retail for brands, certainly upon our long-standing merchandising strategy, we are also making change throughout organizations in how we align with those priorities, operator in greater synergy and drive unique compelling customer value. Our teams are restricted in the way that more aligned and efficient so that they can act with speed to potential into growth. we will highlight the strategic priorities to grow the share of branded supply at exceptional value to invest in customer engaging initiatives that drive traffic, frequency and multi-category purchases and to speed up technology advancement that's driven value creation for business. Starting with merchandising. We are focused on the brand and the products where we have made the biggest difference for customers. Its key fates in driven traffic and customer growth. That's why we believe in the power of merchandising capabilities, which we are leveraging to quickly adapt to trend across fashion tele, as measures and family lifestyle categories, continuously giving customers more reasons to stay here. 1 of the best example in our [indiscernible] Vipshop business, which continued to outperform in the first quarter, a total of more than 200 brands joined this program by the end of March. We were close to the brand partner in transforming customized offering based on customer insights and changing trends. We were moving fast to deliver a more compelling brand of quality and value. We also have the prominent channel for midpack we expect it to become the to go place for customers to discover affordable on-trend products that they cannot find anywhere else. In the first quarter, we also unveiled more expect high fresh selection to keep customers coming back to see what's new. Customers were overjoyed with some of the best views they got such as Baby Coach and mall or through the invite-only provide sales, we are trying to gain traction with customers as a place for fresh cell and trade hunting. Turning to customers. We aspire to bring together the best what they want in the unique shopping experience on top of the compelling way our product offering, customers know that we stand behind what we sell. That's why our SVIP customers are clearly growing more attract to our platform. because of affordable and reliable nature in our business. We have planned to make the loyalty program bigger and better. We are focused on how we could further differentiate it. For example, our customers are often family shoppers who launched travel. So new second quarter, SVIP member received more relevant and rewarding life privileges such as Gold Card upgrade for Canon, Simpar and hotel augmentations and so on. We'll also increase the power of AI throughout the customer experience in many ways. We will improve our AI-powered algorithms to enhance the logic behind the search and recommendations. We were leveraging general AI to create high-impact center, including smart mix and match content that make product page more compelling and automated customer review the summary that highlights key insights to help shoppers. We will also apply AI to customer service, handling product inquiries generating personal-related recommendations and potentially acting as a smart shopping assistant. Also by leveraging general AI, we generally target marketing creative for diverse platforms and audience, helping enhance customer acquisition efficiencies. So we will continue to invest in opportunities for long-term success. We look to set ourselves apart, provides more than what customers expect and building the unique experience. Against a backdrop of ongoing uncertainty, I'm confident in our teams, who have navigated through several years our volatility to keep pace with customer trends, double down on execution of our strategy and regain growth track.
At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.
Thanks, Eric, and hello, everyone. In the first quarter, we sustained solid profitability despite sales pressure due to muted sentiment on discretionary spend. As we prudently increase investments in building customer and brand momentum, to see growth opportunities. Margins softened modestly compared with a year ago, but still help up healthily within our expectations. This underscores our capacity to drive operational efficiency, build down years of efforts in refining internal management. As Eric mentioned, we are driving important teams within the organization for our long-term success. It will be an enhanced minesite across the benefits to fund growth synergy and efficiency opportunities we can take to the bottom line. We will remain focused on executing the strategic priorities with greater agility while maintaining discipline.
Turning to our shareholder return program. Our full year 2025 commitment remains unchanged. Returning no license 75% of the RMB 9 billion full year 2024 non-GAAP net income to shareholders. Year-to-date, we have returned over USD 400 million to shareholders, which include approximately USD 250 million in annual dividend distribution and over USD 150 million in share repurchase.
Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers present below are in renminbi, and all percentage teams are year-over-year change unless otherwise noted. Total net revenues for the first quarter of 2025 were RMB 26.3 billion compared with RMB 27.6 billion in the prior year period. Gross profit was RMB 6.1 billion compared with RMB 6.5 billion in the prior year period. Gross margin was 23.2% compared with 23.7% in the prior year period. Total operating expenses decreased by 1.6% year-over-year to RMB 4.0 billion from RMB 4.1 billion in the prior year period. As a percentage of total net revenues, total operating expenses were 15.3% compared with 14.8% in the prior year period. Fulfillment expenses decreased by 4.8% year-over-year to RMB 1.9 billion from RMB 2.0 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.2%, which remained stable as compared with that in the prior year period.
Marketing expenses increased by 6.0% year-over-year to RMB 732.1 million from RMB 69.9 million in the prior year period. As a percentage of total net revenues, Marketing expenses were 2.8% compared with 2.5% in the prior year period. Technology and content expenses decreased by 6.8% year-over-year to RMB 449.1 million from RMB 481.9 million in the prior year period. As a percentage of total net revenues, technology and content expenses were 1.7%, which remained stable as compared with that in the prior year period. General and administrative expenses increased by 2.3% year-over-year to RMB 95.8 million, from RMB 929.1 million in the prior year period. As a percentage of total net revenues, general and administrative expenses were 3.6% and compared with 3.4% in the prior year period. Income from operations was RMB 2.3 billion. compared with RMB 2.8 billion in the prior year period. Operating margin was 8.7% compared with 10.0% in the prior year period.
Non-GAAP income from operations was RMB 2.6 billion compared with RMB 3.1 billion in the prior year period. Non-GAAP operating margin was 10.0% compared with 11.1% in the prior year period. Net income attributable to Viad shops shareholders was RMB 1.9 billion compared with RMB 2.3 billion in the prior year period. Net margin attributable to Vipshop shareholders was 7.4% compared with 8.4% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS was RMB 3.72 compared with RMB in the prior year period.
Non-GAAP net income attributable to Vipshop shareholders was RMB 2.3 billion, compared with RMB 2.6 billion in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders was 8.8% and compared with 9.3% in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS was RMB 443 compared with RMB 4.6 in the prior year period.
As of March 31, 2025, the company had cash and cash equivalents and the restricted cash of RMB 28.9 billion and short-term investments of RMB 192.3 million. Looking forward to the second quarter of 2025. We expect our total net revenues to be between RMB 25.5 billion and RMB 26.9 billion, representing a year-over-year decrease of approximately 5% to 7%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change.
With that, I would now like to open the call to Q&A.
[Operator Instructions] First question is from Thomas Chong from Jefferies.
[Foreign Language] My question is about the recent consumer sentiment. Can management comment about the monthly GMV trend so far we are seeing in Q2, given a lot of events happening like a tariff macro headwinds, et cetera, and how we should think about the revenue and the earnings outlook for the full year 2025?
And my second question is about the upcoming dieting campaign. Can management comment about the latest sentiment and how the event is different from last year or similar to last year from an industry perspective?
[Foreign Language]
[Interpreted] Okay. Regarding your first question on consumption, I think in the past few months, we do see signs of improvement in over or consumption sentiment. Optimate start in January and February, actually, we do to see some margin improvement in March in terms of sales and into the second quarter, April plus lat-date, we see actually even better sales momentum. And for the 2025 full year outlook, we maintain our view that we are going to regain growth track in the second half in the third quarter or the fourth quarter after a negative 5 to 0 growth trends in the first half. And on margins, we have a good command of our overall profitability because of our disciplined investment and also management. So we'll maintain our new margins as well, we believe that on a full year basis, our net margins will be largely comparable as we had achieved in 2024. And in terms of the second question on the June 18 promotion. Actually, you may have noticed that the industry promotion has been quite lengthy last 4 months. And consumers are growing a customer to these promotions and subsidies, everything is readily available. They actually don't have to stop power anything. But they do look for value when they focus on deals. So they are still responding to promotions if these -- they do have a shopping needs in terms of family and seasonal essentials. But the overall trend becomes quite normalized for everybody. So for the piston, we just focus on providing unique quality and off-price value of money a deal for consumers.
We'll now take our next question. This is from Alicia Yap from Citigroup.
[Foreign Language] I have questions related to the tariff. I understand that our business does not have a direct collaboration with the cross-border sales and also the tariffs. But just wonder if some of these access from apparel that's supposed to aim for the export market that were temporary diverted to the domestic market in April or the last couple of months that actually attract away some of the user demand to the competitor sites.
Second quick question is that just wondering if our management or company have any view about potential secondary listing in Hong Kong?
[Foreign Language]
[Interpreted] Let me translate first. In terms of the tariff question, we have very limited exposure to sports. And we do have a very limited amount of direct purchase from the U.S. markets, mostly health care products. or non-U.S. origin product. But overall, the exposure is very small. And in terms of export company can diverse export goods to domestic markets. We do see that because in April, we have already started to work with these excellent companies trying to see the possibilities to help them gain a sense to our customers on Vipshop. And -- but it takes time because there are a lot of different standards for export versus domestically manufactured products in terms of brand market and quality certification, et cetera. We believe over time, for companies, especially those with quality supply chain we have choose thematic market as 1 of the options for them to be a wider base of consumers within China. And we are trying to grab any opportunities arising from that in terms of benefit to oncology brand supply, et cetera, but it takes time.
Okay. Alice, thanks for your question regarding the Hong Kong listing. And we have been closely following change in the capital market developments and evaluating the option of Hong Kong listing internally. So we will keep the market posted if there is any progress. Thank you.
We'll now take our next question. This is from Wei Xiong from UBS.
[Foreign Language] I have 2 questions. The first 1 is regarding our SVIP program. We can see the SVIP member growth has been very steady over the past few quarters. Can we please update our strategy here to further drive the SVIP growth going forward? And do we have any goal for the second half and next year?
And second, just a quick one, could management update the competitive landscape change you have seen over the past few weeks, I mean over the past, past few months amid the macro uncertainty for the e-commerce competition?
[Foreign Language]
[Interpreted] First, as VIP customers, we do see very solid momentum in the growth of SVIP customers, and it has 10 to double-digit growth for several quarters, and it continues to be so in Q1 and Q2 to date. And we think we have a very strong confidence that we can continue to achieve double-digit growth for SVIP customers for the full year of 2025. And across the year, we are also working a lot of initiatives to drive the SVIP customer growth, especially in terms of merchandising, we are trying to provide more unique exclusive off-price product offerings all through in light of the private sales to attract more VIP customers. And by doing so, we believe that we will increase retention of SVIP customers as well, and we do please [indiscernible] over time, as the IP contribution in terms of online spending will grow from the current to even a higher level in the foreseeable future.
And second, in terms of industry dynamics, apparently, it's a very and hypercompetitive environment. We believe that the only way for Vipshop to survive and to compete and to win in this e-commerce sector to remain encouraged to the value proposition of discount retail for brands. And also, there are a lot of business models in terms of how to sell the products, including live streaming platforms or shelf-based e-commerce. But the long-term factors that drive consumers in terms of where -- in terms of where we choose to shop has always been great merchandise, great prices and great services. So we will continue to deepen our initiatives in terms -- to enhance the supply view from merchandise to value to customer engagement. We believe that I remain highly focused in discount retail for brands will gradually become the online outlet and this is the gateway to -- for consumers to access deep discount product offerings, we believe we have the capabilities and the capacity to completion wins in this market.
We will now take our next question. This is from Jialong Shi from Nomura.
[Foreign Language] I have 3 questions. And the first question is what is the latest trend, excuse me, what is the latest trend? What is the latest shopping frequency ARPU trend for super VIP members?
And the second question is what is the latest trend for your return rate.
And third and last question is despite all these challenges for the e-commerce industry. Just wonder if management still maintained the previous capital return guidance for this year.
[Foreign Language]
[Interpreted] Okay. First, let me translate a 2 questions. In terms of SVIP operating metrics, it has been quite stable. And up wise, we do see a more decline because of the dilutive impact from new SVIP customers we need time to ramp up their spending. But if we look at the 2-year cohort of VIP customers, actually the ARPU decline is much smaller. And we are trying to leverage a more unique and exclusive merchandising to increase the loyalty, frequency and across category purchase opportunities for SVIP customers. And we do see a lot of potential there because a lot of -- because many of our SVIP customers are family supers who look to shop across categories for the whole family and it's just a matter of time for to optimize our personalized recommendation and to increase the -- to translate this across category purchase potential into growth. In terms of return rates, overall, the return rate has been stabilized I think in the past quarter, it has increased by a little bit over 2 opportunity points we have a very stable return policy for customers. And in the past 6 to 7 years, we have been adhering to that policy. So that's why our return rate has moderated over time to a low single-digit increase every year. rather than dramatic increases on those other -- some of the other tractors.
Okay. Jialong, regarding your third question, let me give you a full picture for this point. So although we are facing short-term pressure in the dynamic industry change, we have a solid business model in with disciplined operations and solid execution. So we are confident that we can achieve relatively stable and healthy profit and cash inflow. So we have returned over USD 3 billion to shareholders since April 2021 in the form of buyback and dividends. And year-to-date, we have returned over USD 400 million to shareholders which include approximately USD 250 million in annual dividend distribution and over $150 million through our buyback program. So I would like to emphasize for 2025, as we mentioned before, we are going to return no less than 75% of our full year 2024 non-GAAP net income to shareholders. in discretionary share repurchase and dividend distribution. Thank you.
We'll now take our next question. This is from Eddy Wang from Morgan Stanley.
[Foreign Language] I have 2 questions. First is about the trading policy. I noticed that we have a channel on the app, which is focused on the trading program. So just wondering what kind of the sales and incremental sales or GMV actually coming from the trading program and how should we expect this benefit in the second quarter and the second half?
And second question is, I just noticed that we have issued a rate for the Shanshan online. So is there any kind of the change of the Shenzhen strategy after we get the funding fund rates?
[Foreign Language]
[Interpreted] So first on the trading program, the trading program mostly cover covers home appliances, which is not a strong pace for VIPshop, and also consumer don't feel a launch by hole applying on VIP on vets, they don't have that kind of mind share. So in total, we expect any contribution from the trading program will be around 1% of our total GME. So it's not going to be -- to have a meaningful impact on our financial performance.
Okay. Eddy, thanks for your second question regarding the Shenzhen list program. And all business in China is huge and fast-growing Als businesses are long proven and profitable off-line business, which positioning is also discount retail for brand. Well, we sell is also a leading online discount retailer for brand. So definitely, we have huge synergies with all that business, not only from the partner side but also from the user side. At the end of last quarter, we have 20 Shanshan. We are 1 of the largest ALS group in China. And the underlying assets nimble Shania has been in operation for 4 years and is 1 of our best and postal in Shenzhen Group. So we have submitted the risk application documents to the China Securities Regulatory Committee and the Shanghai Stock Exchange for their review and approval. And the risk could be regarded as a financing platform. We can respond by enroll more outlets products into race. And the funds can be used to reinvest into new OLED projects and merger and acquisition of existing projects. so which will help us to expand our business more efficiently. Thank you.
We'll now take our next question. This is from Roger Duan from Barclays.
[Foreign Language] My question is on sales and marketing and margins for this year. management previously mentioned that we want to have GMV return to positive growth in the second half of the year, while also maintaining a quite stable margin profile for the remainder of the year. So my question is on how should we think about your marketing campaign cadence and the balance between spending on marketing and maintaining margin profile for the year.
[Foreign Language]
[Interpreted] In terms of marketing spend, actual Aptina has been very narrowed and we are going to be that for the rest of the year. If you look at our numbers in 2024 marketing expense as a percentage of total revenue was 2.7%. And in Q1, it was 2.8% for the full year. what we believe it's going to be rising 3%. And we continue to evaluate the effects of our marketing initiatives from a lot of perspectives, essentially the LPV side. So we don't believe that marketing spend is the only way to drive customer growth. We believe a combination of merchandise value and services to help drive customer growth. If you look at our Q1 and Q2 growth in new customers, actually, they are growing nicely, but we actually don't spend so much marketing. And of course, we are trying to diversify our marketing channels, including branding through TV sponsorships and target marketing a lot of external channels, and we are also expanding our partnerships with major media outlets. And we are trying to look for the most valuable channels for us to invest that we can have the best ROI and also have a sustainable growth in high-quality customers. So basically, as we have a very good amount of our marketing spend. And we don't think it's going to be a drag for our margins.
Thank you. Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.
Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.