Vipshop (NYSE:VIPS) Holdings Limited (NYSE: VIPS) has announced its financial results for the first quarter of 2024, revealing a slight increase in total net revenues and a significant rise in gross profit. Despite slower sales growth, the company experienced a substantial increase in profit margins, with a particular strength in the apparel category. Active Super VIP (SVIP) members grew by 11%, contributing notably to online spending. Looking ahead, Vipshop anticipates a cautious revenue outlook for Q2 2024, with a focus on stabilizing core business profitability and expanding its SVIP customer base.
Key Takeaways
- Vipshop's Q1 2024 total net revenues grew marginally by 0.4% year-over-year to RMB 27.6 billion.
- Gross profit saw a 10.9% increase from the previous year, reaching RMB 6.5 billion.
- The company experienced a record high non-GAAP net margin of 9.3% attributable to shareholders.
- An 11% growth in active SVIP members was reported, accounting for 45% of online spending.
- Vipshop plans to repurchase approximately $500 million worth of shares by year-end.
- For Q2 2024, the company forecasts total net revenues to be between RMB 26.5 billion and RMB 27.9 billion.
Company Outlook
- Vipshop remains confident in its long-term growth despite a cautious near-term revenue outlook.
- The company is committed to driving the expansion of its SVIP customer base and maintaining profitability.
Bearish Highlights
- Sales growth moderated due to weaker demand for spring clothes in March.
- Revenue guidance for Q2 2024 indicates a potential year-over-year decrease of up to 5%.
Bullish Highlights
- Apparel category continues to perform strongly with double-digit growth in GMV.
- Vipshop's strategic focus on branded discount retail aims to deepen brand partnerships and customer loyalty.
Misses
- The company experienced a slight decline in active customers in Q1 due to strict customer lifetime value requirements.
Q&A Highlights
- Management emphasized a strategic shift towards acquiring high-quality customers without heavy investment in subsidies.
- They plan to cautiously relax customer acquisition restrictions going into Q2 while maintaining a focus on SVIP member expansion.
- The increase in GMV per customer reflects positive customer momentum, particularly among SVIP members.
Vipshop's financial performance in the first quarter of 2024 showed resilience in the face of a challenging retail environment. The company's strategic initiatives, including the expansion of its SVIP program and a commitment to branded discount retail, are set to play a crucial role in driving future growth and shareholder value.
InvestingPro Insights
Vipshop Holdings Limited's (NYSE: VIPS) recent financial results highlight the company's robust profitability and strategic financial management. The InvestingPro data and tips provide further insight into the company's financial health and future prospects.
InvestingPro Data:
- The company boasts a market capitalization of $8.96 billion, showcasing its significant presence in the retail market.
- With a P/E ratio of 7.69 and an adjusted P/E ratio for the last twelve months as of Q1 2024 at 7.51, Vipshop is trading at an attractive earnings multiple.
- The revenue for the last twelve months as of Q1 2024 stands at $15.645 billion, with a solid revenue growth of 7.13%, indicating the company's ability to increase its sales effectively.
InvestingPro Tips:
- Vipshop is trading at a low revenue valuation multiple, which suggests that the company's stock may be undervalued relative to its revenue generation capabilities.
- Analysts predict the company will be profitable this year, which is supported by a strong return over the last five years. This demonstrates the company's consistent ability to generate profits and deliver value to shareholders.
For readers interested in a deeper analysis, there are 9 additional InvestingPro Tips available for Vipshop at https://www.investing.com/pro/VIPS. These tips include insights on the company's share buyback activities, cash position, and shareholder yield. To access these valuable insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This comprehensive analysis can help investors make more informed decisions about their investments in Vipshop Holdings Limited.
Full transcript - Vipshop Holdings (VIPS) Q1 2024:
Operator: Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited First Quarter 2024 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.
Jessie Zheng: Thank you, operator. Hello, everyone, and thank you for joining Vipshop’s first quarter 2024 earnings conference call. With us today are Eric Shen, Co-Founder, Chairman and CEO; 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 eliminated to those outlined in our safe harbor statements in our earnings release and 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, and non-GAAP net income per ADS are not presented in accordance with 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.
Eric Shen: Good morning, and good evening, everyone. Welcome and thank you for joining our first quarter 2024 earnings conference call. We had a slow quarter in terms of business momentum, but profit grow much faster than sales. In the face of the shortfall of the top line, we stayed flexible to operate most effectively, while focusing on priorities to enhance long term strength. In the first quarter, sales growth moderated as the quarter progressed after strong start seasonal demand for spring clothes was softer than expected in March. But for the full quarter, apparel category continued to stand out with double-digit GMV growth year-over-year. Customer spending proved resilient. In the first quarter, active Super VIP members increased by 11% from a year ago and accounted for 45% of our online spending, that's a healthy indication of the trust, value and the ease of the shopping we've created for them. We came into the year by responding to the change in customer behaviors and continuously refining our approach to navigate a still dynamic environment. All that we do centers upon increasing our parallel to customers beyond our existing base. We expand into what customers like and what make us different. We provide greater value that customers are looking for every day. On merchandise expansion, we continue to see plentiful supply in the industry and we are happy with our access to quality planned inventory. We are building a wide range assortment basis on our broad and deep brand relationships, a steadily flow of select national and global brands keep us up to date to provide more treasure hunting deal for our customers. Our team's merchandising expertise really feel better brand portfolio with product mix at a range of discount levels. We remain dominant in our share of deep discount branded products, even as consumers have to make disciplined buying choice, our customer continue to welcome affordable selections. The Made for Vipshop line further gives us the ability to meet the needs of customer who are more style and price cautious. Through 180 well-known brand partners, we managed to more than double the supply of customized product from a year ago. We are pleased to see that Made for Vipshop products are more preferred by high quality customers, who tend to place more repeat orders in apparel categories. Across geographies, we see people are closely looking for value. We have got a good chance to grow our share of value spending. We continue to drive value for our customers beyond the compelling price. In addition to promotion, customers buy our brand offerings, because they receive the combination of price, quality and service. They are conscious of product authenticity, so they rely on our offerings. They like simplified promotions and seamless returns and exchange. All these things make it easy in the shopping experience, which lead to great repeat purchase, that's how we're different from others. We are also taking initiatives to enhance the loyalty program in the first quarter. We launched product sales and the special offering for Super VIP members to enjoy additional privileges. It's a good start to building more online and offline connection to our loyal customers. Initial results are encouraging. Within the company, we continue to reinforce our efforts to gain efficiencies. We are working to design better progress and deploy the latest technology in our business. For example, we are applying AI generated model, photos and product videos to optimize our marketing efforts and help brand partners engage with their customer more effectively. With the potential to improve engagement and the creation, we expect to drive further adoption of this solution over the course of the year. While we are cautious in our near term outlook, we remain confident in our ability to generate long term results. Our unique value proposition allow us to service in the best interest of brand partners and grow high quality customers across age and income cohorts. We believe we have the solid foundations to capture the opportunity we see to grow our business in the years ahead. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.
Mark Wang: Okay. Thanks, Eric, and hello, everyone. We are pleased to record another quarter of strong profit growth, despite the tepid top line performance. In the first quarter, our team executed well, moving quickly in response to the dynamic operating environment to drive efficiency gains. As a result, margins all remain very healthy. Most basically, consolidated gross margin increased to 23.7% from 21.4% a year ago, primarily with the help of higher margin category mix from apparel sales. Non-GAAP net margin attributable to Vipshop's shareholders expanded to another record high of 9.3% from 7.5% a year ago, aided by our ongoing efforts to maintain operating discipline. As consumers remain budget conscious and value driven, we were reinforcing our value proposition across our merchandise offering to deliver the affordability that better fits into consumer preference, and we will focus on priorities to capture the growth opportunity we see with brand partners and customers. We believe with solid business fundamentals and a great financial position, we are able to deliver quality growth, good profitability, as well as consistent shareholder return for the long term. Looking to 2025. For the benefit of our shareholders, we plan to commit no less than 75% of our full year 2024 non-GAAP net income attributable to Vipshop's shareholders in discretionary share repurchase and/or dividend distributions. 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 the percentage changes are year-over-year changes, unless otherwise noted. Total net revenues for the first quarter of 2024 increased by 0.4% year-over-year to RMB27.6 billion from RMB27.5 billion in the prior year period. Gross profit increased by 10.9% year-over-year to RMB6.5 billion from RMB5.9 billion in the prior year period. Gross margin increased to 23.7% from 21.4% in the prior year period. Total operating expenses increased by 0.6% year-over-year to RMB4.09 billion from RMB4.06 billion in the prior year period. As a percentage of total net revenues, total operating expenses for the first quarter of 2024 was 14.8%, compared with 14.7% in the prior year period. Fulfillment expenses increased by 11.3% year-over-year to RMB2.0 billion, from RMB1.8 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses was 7.2%, compared with 6.5% in the prior year period. Marketing expenses decreased by 17.4% year-over-year to RMB690.9 million from RMB836.9 million in the prior year period. As a percentage of total net revenues, marketing expenses decreased to 2.5% from 3.0% in the prior year period. Technology and content expenses increased by 22.7% year-over-year to RMB481.9 million from RMB392.8 million in the prior year period. As a percentage of total net revenues, technology and content expenses was 1.7%, compared with 1.4% in the prior year period. General and administrative expenses decreased by 11.3% year-over-year to RMB929.1 million from RMB1.0 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses decreased to 3.4% from 3.8% in the prior year period. Income from operations increased by 39.0% year-over-year to RMB2.8 billion from RMB2.0 billion in the prior year period. Operating margin increased to 10.0% from 7.2% in the prior year period. Non-GAAP income from operations increased by 33.4% year-over-year to RMB3.1 billion from RMB2.3 billion in the prior year period. Non-GAAP operating margin increased to 11.1% from 8.3% in the prior year period. Net income attributable to Vipshop's shareholders increased by 24.6% year-over-year to RMB2.3 billion from RMB1.9 billion in the prior year period. Net margin attributable to Vipshop's shareholders increased to 8.4% from 6.8% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS increased to RMB4.18 from RMB3.16 in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders increased by 24.8% year-over-year to RMB2.6 billion from RMB2.1 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders increased to 9.3% from 7.5% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS increased to RMB4.66 from RMB3.52 in the prior year period. As of March 31, 2024, the company had cash and cash equivalents and restricted cash of RMB24.6 billion, a short-term investments of RMB2.9 billion. Looking forward to second quarter of 2024, we expected our total net revenues to be between RMB26.5 billion and RMB27.9 billion, representing a year-over-year decrease of approximately 5% to 10% -- to 0% (ph). 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: Thank you. [Operator Instructions] And now we are going to take our first question and it comes from the line of Alicia Yap from Citigroup. Your line is open. Please ask your question.
Alicia Yap: Hi. Good morning. Good evening, management. Thanks for taking my questions. I have a question regarding the guidance. So just curious, in terms of what's the drivers and factors that you have been factored into your latest second quarter revenue guidance. Is that related to the demand has been a little bit sluggish or you actually factor in a higher return rate? So any color you can provide in terms of how you see the second quarter trends and demand would be helpful? Thank you.
Eric Shen: [Foreign Language] [Interpreted] Okay. For the Q2 guidance, we actually have factored a number of considerations. First, we had extended winter and also early summer, which actually shortened the window for apparel sales for spring clothing. And the apparel sales, it really depends on the right timing, especially, during the seasonal shift. And second, we face a tough comp, a high base from the same quarter last year, which we really did very well as that does not favor us. And third, we still have a very dynamic industry. So we focus on stabilizing our core business to maintain solid profitability. We did not -- we have not invested in large scale subsidies and marketing spend to acquire customers very aggressively. This has resulted in some lot of sales from customers, who swing among different platforms. And lastly, the return rate you mentioned, yes, it's been up, it's primarily because of the higher contribution from our SVIP members, who are still growing very nicely, and also ties to our customer behavior, who are used to -- who likes to return and exchange when they shop among different e-commerce platforms.
Alicia Yap: Okay. Thank you so much.
Operator: Thank you. [Operator Instructions] Now we will take our next question, and the question comes from the line of Ronald Keung from Goldman Sachs. Your line is open. Please ask your question.
Ronald Keung: [Foreign Language] [Interpreted] Thank you, management for taking my question. My first question is, I want to ask, have we seen -- was the first quarter kind of softness mainly due to March? And then, as we guide this zero to minus 5, are we phasing this on April trends or are we expecting it's a base issue mostly for May and June, particularly the shopping festival, our June 16 festival into – that with last year. Second is on shareholder return. We've seen -- we bought back around at 11.9 million of shares worth of shares in the first quarter. And the announcement says we're committed to up to 500 million by the end of this year. Does that imply a significant step up in share buybacks in the remaining three quarters? Thank you.
Eric Shen: [Foreign Language] [Interpreted] On your first question, actually quarter-to-date, sales momentum has been softer than expected and we are doing our best to try to adjust the business and try to execute right. And given a lengthen extended promotional season, it started this year, it start from May 20, it is going to last for one month and it's quite different from the situation we faced last year. So we try to remain cautious about the sales momentum going forward. And in ups and downs, so we will be try to be conservative in terms of the outlook. And also, we will continue to be quite disciplined in our operations.
Mark Wang: Okay. Thanks for your question. For the second question regarding the shareholders' returns, okay. Let me answer you in this way, okay. We are committed to a long term shareholder return policy and we'll continue to use the combination of buyback and the dividend to provide shareholders with relatively stable and consistent annual returns. We have returned over $2.2 billion to shareholders since April 2021 in the form of buyback and dividends. For 2024, we have adopted an annual dividend policy and announced a $250 million dividend. In addition, we are steadily buying back shares and are committed to repurchasing approximately $500 million by December 31, 2024. This implies that we will almost utilize the remaining amount of the existing $1 billion two year buyback program by year end. Furthermore, looking into 2025, for the benefit of our shareholders, we plan to commit no less than 75% of our full year 2024 non-GAAP net income attributable to Vipshop shareholders in discretionary share repurchase and our dividend distributions. All I mentioned above regarding the history records and the future planning shows our determination and insistence to return value to our shareholders in a long term, stable and consistent way. Hope this answer your question. Thank you.
Ronald Keung: Yes. Thank you, Shen-zong and Mark.
Operator: Thank you. Now we're going to take our next question. And the next question comes from the line of Eddy Wang from Morgan Stanley. Your line is open. Please ask your question.
Eddy Wang: [Foreign Language] [Interpreted] Thank you for taking my question. So my first question is about the competition. As Shen-zong mentioned that we have seen a more intensive competition from peers, especially, in terms of the subsidy they granted. So I understand in the short term, we may stick through our current strategy, but if you take a relatively long term view, will we also follow suit with the more aggressive like the subsidy strategy or we will continue to see through our current strategy? And secondly is the user side. We record a year over decline for the user in the first quarter of this year. So just want to hear your view on your user growth strategy in this year and in the longer term. And the third one is about the AOV. So we see that AOV in this quarter actually increased on a year-over-year basis. So is this because of the proportion of the SVIP, the users coming up, so their AOV is higher or any other reasons actually leads to a higher AOB in this quarter? Thank you.
Eric Shen: [Foreign Language] [Interpreted] So on the first question, competition, actually our strategy has been and will continue to be laser focused on this branded discount retail. There are many e-commerce platforms nowadays, but each has its unique value proposition and our uniqueness lies in our ability capability to serve in the best interest of brand partners and to deliver better value to our customers. That's why we have so many loyal customers on our platform who has -- who have seldom leave us. And we will continue to deep broaden and deepen our relationship with more brand partners to bring in a steady flow of the right merchandise, offerings to deliver value to our customers who are looking at brand quality and the product authenticity, etc. And in terms of subsidy, we wouldn't want to follow our industry peers to blindly investing in large scale subsidies. Of course, we will be prudently aggressive in customer acquisition, but we will continue to focus on acquiring high quality customers. On your second question, in terms of the marketing spend, in Q1, our -- we had a slight decline in active customers that's because we have very strict requirements on LTV, as long as it's higher than a certain level, we would stop investing in marketing spend. We realize that in the face of competition and especially in price competition, there are some customers who are more driven by subsidy or more price sensitive. They were -- they actually have to run to other platforms. But, on the other hand, SVIP, the core customer base has been quite resilient. They are still growing at double-digit in terms of customer base and their ARPU is still going up faster than the average customer. Having said that, entering into Q2, we will be a little bit more aggressive in terms of our current customers. After all, we want to -- are bringing, more new customers to our platform, but only those who are high quality. So we will cautiously relax our restrictions in terms of our LTV to make sure we continue to acquire customers in an effective and efficient way. And lastly, on the GMV per customer, the trend actually, if you look at the upward trend that's more representative of the customer momentum. SVIP members are still gaining very good traction. As I mentioned earlier, ARPU -- as their ARPU are growing faster than the average customers. And it demonstrated that as long as we serve in the best interest of our SVIP members providing them with the right merchandise offerings, as well as the best thing in cost services, they will continue to shop with us and they will shop more and come more. So in the future, we will continue to drive the expansion of our SVIP customer base, we believe that our core customer cohort, a very strong foundation for us to maintain quality growth as well as good profitability.
Operator: Excuse me, Eddy, do you have any further questions?
Eddy Wang: No. Thank you.
Operator: Thank you. Dear speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Jessie Zheng, for any closing remarks.
Jessie Zheng: 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.
Operator: That does conclude the conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
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