Vipshop Q4 2024 Earnings Report

Vipshop EPS Results

• Actual EPS: $0.65
• Consensus EPS: $0.70
• Beat/Miss: Missed by -$0.05
• One Year Ago EPS: N/A

Vipshop Revenue Results

• Actual Revenue: $4.55 billion
• Expected Revenue: $3.82 billion
• Beat/Miss: Beat by +$730.61 million
• YoY Revenue Growth: N/A

Vipshop Announcement Details

• Quarter: Q4 2024
• Date: 2/26/2025
• Time: After Market Closes
• Conference Call Date: Friday, February 21, 2025
• Conference Call Time: 7:00AM ET

Vipshop (NYSE:VIPS) operates online platforms in the People's Republic of China. It operates in Vip.com, Shan Shan Outlets, and Others segments. The company offers womenswear, menswear, sportswear and sporting goods, shoes and bags, accessories, baby and children products, skincare and cosmetics, home goods and other lifestyle products, and supermarket products. It also provides internet finance services, including consumer and supplier financing. In addition, the company engages in warehousing, retail business, product procurement, and software development and information technology support activities. The company provides branded products through its vip.com and vipshop.com online platforms, as well as through retail stores. Vipshop Holdings Limited was founded in 2008 and is headquartered in Guangzhou, the People's Republic of China.

Vipshop Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Ladies and gentlemen, good day, everyone, and welcome to the VIP Shop Holdings Limited Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. At this time, I would like to turn the call to Ms. Jessie Zheng, VIP Shop's Head of Investor Relations. Please proceed.

[Jessie Zheng, Head, Investor Relations at Vipshop]

Thank you, operator. Hello, everyone, and thank you for joining VIP Shop's fourth quarter and full year twenty twenty four earnings conference call. With us today are Eric Shen, our Co Founder, Chairman and CEO and Mark Wong, 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.

[Jessie Zheng, Head, Investor Relations at Vipshop]

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 outlined in 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 that 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 VIP Shop shareholders and non GAAP net income per ADS, are not presented in accordance with U. S.

[Jessie Zheng, Head, Investor Relations at Vipshop]

GAAP. Please refer to our earnings release for details relating to the reconciliations of our non GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

Good morning and good evening, everyone. Welcome and thank you for joining our fourth quarter and the full year twenty twenty four earnings conference call. We delivered a set of results well above our expectations in the fourth quarter to finish a challenging year, while consumers still spend cautiously

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

on discretionary

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

categories. Our team has flow actively during changes to address growth priorities with a focus on retail fundamentals and strong execution. At the category level, we saw some strength in apparel, which turned into positive growth in the fourth quarter of a high base. Our team moved swiftly to include more unique off price seasonal offering that meet customer needs, especially in sportswear and outdoor products. For the full year, apparel categories were up 2% from the year ago, accounting for 75% of our total GMV, the highest level in our history.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

That helped us once again close RMB200 billion in total annual sales. Our non apparel business also clearly narrowed its loss of sales in the fourth quarter, driven in part by

[Operator]

Ladies and gentlemen, please remain on the line. Your conference will resume shortly.

[Jessie Zheng, Head, Investor Relations at Vipshop]

One one one Hi, can you hear me?

[Operator]

Yes, please continue.

[Jessie Zheng, Head, Investor Relations at Vipshop]

Hello?

[Operator]

Please continue. We can hear you. Ladies and gentlemen, please remain on the line.

[Operator]

Your conference will resume shortly. Thank you. The presenters are back on line. Please continue.

[Jessie Zheng, Head, Investor Relations at Vipshop]

Hello operator. Can you remind us we are with Scott?

[Operator]

You are back online. You can continue from the very

[Operator]

CEO.

[Jessie Zheng, Head, Investor Relations at Vipshop]

From the CEO part.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

Okay. Good morning and good evening, everyone. Welcome and thank you for joining our fourth quarter and full year twenty twenty four earnings conference call. We delivered a set of results well above our expectations in the fourth quarter to finish a challenging year, while consumers still spend cautiously in these centrally categories. Our team has actively driven changes to address growth priorities with a focus on retail fundamentally and the strong exclusions.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

At the category level, we saw some strength in apparel, which turned into positive growth in the fourth quarter of a high base. Our team moved swiftly to include more unique off price seasonal offerings that meet custom needs, especially in sportswear and outdoor products. For the full year, apparel categories was up 2% from a year ago, accounting for 75 of our total GMV, the highest level in our history that helped us once again across RMB200 billion in total annual sales. Our non apparel business also clearly narrowed its loss of sales in the fourth quarter, driven in part by the outperformance in home appearance and digital products as we capture growth opportunities from the government trade in program. On the customer front, Super VIP memberships extended its double digit growth, which is a strong validations of our team's commitment to delivering a differentiated experience.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

In the fourth quarter, active Super VIP increased by 50% from a year ago and accounted for 51% of our online spending. On an annual basis, we had a total of 8,800,000 active SVIP members who contributed 49% of our online spending last year. We are encouraged by this initial improvement after we identified key near term actions in each area and moved with urgency. In merchandising, we are getting shaped on brand and the productive portfolio to stay highly relevant to custom needs. Value is on the full display through a series of operational adjustment and the target incentive that help our customers shop for holidays and the seasonal promotions.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

And we are engaging more with family shoppers with a more balanced assortment of apparel and the non apparel products to drive in sentimental growth in frequency and multi category purchases. With these challenges with these changes, we are better positioned going into twenty twenty five. Importantly, we remain very committed to our long term strategy in this kind of retail for brands. And we dedicate our efforts to the long standing status that have been successful in driving quality growth. That includes our unique business model, a merchandising approach with no compromise on qualities and authentic, a strength focus on value that include the low price and the compelling views and the suits of the service that highlights reliability.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

All these are put together through a differentiated strategy. More specifically, the business highlights, we continue to invest in our merchandising capabilities to become even more reliable destinations for our customers. Following three years initial enhancement program, our team has been reshaped, developed new expertise and mastered how to work in more impactful ways. We brought in over 1,500 new brands last year, including officially partners with many high profile global brands. We built deeper relationship with several hundred core brands, secured great in demand value for money offerings throughout the year and managed our productive portfolio and on a great level of breadth and the deeps.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

Most recently, our team has started in deep dive deeper categories by categories to seek opportunities by further expanding in the brand supply that we expect customers to truly feel the treasure hunting excitement. Another area of focus has been added more unique supply to make our differentiated product offering even better and bigger. The made for VIP line did become a meaningfully driver for more than 200 brands who have joined the program last year. We saw three sisters' strength in sales all year long benefiting from quality custom and repeat orders, as well as clearly better conversions and compared to the general merchandising within a same brand categories and price range with some brand up to 20% of their sales on our platform came from a mid for VIP last year. Turning to customers, we remain largely pressured, but we're willing to spend when they find the right balance of quality products and the compelling price.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

Our SVIP customers are clearly more resilient and have a strong response promotions and the subsidies because the real value we provide for them. In addition, they find it enticing to get even better deals through the provided sales and special offers. We are happy to see that SVIPs continue to spend much more and more frequency than the regular customer and the vast majority of them have renewed their memberships with us. Given how fast things are changing, it is all the more important to put technology to work to drive growth and efficiency. We have made relentless efforts to optimize search and the recommendations, which starts to incrementally improve customer experience and the conventions.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

In addition, we are using the last general AI model to help our team work in the more productivity way, enable them to serve brand partners and the customer with greater efficiency. We have made initial attempts and applications case such as shopper guide, marketing contents, customer service and analyze tools for brand partners. Despite ongoing uncertainty, we are confident in a long term development of our business, given the continuity of our strategy, the merchandising strengths we are building upon and the growth initiatives we are taking in merchandise expansion and the deepened engagement with different customer cohorts. Most importantly, we have infused more flexibility into our business to compete and win in an environment where customers are focused on value. We are confident in our ability to move beyond the current situations and return to sustainable and profitable growth in the long term.

[Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer at Vipshop]

At this point, let me hand over the call to our CFO, Mark Wang to go over our financial results.

[Mark Wang, Chief Financial Officer at Vipshop]

Okay. Thanks, Eric. Hello, everyone. In the first quarter, we achieved a better balance in our business. We took swift and disciplined actions to reallocate resources that maximize growth while preserving solid profitability.

[Mark Wang, Chief Financial Officer at Vipshop]

Top line came in better than our guidance, as our team has made every endeavor to see growth opportunity in both apparel and non apparel business. Leaning into categories where we know customers are trying to get ready for holidays, seasonal or family meals. Gross margin decreased year over year, but remained at a decent level of 23%, reflecting our stepped up investment in customer incentives to drive quality growth. On a full year basis, gross margin is an eight year high of 23.5%, benefiting from the all time high contribution from our apparel business. With improved business scale and consistent execution on operating efficiency, our bottom line held up pretty well in both absolute profit and margin in the quarter.

[Mark Wang, Chief Financial Officer at Vipshop]

This helped us record over RMB9 billion in full year non GAAP net profit attributable to VIP Shop's shareholders at a solid margin of 8.3%, which was largely comparable to a year ago. As we await consumer discretionary spending to normalize over time, we believe we are on the right track to returning to healthy growth in the foreseeable future. We continue to move at pace and align our focus around merchandising, core categories, value offering and customer impact. These growth initiatives are well supported by the expense in our profit and cash generation capability. Turning to capital allocation, in 2024, we returned a total of approximately US770 million dollars to our shareholders through annual dividend and buyback.

[Mark Wang, Chief Financial Officer at Vipshop]

For 2025, as we consistently communicated, we will return less than 75% of our full year 2024 non GAAP net income attributable to Vipshop's shareholders in a combination of annual dividend and buyback. This reinforces our commitment to shareholder value creation in the long term. Now, moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below are in RMB and all the percentage change are year over year change unless otherwise noted. Total net revenues for the fourth quarter of twenty twenty four were RMB33.2 billion compared with RMB34.7 billion in the prior year period.

[Mark Wang, Chief Financial Officer at Vipshop]

Gross profit was RMB7.6 billion compared with RMB8.2 billion in the prior year period. Gross margin was 23% compared with 23.7% in the prior year period. Total operating expenses was RMB5.1 billion compared with RMB4.9 billion in the prior year period. As a percentage of total net revenues, total operating expenses was 15.2% compared with 14% in the prior year period. Fulfillment expenses decreased by 2.5% year over year to RMB2.46 billion from RMB2.53 billion in the prior year period.

[Mark Wang, Chief Financial Officer at Vipshop]

As a percentage of total net revenues, fulfillment expenses were 7.4% compared with 7.3% in the prior year period. Marketing expenses increased by 10.3 year over year to RMB930.3 million from RMB843.2 million in the prior year period. As a percentage of total net revenues, marketing sensors was 2.8% compared with 2.4% in the prior year period. Technology and content sensors decreased by 5.5% year over year to RMB469.2 million from 496,400,000.0 in the prior year period. As a percentage of total net revenues, technology and content expenses was 1.4%, which states light as compared with that in the prior year period.

[Mark Wang, Chief Financial Officer at Vipshop]

General and administrative expenses increased by 20% year over year to RMB1.2 billion from RMB1.0 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses were 3.6% compared with 2.9% in the prior year period. Income from operations was RMB2.9 billion compared with RMB3.7 billion in the prior year period. Operating margin was 8.6% compared with 10.6% in the prior year period. Non GAAP income from operations was RMB3.4 billion compared with RMB4.0 billion in the prior year period.

[Mark Wang, Chief Financial Officer at Vipshop]

Non GAAP operating margins was 10.2% compared with 11.4% in the prior year period. Net income attributable to Vipshop's shareholders was RMB2.4 billion compared with RMB3.0 billion in the prior year period. Net margin attributable to VIP Shop's shareholders was 7.4% compared with 8.5% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS was RMB4.69 compared with RMB5.35 in the prior year period. Non GAAP net income attributable to VIP Shop shareholders was RMB3.0 billion compared with RMB3.2 billion in the prior year period.

[Mark Wang, Chief Financial Officer at Vipshop]

Non GAAP net margin attributable to VIP Shop shareholders was 9% compared with 9.2% in the prior year period. Non GAAP net income attributable to Vipshop's shareholders per diluted ADS was RMB5.70 compared with RMB5.79 in the prior year period. As of 12/31/2024, we had cash and cash equivalents and restricted cash of RMB 27,000,000,000 and short term investments of RMB1.9 billion. Now, I will briefly walk through the highlights of our full year results. Total net revenues were RMB108.4 billion compared with RMB112.9 billion in the prior year.

[Mark Wang, Chief Financial Officer at Vipshop]

Gross profit was RMB25.5 billion compared with RMB25.7 billion in the prior year. Gross margin increased to 23.5% from 22.8% in the prior year. Income from operations increased by 0.8% year over year to RMB9.2 billion from RMB9.1 billion in the prior year. Operating margin increased to 8.5% from 8.1% in the prior year. Non GAAP income from operations increased by 0.9% year over year to RMB10.7 billion from RMB10.6 billion in the prior year.

[Mark Wang, Chief Financial Officer at Vipshop]

Non GAAP operating margin increased to 9.9% from 9.4%

[Mark Wang, Chief Financial Officer at Vipshop]

in

[Mark Wang, Chief Financial Officer at Vipshop]

the prior year. Net income attributable to VIP Shop shareholders was RMB7.7 billion, compared with RMB8.1 billion in the prior year. Net margin attributable to VIP Shop's shareholders was 7.1% compared with 7.2% in the prior year. Net income attributable to Yabishap's shareholders per diluted ADS was RMB14.35 compared with RMB14.42 in the prior year. Non GAAP net income attributable to Vibishop's shareholders was RMB9.0 billion compared with RMB9.5 billion in the prior year.

[Mark Wang, Chief Financial Officer at Vipshop]

Non GAAP net margin attributable to VIP Shop's shareholders was 8.3% compared with 8.4% in the prior year. Non GAAP net income attributable to Wabishap's shareholders per diluted ADS was RMB16.75 compared with RMB first quarter of 20 20 5, we expect our total net revenues to be between RMB26.3 billion and RMB27.6 billion, representing a year over year decrease of approximately 5% to 0%. 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 and A.

[Operator]

Thank you. We will now begin the question and answer session. We will now take our first question from the line of Thomas Chong from Jefferies. Please ask your question, Thomas.

[Thomas Chong, Managing Director at Jefferies]

Hi, good evening. Thanks management for taking my questions and congratulations on a very solid search of result. My first question is about our Q1 revenue guidance. Can management comments about our year to date performance so far? Are we actually seeing we are more towards the low end or the high end of the guidance?

[Thomas Chong, Managing Director at Jefferies]

And can management also comments about the recent consumer sentiment? That's my first question. And my second question is about the 2025 outlook. Yes, I think it is a bit early right now, but it would be great if management can comment about how we should think about the revenue and the margin trend throughout the rest of the year. Thank you.

[Moderator]

Okay. As for Q1 revenue guidance in terms of the year to date trend, because of the different timing of the spring festival, it's not that ideal to look at single month in January or February. If we look at January plus February today, I think that actually our business is on track within our guidance. And when we assess consumer sentiment, we believe it's actually slightly better than expected, although still we observe still takes time to be fully back on the recovery trend. But apparently, we think it's marginally better than prior quarters.

[Moderator]

And since it's still early into the quarter and we have upcoming promotions in March when we started to sell spring apparel. And until then, we may have a clear picture of how the quarter is going to end, whether it's lower or higher end of the guidance. But for sure, we are on track for now. As for the full year of 2025, we think everything should get back to the positive trajectory. That's what we hope, whether it's GMV or revenue.

[Moderator]

Last year, we did not that so well. GMV is just was just slightly up. And because of the return rate, there is still some gap between GMV and the revenues. The revenue is slightly down, but we believe this year, we will make every endeavor to bring the business back from every in terms of every operating metric. Of course, we're going to pursue high quality and broad strategy as we have done consistently.

[Moderator]

And we will, maximize our growth opportunities in terms of customer and revenue under the condition that we will maintain a solid profitability as well. We have an opportunity to invest a portion of our profit into growth opportunities. We will do that. But overall, we will try to make sure we will maintain solid profitability and maximize our growth.

[Operator]

Thank you. We will now take our next question from the line of Alicia Yap from Citigroup. Please ask your question, Alicia.

[Alicia Yap, Analyst at Citigroup]

Okay. Thank you.

[Moderator]

So two quick questions. First is that regarding your 4Q outperformance, just wanted to know a little bit more the drivers. So is that mainly because of your effective marketing promotion? Or is that also benefiting from some improvement of the macro environment? And then second question is in your 4Q GMV, how much of that is actually benefiting or related to the trade in benefits?

[Moderator]

Thank you.

[Moderator]

Well,

[Moderator]

to

[Moderator]

our first question on Q4, it turns out to be we are ahead of expectations due to a couple of few factors. First, I think it helped a little bit because we start to see consumers became a bit more active from the November into December when we see normalized weather conditions that helped our winter closing sales. And also consumer sentiment, it was not as bad as we had thought. It turned slightly better than prior quarters. And of course, we did a lot of proactive actions in terms of the merchandising portfolio and more in demand value for money product offerings.

[Moderator]

And also, we did some decent promotions in the subseas targeting our high value customers, which brought in additional growth opportunities. And to your second question on the related category benefiting from the trading program, it did help a little bit because we managed to narrow the loss of sales in our non apparel business. But in terms of the absolute GMV, it's still not that meaningful. It's around 300,000,000 to 400,000,000 in terms of incremental GMV from home appliances and the digital products in Q4. Okay.

[Moderator]

Thank you.

[Operator]

Thank you. Next, we'll take question from the line of Wei Shiong from UBS. Please ask your question Wei.

[Moderator]

Thank you, management, for taking my question. First, I want to ask about the gross margin trend in 2025. Are we seeing further room to improve year on year on the basis of very good results of full year 2024? If there is, what are the drivers behind? And also just to follow-up on the net profit margin for 2025.

[Moderator]

Given that we are trying to pursue the goal of GMV and revenue turning positive as soon as possible, are we expecting stable net margin year on year? Or are we seeing further room to improve? And also, what's our latest judgment on the long term sustainable net margin level for the company? Thank you.

[Moderator]

In terms of the margin trend, GP margin, I remember we hit a eight year high GP margin of 23.5% in 2024. So we actually think that's a very good level and we can afford to invest a portion of the gross profit, for example, to our brand partners to incentivize them to bringing more merchandising and more deep discount inventory so that we can grow together. So we are thinking about prudently reviewing the take rate levels with brand partners and allow them to have more opportunities for growing the business on our platform instead of just maintaining a fixed GP margin for the platform. And turning to NP margin, we have pretty good command of managing the cost and the expense items. So we think in terms of the NP margin, we are pretty confident that we can achieve a flattish level as compared to the past two years.

[Moderator]

And in terms of the profit dollars, we try to grow our profit dollars as much as we can if we can grow into a better scale. And at a parentally that would take a lot of pressure on operating deleverage and then we can achieve a greater NP margin as well as a much better profit dollar level. So in terms of the margin profile, we have no concern on that actually. We had pretty good amount of the both GP margin and NP margin.

[Moderator]

Very clear. Thank you, management.

[Operator]

Thank you. Next question comes from the line of Jia Long Shi from Nomura. Please go ahead, Jia Long.

[Moderator]

So I have two questions. First question is about generative AI. So the AI has become a popular trend these days. So just wondering if there are any excuse me, if there are any areas in this business where AI may help either improve profitability or reduce the cost? Just wonder if management can provide some colors.

[Moderator]

And the second question is wondering what is the trend for Apple and the shopping frequency of Super VIP members? Thank you.

[Moderator]

In terms of the AI application, actually internally, we are moving very fast to investing to AI applications, including personalization, Q and A generation and product recommendation, etcetera, on a number of application cases. Specifically, actually, we are deploying a deep seat internally as well. The immediate focus is, of course, to try to find opportunities to improve productivity as well as efficiency. For example, customer service, we're trying to see whether DeepSeq can be integrated in our self developed model to improve the analysis and the reasoning of the many dialogues that are taking place on customer service every day. We're trying to find if there is any area of improvement.

[Moderator]

And to brand partners, we are also launching new analytical tours to try to help them optimize their merchandising portfolio to promote their sales campaigns to see whether what kind of actions they should take to maximize business opportunities on our platform. So although we are not rolling out any to see application publicly, but we are deploying AI and the latest to gen AI models into our internal business cases on a broad basis. And on the customer front, so we are also trying to see whether we can leverage the latest Digent AI model to improve the generation of Q and A. And we are constantly upgrading the model and try to make our recommendation to customers even better and more precisely and more to their needs. So we are using AI applications in our internal business cases and we are tracking the developments and we look to leverage AI on a constant basis to find opportunities for to drive both growth and the efficiency.

[Moderator]

To your second question on SVIP customer, last year in terms of annual ARPU, we did see a slight decline in slight decline, but that's more of a dilutive impact from 16% increase in the annual active C4 VIP customers. And it takes it normally takes some time for new SBIP member to ramp up a spending. And if we look at the hardcore two year customer cohort of our SVIP customer base, actually the ARPU remains very resilient. We only see a slight drop in terms of annual ARPU. So we think that the overall SVIP customer base is still very healthy and we look to expand the SVIT membership continuously and protect the overall health of the consumer group.

[Operator]

All right. Thank you. Due to time constraints, that concludes today's question and answer session. At this time, I'll turn the conference back to Jesse for any closing remarks.

[Jessie Zheng, Head, Investor Relations at Vipshop]

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]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Jessie Zheng, Head, Investor Relations
• Eric Ya Shen, Chairman of the Board of Directors and Chief Executive Officer
• Mark Wang, Chief Financial Officer

Analysts

• Thomas Chong, Managing Director at Jefferies
• Moderator
• Alicia Yap, Analyst at Citigroup