Baozun Q2 Earnings Call Highlights

Key Points

• Revenue and profitability improved: Baozun’s Q2 2026 revenue rose 7% to RMB2.7 billion, while non-GAAP operating income increased to RMB74 million from RMB6 million a year earlier. Management raised its 2028 non-GAAP operating profit target to RMB700 million from RMB550 million.
• E-commerce services and brand management drove growth: E-commerce service revenue grew 10% as Baozun focused on higher-value categories and reduced lower-margin product sales. Brand management revenue rose 22%, led by Gap, whose same-store sales increased in the 20% range and whose operating loss improved by more than 40%.
• AI, automation and expansion remain key priorities: Baozun reported early productivity gains from AI and automation pilots in Gap’s e-commerce operations and plans to accelerate adoption over the next 18 months. It also intends to open more than 50 Gap stores in 2026 and expects BBM revenue growth of 20% to 25% for the full year.

Baozun NASDAQ: BZUN reported second-quarter 2026 revenue growth of 7% to RMB2.7 billion, as gains in its e-commerce services and brand management businesses offset a planned reduction in lower-margin product sales categories.

Non-GAAP income from operations reached RMB74 million, compared with RMB6 million in the prior-year period. Excluding a one-time write-off in the year-earlier quarter, the comparable figure was RMB59 million. Chairman and Chief Executive Officer Vincent Qiu said the results reflected improving earnings quality and resilience in a competitive e-commerce environment.

The company also raised its 2028 non-GAAP operating profit target to RMB700 million from RMB550 million, citing confidence in its brand management momentum, artificial intelligence and automation initiatives, and potential synergies between its business segments.

E-Commerce Services Drive BEC Growth

Baozun’s e-commerce segment, or BEC, generated RMB2.3 billion in revenue, up 5% from a year earlier. Service revenue increased 10% to RMB1.8 billion, supported by market-share gains in luxury, sports and outdoor categories, as well as greater investment in content creation, digital marketing and Douyin-related initiatives.

BEC product sales revenue declined 10% to RMB541 million. Chief Strategy Officer Junhua Wu said Baozun intentionally reduced its exposure to certain standardized product categories, including home furnishings, beauty and cosmetics, and appliances, where price competition was intense and margins were less attractive.

For the first half, total product sales were RMB1 billion, up 3% year over year. Wu said the company is investing in supply-chain management, data analytics and product development to build out an apparel product-sales business, which Baozun expects to begin contributing to both revenue and profit from 2027 onward.

BEC non-GAAP operating income rose to RMB107 million, which management described as its highest second-quarter level since 2022. Baozun attributed the improvement to cost discipline, structural efficiency measures and a greater focus on higher-value revenue streams.

The company has begun piloting AI and automation tools in Gap’s e-commerce operations to streamline selected processes. Qiu said the early trials showed “substantial productivity gains,” while Wu said the near-term emphasis is on improving operational efficiency rather than directly driving sales growth. Baozun expects to accelerate these initiatives over the next 18 months.

Brand Management Revenue Rises 22%

Brand management, or BBM, revenue increased 22% year over year to RMB486 million. The segment’s non-GAAP operating loss narrowed to RMB33 million from RMB35 million a year earlier, despite additional investment in emerging brands.

Gap remained the primary driver of BBM performance. Ken Huang, chief financial officer of Baozun Brand Management, said Gap’s non-GAAP operating loss improved by more than 40% year over year, while same-store sales rose in the 20% range for a second consecutive quarter.

Management cited gains in traffic, store productivity and gross margin, as well as product assortment optimization, data-driven merchandising, tactical pricing and supply-chain management. Gap posted double-digit growth across women’s, men’s and kids’ categories, Huang said.

BBM gross margin expanded 383 basis points from a year earlier to 56.1%. Gap inventory turnover stood at 128 days, which Huang said reflected disciplined inventory management and healthy sell-through.

Baozun opened eight Gap stores during the quarter, bringing the network to 167 stores. The company remains on track to open more than 50 new stores in 2026, with a focus on tier-one and tier-two cities. Huang said management had seen further month-over-month improvement in July and August and now expects full-year BBM revenue growth of 20% to 25%.

The company is also investing in Hunter, opening three flagship stores during the first half to bring its store count to 16 as of June 30. Hunter expanded beyond rain boots into urban apparel and outdoor wear. Huang said apparel represented more than 30% of sales in certain Hunter stores during the second quarter.

Margins, Expenses and Liquidity

Group gross profit from product sales increased 21.3% to RMB343 million. Blended product-sales gross margin expanded 499 basis points to 33%. E-commerce product-sales gross margin was 13%, compared with 12.8% a year earlier, while BBM gross margin increased from 52% to 56.1%.

Sales and marketing expense increased by RMB239 million to RMB1.2 billion. The increase included RMB188 million in BEC spending, largely tied to creative content and marketing on Douyin and Xiaohongshu, and RMB46 million in BBM spending associated with store expansion and marketing activity.

Other operating costs declined. Fulfillment costs fell 9% to RMB549 million, technology and content expenses declined 0.4% to RMB114 million, and general and administrative expenses decreased 22% to RMB175 million.

Working-capital turnover improved to 107 days from 148 days a year earlier, while inventory turnover improved to 112 days from 134 days. As of June 30, Baozun held RMB2.9 billion in cash equivalents, restricted cash and short-term investments.

Management Sees Brand and AI Opportunities

Qiu said Baozun is seeing more opportunities involving international brands exploring alternatives for their China operations. However, he said the company’s priority remains improving the performance of its existing BBM portfolio, including Gap, Hunter and Sweaty Betty.

Management said it has not observed significant changes in brand partners’ spending budgets, although partners are placing greater emphasis on content-driven marketing and shifting inventory toward livestreaming platforms such as Douyin. Wu said shelf-based e-commerce has become stable, while livestreaming platforms continue to grow.

By category, Baozun said it continues to see strong growth in premium luxury, sports and outdoor, fashion, and health and care sectors.

About Baozun (NASDAQ:BZUN)

Baozun Inc is a leading pure-play e-commerce solutions provider based in Shanghai, China. The company specializes in helping global and domestic brands establish and manage their online stores across major Chinese platforms, including Tmall, JD.com, and WeChat. By offering a one-stop service model, Baozun enables brand owners to outsource the complexities of digital retail operations and focus on product development and customer engagement.

The company's suite of services encompasses store design and setup, digital marketing and promotion, technology integration, order fulfillment, warehousing and logistics, customer care, and data analytics.

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