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Vipshop Reports Unaudited First Quarter 2018 Financial Results

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Vipshop Reports Unaudited First Quarter 2018 Financial Results

Conference Call to Be Held at 8:00 A.M. U.S. Eastern Time on May 15, 2018

PR Newswire

GUANGZHOU, China, May 14, 2018 /PRNewswire/ -- Vipshop Holdings Limited (NYSE:VIPS), a leading online discount retailer for brands in China ("Vipshop" or the "Company"), today announced its unaudited financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Highlights

  • Total net revenue for the first quarter of 2018 increased by 24.6% year over year to RMB19.9 billion (US$3.2 billion) from RMB16.0 billion in the prior year period.
  • The number of active customers[1] for the trailing twelve months ended March 31, 2018 was 56.6 million, as compared with 55.5 million in the prior year period.
  • Total orders[2] for the first quarter of 2018 increased by 25% year over year to 90.2 million from 72.1 million in the prior year period.
  • Gross profit for the first quarter of 2018 increased by 8.5% year over year to RMB4.0 billion (US$639.2 million) from RMB3.7 billion in the prior year period.
  • Net income attributable to Vipshop's shareholders for the first quarter of 2018 was RMB529.7 million (US$84.5 million), as compared with RMB551.9 million in the prior year period.
  • Non-GAAP net income attributable to Vipshop's shareholders[3] for the first quarter of 2018 was RMB727.7 million (US$116.0 million), as compared with RMB799.4 million in the prior year period.

Mr. Eric Shen, Chairman and Chief Executive Officer of Vipshop, stated, "In the first quarter of 2018, we delivered solid operational results as demonstrated by the continued improvement in customer stickiness and loyalty. We made further progress with our strategic collaboration with Tencent and JD.com, opening up the entry on JD's app homepage in mid-March and the WeChat wallet entry in early April. Looking ahead, we will continue to work closely with Tencent and JD.com in order to improve the traffic flow and conversion rates, which will contribute meaningfully to our long-term customer and revenue growth."  

Mr. Donghao Yang, Chief Financial Officer of Vipshop, further commented, "We finished the first quarter of 2018 with a solid 25% year-over-year increase in topline, which was at the high-end of our guidance range. Our average revenue per customer increased by 25% year over year, driven by improved customer shopping frequency. Leveraging the support from Tencent and JD.com, we will continue to grow our topline and expand our market share."

Recent Business Highlights

  • Vipshop launched its JD flagship store on March 3, 2018 and opened up its entry on the homepage of JD's app to all customers on March 14, 2018. Vipshop's JD flagship store attracted approximately half a million followers within the first two months of launching. The majority of customers from the JD channel are new customers, and male apparel is the strongest category. The Company opened access of its WeChat wallet entry to all traffic on April 8, 2018 and conducted a round of promotions with red dots prompting users to click into Vipshop's WeChat mini-program in mid-April, 2018. Comparing to the Company's app users, customers from its mini-program are younger and more male-concentrated.
  • In the first quarter of 2018, Vipshop's average revenue per customer increased by approximately 25% year over year, driven by the robust 25% year-over-year increase in average number of orders per customer. During this quarter, 86% of customers were repeat customers, up from 77% in the prior year period, and approximately 96% of orders were placed by repeat customers, up from 92% in the prior year period.
  • Vipshop's Board of Directors appointed Mr. Martin Lau, President and Executive Director of Tencent Holdings Limited (SEHK: 0700), as a Director of the Company's Board, effective December 29, 2017. In addition, Mr. Bin Wu resigned from the Company's Board of Directors, effective January 30, 2018.
  • On May 8, 2018, L'Oréal Paris launched its official WeChat mini-program, which was developed and operated by Vipshop. Vipshop is actively exploring more opportunities within the WeChat ecosystem with its brand partners, empowering brands to grow their business leveraging the robust traffic within WeChat.
  • In the first quarter of 2018, Vipshop added an overseas warehouse in Frankfurt, Germany, bringing the Company's total international warehousing capacity to approximately 59,000 square meters. Vipshop currently has overseas warehouses in nine locations, including Hong Kong, New York, Paris, Milan, London, Seoul, Tokyo, Sydney, and Frankfurt. As of March 31, 2018, the Company has approximately 2.8 million square meters of total warehousing space, of which around 1.8 million square meters is owned by Vipshop.
  • During the first quarter of 2018, Vipshop delivered approximately 99% of its orders through its in-house last mile delivery network, up from 93% in the prior year period. More than 81% of customer returns were handled directly by Vipshop's in-house last mile delivery network, up from 67% in the prior year period.
  • As of March 31, 2018, close to 1.5 million customers enrolled in Vipshop's Super VIP Paid Membership Program, representing a 54% increase sequentially.
  • Vipshop's cross-border business was particularly strong during this year's 4.19 promotional event, with sales increasing by 43% year over year.
  • Vipshop recently added a number of popular domestic and international brands to its platform, including Furla, Stella McCartney, and Dodo.

First Quarter 2018 Financial Results

REVENUE

Total net revenue for the first quarter of 2018 increased by 24.6% year over year to RMB19.9 billion (US$3.2 billion) from RMB16.0 billion in the prior year period, primarily driven by the improvement in average revenue per customer.

GROSS PROFIT

Gross profit for the first quarter of 2018 increased by 8.5% to RMB4.0 billion (US$639.2 million) from RMB3.7 billion in the prior year period. Gross margin for the first quarter of 2018 was 20.2% as compared with 23.2% in the prior year period. In the first quarter of 2018, the Company reclassified costs related to third-party logistics from fulfillment expenses into cost of revenues, which had a 0.9% impact on the gross margin for the quarter. The Company continues to balance investment in promotional activities with its broader marketing efforts to drive growth.

OPERATING INCOME AND EXPENSES

Total operating expenses for the first quarter of 2018 were RMB3.5 billion (US$551.4 million), as compared with RMB3.1 billion in the prior year period. As a percentage of total net revenue, total operating expenses for the first quarter of 2018 decreased to 17.4% from 19.6% in the prior year period.

  • Fulfillment expenses for the first quarter of 2018 were RMB1.7 billion (US$276.4 million), as compared with RMB1.4 billion in the prior year period, primarily reflecting an increase in sales volume and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses for the first quarter of 2018 decreased to 8.7% from 9.0% in the prior year period.
  • Marketing expenses for the first quarter of 2018 were RMB645.3 million (US$102.9 million), as compared with RMB729.5 million in the prior year period. As a percentage of total net revenue, marketing expenses for the first quarter of 2018 decreased to 3.2% from 4.6% in the prior year period.
  • Technology and content expenses for the first quarter of 2018 were RMB466.4 million (US$74.3 million), as compared with RMB419.5 million in the prior year period. As a percentage of total net revenue, technology and content expenses for the first quarter of 2018 decreased to 2.3% from 2.6% in the prior year period.
  • General and administrative expenses for the first quarter of 2018 were RMB613.6 million (US$97.8 million), as compared with RMB542.2 million in the prior year period. As a percentage of total net revenue, general and administrative expenses for the first quarter of 2018 decreased to 3.1% from 3.4% in the prior year period.

Income from operations for the first quarter of 2018 was RMB662.7 million (US$105.6 million), as compared with RMB736.6 million in the prior year period. Operating margin for the first quarter of 2018 was 3.3% as compared with 4.6% in the prior year period.

Non-GAAP income from operations[4], which excludes share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, was RMB878.1 million (US$140.0 million) as compared with RMB1.0 billion in the prior year period. Non-GAAP operating income margin[5] for the first quarter of 2018 was 4.4% as compared with 6.3% in the prior year period.

NET INCOME

Net income attributable to Vipshop's shareholders for the first quarter of 2018 was RMB529.7 million (US$84.5 million), as compared with RMB551.9 million in the prior year period. Net margin attributable to Vipshop's shareholders for the first quarter of 2018 was 2.7% as compared with 3.5% in the prior year period, primarily attributable to the Company's investment in promotional activities to drive growth. Net income attributable to Vipshop's shareholders per diluted ADS[6] was RMB0.77 (US$0.12) as compared with RMB0.92 in the prior year period.

Non-GAAP net income attributable to Vipshop's shareholders, which excludes share-based compensation expenses, impairment loss of investments, and amortization of intangible assets resulting from business acquisitions and equity method investments, was RMB727.7 million (US$116.0 million) as compared with RMB799.4 million in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders[7] for the first quarter of 2018 was 3.7% as compared with 5.0% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS[8] was RMB1.05 (US$0.17) as compared with RMB1.31 in the prior year period.

For the quarter ended March 31, 2018, the Company's weighted average number of ADSs used in computing diluted income per ADS was 702,451,555.

BALANCE SHEET AND CASH FLOW

As of March 31, 2018, the Company had cash and cash equivalents and restricted cash of RMB7.4 billion (US$1.2 billion) and short term investments of RMB1.8 billion (US$288.1 million).

For the quarter ended March 31, 2018, net cash from operating activities was RMB171.2 million (US$27.3 million), and free cash flow[9], a non-GAAP measurement of liquidity, was as follows:

For the three months ended


Mar 31, 2017

        

RMB'000

Mar 31, 2018

         

RMB'000

Mar 31, 2018

         

US$'000

Net cash from operating activities

736,744

171,245

27,300

Add: Impact from Internet financing activities[10]

277,524

(718,952)

(114,618)

Less: Capital expenditures

(585,462)

(816,167)

(130,116)

Free cash flow in/(out)

428,806

(1,363,874)

(217,434)

For the trailing twelve months ended


Mar 31, 2017

        

RMB'000

Mar 31, 2018

         

RMB'000

Mar 31, 2018

         

US$'000

Net cash from operating activities

3,414,946

415,752

66,281

Add: Impact from Internet financing activities[10]

2,557,169

2,304,275

367,356

Less: Capital expenditures

(2,715,495)

(2,705,155)

(431,265)

Free cash flow in

3,256,620

14,872

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