Vipshop Holdings Limited, an online discount retailer for brands in China, including many U.S. active lifestyle brands, reported total net revenues for the second quarter increased 13.6 percent year-over-year to RMB27.9 billion (US$3.8 billion) from RMB24.5 billion in the prior-year period, primarily attributable to the growth in active customers and spending driven by the recovery in consumption of discretionary categories.

  • The number of active customers for the second quarter increased 9.6 percent year-over-year to 45.7 million from 41.7 million in the prior-year period.
  • Total orders for the second quarter increased 14.7 percent year-over-year to 213.8 million from 186.3 million in the prior-year period.
  • Gross merchandise value for the quarter increased 24.5 percent year-over-year to RMB50.6 billion from RMB40.6 billion in the prior-year period.

“We had a strong second quarter driven by our well-executed merchandising strategy,” said company Chairman and CEO Eric Shen in a release of results for the quarter. “During the quarter, our team was able to secure much more quality supply from core brands, which fueled the broad-based strength in apparel-related categories. Customers also showed a stronger preference for us as they constantly seek value for money, led by robust momentum in our Super VIP members.”

Gross profit for the second quarter increased 23.4 percent year-over-year to RMB6.2 billion (US$855.3 million) from RMB5.0 billion in the prior-year period. Gross margin for the second quarter increased 170 basis points to 22.2 percent of sales from 20.5 percent in the prior-year period.

Total operating expenses for the second quarter increased 13.7 percent year-over-year to RMB4.5 billion (US$617.8 million) from RMB3.9 billion in the prior-year period. As a percentage of total net revenues, total operating expenses for the second quarter were 16.1 percent of sales, which stayed flat compared with the prior year period.

  • Fulfillment expenses for the second quarter increased 22.8 percent year-over-year to RMB2.2 billion (US$300.8 million) from RMB1.8 billion in the prior-year period. As a percentage of total net revenues, fulfillment expenses for the second quarter were 7.8 percent of sales, compared with 7.2 percent in the prior year period.
  • Marketing expenses for the second quarter increased 60.6 percent year-over-year to RMB892.5 million (US$123.1 million) from RMB555.6 million in the prior-year period. As a percentage of total net revenues, marketing expenses for the second quarter were 3.2 percent of sales, compared with 2.3 percent in the prior year period.
  • Technology and content expenses for the second quarter increased 7.6 percent year-over-year to RMB443.0 million (US$61.1 million) from RMB411.8 million in the prior-year period. As a percentage of total net revenues, technology and content expenses for the second quarter decreased to 1.6 percent of sales from 1.7 percent in the prior year period.
  • General and administrative expenses for the second quarter decreased by 19.4 percent year-over-year to RMB963.1 million (US$132.8 million) from RMB1.2 billion in the prior-year period. As a percentage of total net revenues, general and administrative expenses for the second quarter decreased to 3.5 percent of sales from 4.9 percent in the prior year period.

Income from operations for the second quarter increased 51.1 percent year-over-year to RMB1.9 billion (US$264.3 million) from RMB1.3 billion in the prior-year period. Operating margin for the second quarter increased to 6.9 percent of sales from 5.2 percent in the prior-year period.

  • Non-GAAP income from operations for the second quarter, excluding share-based compensation expenses, increased 48.2 percent year-over-year to RMB2.3 billion (US$316.9 million) from RMB1.6 billion in the prior year period. Non-GAAP operating margin for the second quarter increased to 8.2 percent of sales from 6.3 percent in the prior year period.

Net income attributable to Vipshop’s shareholders for the second quarter increased 63.5 percent year-over-year to RMB2.1 billion (US$289.3 million) from RMB1.3 billion in the prior-year period. Net margin attributable to Vipshop’s shareholders for the second quarter increased to 7.5 percent from 5.2 percent in the prior year period. Net income attributable to Vipshop’s shareholders per diluted ADS for the second quarter increased to RMB3.75 (US$0.52) from RMB1.97 in the prior-year period.

  • Non-GAAP net income attributable to Vipshop’s shareholders for the second quarter increased 50.8 percent year-over-year to RMB2.4 billion (US$331.2 million) from RMB1.6 billion in the prior-year period. The non-GAAP measure excludes:
    • share-based compensation expenses,
    • impairment loss of investments,
    • investment loss (gain) and revaluation of investments excluding dividends,
    • reconciling items on the share of equity method investments, and
    • tax effects on non-GAAP adjustments.
  • Non-GAAP net margin attributable to Vipshop’s shareholders for the second quarter increased to 8.6 percent of sales from 6.5 percent in the prior-year period. Non-GAAP net income attributable to Vipshop’s shareholders per diluted ADS for the second quarter increased to RMB4.30 (59 cents US) from RMB2.45 in the prior-year period.

As of June 30, the company had cash and cash equivalents and restricted cash of RMB18.3 billion (US$2.5 billion) and short-term investments of RMB1.5 billion (US$200.2 million).

Business Outlook
For the third quarter of 2023, the company expects its total net revenues to be between RMB21.6 billion and RMB22.7 billion, representing a year-over-year increase of approximately flat to 5 percent. These forecasts reflect the company’s current and preliminary view of the market and operational conditions, subject to change.

Exchange Rate Note
The company’s business is primarily conducted in China, and most revenues generated are denominated in Renminbi. Currency conversions of Renminbi amounts into U.S. dollars are solely for the reader’s convenience. Unless otherwise noted, all translations from Renminbi to U.S. dollars are made at RMB7.2513 to US$1.00, the effective noon buying rate on June 30, 2023, as outlined in the H.10 statistical release of the Federal Reserve Board.

Photo courtesy Selling on VipShop/VIP International, China