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Vipshop Holdings: Vipshop Reports Unaudited Third Quarter 2015 Financial Results

The following excerpt is from the company's SEC filing.

3Q15 Total Net Revenue Up 63% YoY to RMB8.67 Billion (US$1.36 Billion)

3Q15 Income from Operations Up 241% to RMB436 Million (US$69 Million)

3Q15 Net Income Attributable to Shareholders Up 90% to RMB317 Million (US$50 Million)

Guangzhou, China, November 17, 2015 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 third quarter ended September 30, 2015.

Third Quarter 2015 Highl ights

Total net revenue

increased by 63% to RMB8.67 billion (US$1.36 billion) from RMB5.33 billion in the prior year period.

Gross profit

increased by 63% to RMB2.16 billion (US$339 million) from RMB1.33 billion in the prior year period. Gross margin remained stable at 24.9%, as compared to the prior year period.

Income from operations

increased by 241% to RMB436 million (US$69 million) from RMB128 million in the prior year period. Operating margin increased to 5.0% from 2.4% in the prior year period.

Non-GAAP income from operations

increased by 131% to RMB587 million (US$92 million) from RMB254 million in the prior year period. Non-GAAP operating margin

increased to 6.8% from 4.8% in the prior year period.

Net income attributable to Vipshops shareholders

increased by 90% to RMB317 million (US$50 million) from RMB167 million in the prior year period. Net income margin attributable to Vipshops shareholders increased to 3.7% from 3.1% in the prior year period.

Non-GAAP net income attributable to Vipshops shareholders

increased by 62% to RMB453 million (US$71 million) from RMB279 million in the prior year period. Non-GAAP net income margin attributable to Vipshops shareholders

remained stable at 5.2%, as compared to the prior year period.

Mr. Eric Shen, chairman and chief executive officer of Vipshop, stated, Even though we are disappointed that we didnt achieve our revenue guidance for the third quarter 2015, we firmly believe that the business fundamentals and growth dynamics of our platform, in terms of orders, customers and revenues, remain solid. We added 5.4 million new active customers

in the third quarter, bringing our number of total active customers to 14.6 million. Customer loyalty and buying activity also continued to strengthen during the quarter: Customers made 3.1 purchases and spent RMB595 on average, up from 2.9 purchases and RMB541, respectively, in the prior year period; and 92.5% of our total orders were made by repeat customers. Our GMV from mobile rose to 79% in the third quarter, up from 57% one year ago, further demonstrating the strong appeal of our flash sale offering to on-the-go shoppers. Our cross-border e-commerce business continued to ramp up, with 164% sequential growth. Overall, our cross-border initiatives, supplier and consumer financing programs and logistical enhancements further characterize our platform as an ecosystem designed to drive value for global brands and customers alike.

Mr. Donghao Yang, chief financial officer of Vipshop, commented, Unfortunately, our forecast for the third quarter did not hold up due to unexpected seasonal patterns this year especially late into the quarter, as well as new customer acquisition growth being slightly softer than expected. This was partly due to our conservative approach in optimizing our marketing budget allocation and not investing more aggressively into new user acquisition, leading us to miss our top-line guidance. However, we still managed to increase revenues by over 63% year over year, as well as expand our operating margin to 5.0% from 2.4% in the prior year period. By the close of the third quarter, our warehouse capacity reached 1.6 million square meters, and our total orders covered by our network of in-house and invested couriers reached 80%; in both cases we met our year-end targets one quarter ahead of time. We are also announcing that our board of directors has given us an additional authorization to repurchase up to $300 million of our ADSs. We believe that this initiative demonstrates our confidence in the long-term outlook for our business. Looking ahead, we remain confident in our ability to continue to scale our platform in terms of revenue, order and customer growth as well as logistical expansion and optimization, as we build upon our proven model and create enduring value for our shareholders.

Non-GAAP income from operations is a non-GAAP financial measure, which is defined as income from operations excluding share-based compensation expenses and amortization of intangible assets resulting from a business acquisition.

Non-GAAP operating income margin is a non-GAAP financial measure, which is defined as non-GAAP income from operations as a percentage of total net revenues.

Non-GAAP net income attributable to Vipshops shareholders is a non-GAAP financial measure, which is defined as net income attributable to Vipshops shareholders excluding share-based compensation expenses and amortization of intangible assets resulting from a business acquisition and equity method investments.

Non-GAAP net income margin attributable to Vipshops shareholders is a non-GAAP financial measure, which is defined as Non-GAAP net income attributable to Vipshops shareholders as a percentage of total net revenues.

New active customers refer to any customer who, for a given period, (i) is an active customer during such period, and (ii) had not purchased products from the Company or its online marketplace platforms prior to such period.

Third Quarter 2015 Financial Results

REVENUE

Total net revenue for the third quarter of 2015 increased by 63% to RMB8.67 billion (US$1.36 billion) from RMB5.33 billion in the prior year period, primarily driven by the growth in the numbers of total active customers, repeat customers, total orders, as well as the increasing revenue contribution from the mobile platform.

The number of active customers

for the third quarter of 2015 increased by 48% to 14.6 million from 9.8 million in the prior year period. The number of total orders

for the third quarter of 2015 increased by 58% to 44.8 million from 28.3 million in the prior year period

In an effort to increase focus on its core flash sales business, the Company began to substantially scale down its lower-margin group-buy business in the third quarter of 2014. Excluding the impact of the group-buy business and Lefeng, the number of total customers and total orders for Vipshops core flash sales business increased by 71% and 75% year over year, respectively. On the mobile platform, the number of total active customers and total orders for Vipshops core flash sales business increased by 137% and 141% year over year, respectively.

GROSS PROFIT

Gross profit for the third quarter of 2015 increased by 63% to RMB2.16 billion (US$339 million) from RMB1.33 billion in the prior year period, primarily attributable to the expanding scale of the business. Gross margin remained stable at 24.9%, as compared with the prior year period.

OPERATING INCOME AND EXPENSES

Total operating expenses for the third quarter of 2015 were RMB1.80 billion (US$283 million), as compared with the RMB1.24 billion in the prior year period. As a percentage of total net revenue, total operating expenses decreased to 20.7% from 23.3% in the prior year period.

Fulfillment expenses

for the third quarter of 2015 were RMB778 million (US$122 million), as compared with RMB509 million in the prior year period, primarily reflecting the increase in sales volume, and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses decreased to 9.0% from 9.6% in the prior year period, primarily reflecting the scale effect associated with the growth in total net revenue and the increase in average ticket size.

Marketing expenses

for the third quarter of 2015 were RMB470 million (US$74 million), as compared with RMB284 million in the prior year period, reflecting the Companys strategy to drive long-term growth through increasing investments in strengthening its brand awareness, attracting new users and expanding market share. As a percentage of total net revenue, marketing expenses were 5.4%, as compared to 5.3% in the prior year period.

Technology and content expenses

for the third quarter of 2015 were RMB253 million (US$40 million), as compared with RMB190 million in the prior year period, reflecting the Companys continued efforts to invest in human capital and advanced technologies such as data analytics, which can help improve the ability to predict consumer behavior and further enhance user experience. As a percentage of total net revenue, technology and content expenses decreased to 2.9% from 3.6% in the prior year period, primarily reflecting the scale effect associated with the growth in total net revenue.

General and administrative expenses

for the third quarter of 2015 were RMB297 million (US$47 million), as compared with RMB259 million in the prior year period. As a percentage of total net revenue, general and administrative expenses decreased to...


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