Vipshop Holdings Limited (VIPS) Q4 2022 Earnings Call Transcript

Vipshop Holdings Limited (NYSE:VIPS) Q4 2022 Earnings Conference Call February 23, 2023 7:30 AM ET

Company Participants

Jessie Zheng - Head, IR

Eric Shen - Co-Founder, Chairman and CEO

David Cui - CFO

Conference Call Participants

Vicky Wei - Citi

Thomas Chong - Jefferies

Operator

Ladies and gentlemen, everyone, and invited to nan Vipshop Holdings Limited Fourth Quarter and Full Year 2022 Earnings Conference Call.

At this time, I would for illustration to move nan telephone to Miss Jessie Zheng, Vipshop, Head of Investor Relations. Please proceed.

Jessie Zheng

Thank you, operator. Hello everyone, and convey you for joining Vipshop's 4th fourth and afloat twelvemonth 2022 net convention call. With america coming are Eric Shen, our Co-Founder, Chairman and CEO and David Cui, our CFO.

Before guidance originates their prepared remarks, I would for illustration to punctual you that nan chat coming will incorporate forward-looking statements made nether nan safe harbor provisions of nan US Private Securities Litigation Reform Act of 1995. Forward-looking statements are taxable to risks and uncertainties that whitethorn origin results to disagree materially from our existent expectations. Potential risks and uncertainties include, but are not constricted to those outlining our safe harbor statements successful our net merchandise and nationalist filing pinch nan Securities and Exchange Commission, which besides applies to this 4th to nan grade immoderate forward-looking statements whitethorn beryllium made.

Please statement that definite financial measures utilized connected this call, specified arsenic non-GAAP operating income, non-GAAP nett income and non-GAAP nett income per ADS are not presented successful accordance pinch U.S. GAAP, please mention to our net merchandise for specifications relating to nan reconciliation of our non-GAAP measures to GAAP measures.

With that, I would now for illustration to move nan telephone complete to Mr. Eric Shen.

Eric Shen

Good greeting and bully evening, everyone. Welcome and convey you for joining our 4th fourth and afloat twelvemonth 2022 net convention call. In nan first -- successful nan first quarter, we erstwhile again demonstrated beardown net powerfulness and made tropic [ph] backdrop. The apical statement betterment was impacted by nan short word disruption connected economical activities from nan surge of COVID-19 infections.

Apparel related GMV fared amended than expected somewhat down year-over-year arsenic we actively worked retired merchandising action to fulfill seasonal demand. Customer trends continued to retrieve year-over-year. The desire to walk remained healthly pinch customer visits, intelligibly prime picking up and nan progressive ace VIP customers summation by 13% accounting for 42% of our online spending.

Overall, we accomplished value improvement successful 2022, delivering costs level nett income astatine RMB6.8 cardinal while navigating done highly challenging year. Our business fundamentals has been stronger aft we incrementally superior enhancement connected merchandising pollutions and technologies.

On merchandising, we now person a upgrade portfolio of blend and products offering that reinforced nan worth proposition of our level pinch hundreds of brands astatine nan halfway of our business. New trending and nan precocious extremity scheme and a batch much selections, integration size, bring a caller look to our platform.

For nan afloat twelvemonth of 2022, co-brands has affirmative maturation connected Vipshop pinch greater contributions to full GMV. Apparel-related GMV outperformance non-apparel categories, The made for Vipshop shop customized statement processing into nan much selective postulation that enjoyed higher conventions than wide merchandise. Operationally, we are much businesslike successful deploying assets to champion support expansive partners, launching innovative channels to build income momentum and expanding customer engagement successful a costs effective way. That's really we negociate it to turn nan guidelines of value customer pinch 6.7 cardinal SVIP members many times shopping pinch america past year.

Technologies go much instrumental successful each facet of our business. For example, our afloat upgrade merchant level enabled marque partners to prosecute successful a much measurable way, absolute guidelines specified arsenic offering customers incentives and nan generations waste lead. Our beardown execution successful 2022, gives america assurance arsenic we look up for nan post-pandemic opportunity. We are group to return advantage of our plentiful inventory. Our master purchaser squad proceed to beryllium nan awesome advantage arsenic they activity much efficaciously pinch marque partners.

Though uncertainties still stay travel China's opening. we did stay, we did spot immoderate betterment successful spending connected apparel and different discretionary items since nan opening of this year. There is opportunities for america to pull caller customs and seizure much civilization spend. We judge we are now successful nan wellness position than earlier to execute some adjacent and profitability and proceed delivering worth to our shareholders.

At this point, fto maine manus complete nan telephone to our CFO, David Cui, who will spell complete our financial results.

David Cui

Thanks Eric and hullo everyone. In nan 4th quarter, we did our level champion to support nan business connected track, contempt nan spike of COVID-19 infections successful China. We are pleased that our revenues proceed to recover. While different 4th of beardown profitability demonstrated nan resilience and spot of our business.

Gross separator accrued by 2 percent points to 21.7% from a twelvemonth agone and really improved crossed each categories. Thanks to heighten nan merchandising strategy, fortify costs power arsenic good arsenic dedicate guidance of business processes. Our operating separator achieved an all-time precocious arsenic we consistently attraction connected operational discipline.

As a result, we had nan astir profitable 4th successful 2 years pinch non-GAAP nett income up by 24% to RMB2.2 cardinal and nett separator astatine 7%. That helps america decorativeness disconnected nan afloat twelvemonth of 2022 astatine a grounds level of profitability.

Last year, we generated successful a much than RMB7.8 cardinal free rate travel repurchase nan full of USD952 cardinal of our ADS nether our buyback programs. We are committed to delivering worth to our shareholders by steadily executing nan programs.

As we entered nan post-pandemic era, pursuing China's reopening, we are moving quickly, but rationally to prehend nan opportunities for growth, while allocating our resources wherever we will supply nan champion returns complete time. At nan aforesaid time, we support our attraction connected mundane cognition to make nan synergies and ratio gains. We are affirmative connected regaining maturation momentum while sustaining patient profitability.

Now moving to our elaborate quarterly financial highlights, earlier I get started, I would for illustration to explain that each financial numbers presented beneath are successful Renminbi and each nan percent changes are year-over-year changes unless different noted.

Total nett revenues for nan 4th fourth of 2022 were RMB31.8 cardinal arsenic compared pinch RMB34.1 cardinal successful nan anterior twelvemonth period, chiefly equitable to short-term disruptions connected economical activities from nan surge of COVID-19 infections nationwide. Gross profit accrued by 2.8% year-over-year to RMB6.9 cardinal from RMB6.7 cardinal successful nan anterior twelvemonth period,

Gross separator accrued nan 21.7% from 19.7% successful nan anterior twelvemonth period. Total operating expenses decreased by 6.5% year-over-year to RMB4.6 cardinal from RMB5.0 cardinal successful nan anterior twelvemonth period. As a percent of full nett revenue, full operating expenses was 14.6%, which stayed level arsenic compared pinch nan anterior twelvemonth period.

Fulfilment expenses were RMB2.2 billion, which mostly stayed level arsenic compared pinch anterior twelvemonth period. As a percent of a full nett revenues, fulfilment expenses was 6.8% arsenic compared pinch 6.4% successful a anterior twelvemonth period. Marketing expenses decreased by 17.6% year-over-year to RMB944.1 cardinal from RMB1.1 cardinal successful nan anterior twelvemonth period.

As a percent of a full nett revenues, trading expenses decreased to 3.0% from 3.4% successful nan anterior twelvemonth period, chiefly equitable to much prudent trading strategy. Technology and contented expenses decreased by 7.8% year-over-year to RMB408.5 cardinal from RMB443.0 cardinal successful nan anterior twelvemonth period. As a percent of full nett revenues, exertion and contented expenses was 1.3%, which stayed level arsenic compared pinch nan anterior twelvemonth period.

General and administrative expenses decreased by 5.2% year-over-year to RMB1.1 cardinal arsenic compared pinch RMB1.2 cardinal successful nan anterior twelvemonth period. As a percent of full nett revenue, wide and administrative expenses was 3.6% arsenic compared pinch 3.5% successful nan anterior twelvemonth period.

Income from operations accrued by 37.1% year-over-year to RMB2.5 cardinal arsenic compared pinch RMB1.8 cardinal successful their anterior twelvemonth period. Operating separator accrued to 7.9% from 5.4% successful nan anterior twelvemonth period. Non-GAAP income from cognition accrued by 33.6% year-over-year to RMB2.8 cardinal from RMB2.1 cardinal successful nan anterior twelvemonth period.

Non-GAAP operating income separator accrued to 8.7% from 6.1% successful nan anterior twelvemonth period. Net income attributable to Vipshop's shareholders summation by 57.9% year-over-year to RMB2.2 cardinal from RMB1.4 cardinal successful nan anterior twelvemonth period. Net separator attributable to Vipshop's shareholders accrued nan to 7.0% from 4.1% successful nan anterior twelvemonth period.

Net income attributable to Vipshop's shareholders per diluted ADS accrued to RMB3.66 from RMB2.07 successful nan anterior twelvemonth period. Non-GAAP nett income attributable to Vipshop's shareholders accrued by 23.9% year-over-year to RMB2.2 cardinal from RMB1.8 cardinal successful nan anterior twelvemonth period.

Non-GAAP nett separator astatine buildable to Vipshop's shareholders accrued to 7.0% from 5.3% successful nan anterior twelvemonth period. Non-GAAP nett income attributable to Vipshop's shareholders per diluted ADIs accrued to RMB3.65 from RMB2.64 successful nan anterior twelvemonth period. As of December 31, 2022, we had rate and rate balanced and restricted rate of RMB23.1 cardinal and short word investments of RMB1.6 billion.

Now, I'd for illustration concisely locomotion done nan highlights of our afloat twelvemonth results. Total nett revenues for nan afloat twelvemonth of 2022 were RMB103.2 cardinal arsenic compared pinch RMB117.1 cardinal successful nan anterior year. Gross profit was RMB21.6 cardinal arsenic compared pinch RMB23.1 cardinal successful nan anterior year. Gross separator accrued to 21.0% from 19.7% successful nan anterior year. Income from operations accrued by 11.0% year-over-year to RMB6.2 cardinal from RMB5.6 cardinal successful nan anterior year.

Operating separator accrued to 6.0% from 4.8% successful nan anterior year. Non-GAAP income from operations accrued by 12.1% year-over-year to RMB7.4 cardinal from RMB6.6 cardinal successful nan anterior year. Non-GAAP operating income separator accrued to 7.2% from 5.6% successful nan anterior year. Net income attributable to Vipshop's shareholders accrued by 34.6% year-over-year to RMB6.3 cardinal from RMB4.7 cardinal successful nan anterior year.

Net separator attributable to Vipshop's shareholders accrued to 6.1% from 4.0% successful nan anterior year. Net income attributable to Vipshop's shareholders per diluted ADS accrued to RMB9.83 from RMB6.75 successful nan anterior year. Non-GAAP nett income attributable to Vipshop's shareholders accrued by 13.7% year-over-year to RMB6.8 cardinal from RMB6.0 cardinal successful nan anterior year.

Non-GAAP attributable to Vipshop's shareholders accrued to 6.6% from 5.1% successful nan anterior year. Non-GAAP nett income attributable to Vipshop's shareholders per diluted ADS accrued to RMB10.67 from RMB8.67 successful nan anterior year.

Looking guardant to nan first 4th of 2023, we expect our full nett revenues to beryllium betwixt RMB25.2 cardinal and RMB26.5 billion, representing a year-over-year summation of astir 0% to 5%. Please statement that this forecast reflects our existent and preliminary position of nan marketplace and operational conditions, which is taxable to change.

With that, I'd now for illustration to unfastened nan telephone to Q&A.

Question-and-Answer Session

Operator

[Operator instructions] And our first mobility comes from Alicia Yap pinch Citi. Your statement is open. Your statement is open.

Vicky Wei

[Foreign language] Thanks, guidance for taking my question. This is Vicki Wei connected behalf of Alicia Yap, and I person 2 questions. First, really guidance position nan existent title landscape? Will nan caller step-up trading campaigns by e-commerce peers person immoderate effect connected Vipshop to measurement up connected promotional discount arsenic well?

My 2nd mobility is what is nan institution plans for this twelvemonth successful position of caller personification acquisition and really will that effect margins transmission for 2023? Thank you.

Eric Shen

[indiscernible] Okay. First to reply your mobility connected competition, evidently location is immoderate buzz successful nan e-commerce industry, particularly successful nan support exemplary e-commerce. Some peers person launched taxable campaigns. But remember, Vipshop stay highly focused connected apparel, not standardized items. And that apparel does not only dangle connected pricing, but besides depends connected a batch of different factors for illustration styles, sizes is simply a overmuch blase segment.

Second moreover connected standardized items, we are trying to unafraid unsocial merchandise proviso from our apical brands pinch unsocial 1,000 SKUs. We are not looking for arsenic galore SKUs arsenic possible. We are trying to build a overmuch much selective SKU. So we were not getting progressive successful a pricing war. We are trying to turn our business successful a healthier way. We are not going to sacrifice profitability by utilizing a batch of subsidies successful speech for customer growth.

I deliberation nan cardinal -- nan cardinal constituent for nan Vipshop to turn its customers, to turn its business is to reenforce this unsocial worth proposition successful discount unit and past people customers will person a amended cognition astir Vipshop and will support apical mind -- apical of mind pinch customers arsenic well. On unrecorded streaming really nan title has been already there, but we don't consciousness immoderate further unit connected nan front. The competitory scenery has mostly moderated.

On your 2nd mobility connected caller personification maturation strategy, successful this twelvemonth our extremity is to execute value customer growth. We are decidedly return this opportunity, during nan post-pandemic era to effort much proactively to get caller customers. But astatine nan aforesaid time, we'll proceed to instrumentality to nan LTV exemplary to measure nan ROIs from different channels to guarantee that we are so acquiring precocious value customers.

So overall, we -- astir apt we will person to walk a small spot much to get customers successful absolute amount, but arsenic a percent of gross connected trading expenses should enactment astatine a very patient level arsenic comparable arsenic we had for past year. So, this is going to proceed for -- truthful we'll proceed to instrumentality to our believe past twelvemonth successful position of customer acquisition and it won't person a large accent connected our wide profitability.

Operator

Thank you. Our adjacent mobility comes from [indiscernible] pinch Bank of America. Your statement is open.

Unidentified Analyst

Sure. Good evening, David and Jesse, congrats connected nan coagulated results. I person 2 questions. The first 1 is regarding nan wide apparel request we observed twelvemonth to date. Have we observed immoderate inclination of pent-up request aliases immoderate behaviour alteration specified arsenic depletion upgrade, downgrade, aliases wave change, aliases for illustration immoderate like, trends we observe from nan supplier side, for illustration marque side? Is location immoderate clear goals of clearing nan complete -- clearing nan stocks aliases for illustration they person a scheme of launching caller products? Any colors will beryllium good.

The 2nd mobility is we person observed this successful nan first quarter, nan level GMV really turn a small spot faster than our 1Q gross and this because of for illustration antecedently we mentioned we person immoderate for illustration operation alteration successful our marketplace. Is location immoderate circumstantial scheme successful position of -- successful our for illustration 3 cardinal marketplace?

Eric Shen

Okay. Joyce connected your question, nan caller depletion inclination apparently posted nan pandemic. We did spot faster than expected betterment successful spending successful apparel and different discretionary items. And connected nan ground, you will spot a batch of group emotion much comfortable pinch moving aliases walking around. So they do person beardown request for apparel categories. We've seen affirmative maturation of customer numbers arsenic good arsenic conversion rate. So that's connected nan depletion side.

On nan proviso broadside actually, location is plentiful inventory retired location because a batch of marque partners had a very reliable twelvemonth past twelvemonth particularly a batch of offline stores really locked it down owed to nan COVID impact. So, some connected nan request broadside and connected nan proviso side, we've seen a stronger momentum than expected.

David Cui

Yeah. Your 2nd mobility regarding nan GMV and gross changes, really our GMV narrowed -- our gross narrowed down by 7%, right? And past GMV is down by 4.6%. So nan logic for that is because of nan -- towards nan twelvemonth extremity station pandemic and nan speech and nan return items were really up. So that is nan superior logic for that.

Operator

Thank you. Our adjacent mobility comes from [indiscernible] pinch UBS. Your statement is open.

Unidentified Analyst

Thank you guidance for taking my questions. I person 2 questions regarding nan separator side. First is nan nett margin. So looking astatine 2023, really overmuch room tin we further optimize our expenses and costs? Do we expect that nan nett separator successful 2023 tin proceed to amended year-on-year and are we becoming much assured connected nan semipermanent nett separator target?

And my 2nd mobility is connected nan gross margin. How should we deliberation astir nan trends successful nan first 4th arsenic good arsenic 2023? And really does guidance deliberation astir nan opportunity to further amended connected nan gross separator longer term? Thank you.

David Cui

Yeah, I will harvester nan 2 questions together. Our nonsubjective for some nett margin, gross separator is to stay unchangeable complete nan year. There could beryllium a room for america to amended nan nett separator because of nan leverage volume, for procurement cost. There mightiness beryllium a room complete there. So, successful position of nan gross margin, our purpose is to stay stable.

Operator

Thank you. Our adjacent mobility comes from Thomas Chong pinch Jefferies. Your statement is open.

Thomas Chong

Thanks guidance for taking my question. Could you please supply immoderate updates connected nan business development, GMV and user sentiment successful caller months? How you person nan monthly inclination and what's our outlook for nan 4 twelvemonth 2023?

Eric Shen

Overall, we are beautiful optimistic astir nan outlook for this twelvemonth successful position of growth. After nan outpouring festival, actually, a batch of group are coming backmost and we've seen a stronger momentum than expected successful position of their spending apparel and different categories and this momentum is going to proceed into nan 2nd quarter, which we expect -- we expect to person a stronger recovery, partially because of a debased guidelines past year.

Especially if you retrieve past twelvemonth from March to May, we had a batch of problems specified arsenic proviso concatenation disruption, lockdowns, and nan Shanghai incident. So, a batch of dropdowns for nan aforesaid play -- for nan 2nd 4th of past twelvemonth and for nan 2nd half for Q3 and Q4 pinch nan COVID point cleared away, we deliberation nan momentum should proceed into nan 2nd half, and we're rather optimistic astir our maturation outlook.

Operator

Thank you. Our adjacent mobility comes from Natalie Wu [ph]. Your statement is open.

UnidentifiedAnalyst

Thanks for taking my question. My mobility is related pinch nan spending powerfulness aliases AOB of nan existing users. Just wondering station nan pandemic, pandemic reopen, is location immoderate chance that tin beryllium observed regarding that benignant of nan operating metrics?

And besides nan 2nd mobility is regarding nan progressive paying customers. I deliberation that nan number of nan progressive paying customers should return to affirmative goals successful nan first quarter, if that is true. I'm conscionable wondering if they are target of your progressive paying customer goals this year?

Eric Shen

On customer trend, we've seen apparently customers are becoming much progressive than earlier because of nan lifting of nan COVID restrictions and they person go much comfortable pinch moving astir aliases travelling around. So we've seen they shop a batch much than before, but nan bid size, mean bid size remains rather stable. And yes, we are saying that customer -- progressive customer members are going to book affirmative maturation successful nan first quarter.

And, it'll proceed to turn successful nan 2nd 4th because we had each nan debased guidelines for nan for nan 2nd 4th of past twelvemonth which we had 17% diminution successful customer members because of nan COVID impact. And for nan afloat year, we are beautiful affirmative connected nan customer inclination erstwhile we person achieved value customer growth.

Operator

[Operator instructions] Our adjacent mobility comes from [indiscernible]. Your statement is open.

UnidentifiedAnalyst

Okay. So successful nan past 3 years, nan apical positive maturation whitethorn beryllium owed to nan COVID really didn't turn that much. So nan separator really went up a lot. So I presume nan margin, nan room to amended is constricted going forward. So nether this conversation, nan topline maturation go critical. So Mr. Shen stock immoderate specifications aliases your thoughts astir really to amended nan topline maturation successful 2023? What's nan strategy? Thank you.

Eric Shen

Okay. On nan separator side, we deliberation location a constricted first to amended gross separator because we don't summation nan return raise from Palmers [ph] successful nan past twelvemonth and we besides were very -- were very restrained astir providing nan unnecessary subsidies. So gross separator would beryllium stay -- would beryllium unchangeable for nan future.

And nett separator side, we deliberation location is still immoderate room for america to amended nan costs building and nan summation ratio gains. So location is still opportunity for america to amended nett profit margin, but nan astir important point is of people really to turn nan customers and nan GMV and that should supply nan astir upside for immoderate separator description .

So we will attraction connected dedicated guidance of our business operations. We look astatine value maturation of a customer base. We'll proceed to summation repetition orders from existing customers and adhd value caller customers and grow our ace VIPs to amended mean bid size. And besides we want to amended our customers thickness done innovative utilized cases, channels, and besides amended conversions done personalization. So location are a batch of ways to summation our business to build our business momentum. And we are beautiful assured that we tin execute our value maturation this year.

Operator

Thank you. Due to clip constraints, that concludes today's question-and-answer session. At this time, I will move nan convention backmost to Jessie for immoderate closing remarks.

Jessie Zheng

Thank you for taking nan clip to subordinate america today. If you person immoderate questions aliases travel ups, please don't hesitate to interaction our IR team. We look guardant to speaking pinch you adjacent quarter.

Operator

Thank you. This concludes nan conference. You whitethorn now disconnect. Everyone, person a awesome day.