Q2 2021 Baozun Inc Earnings Call
Yeah.
[music].
Good morning, ladies and gentlemen, and thank you for standing by for Biogen's second quarter 2021 earnings conference call.
At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session.
As a reminder, today's conference call is being recorded.
I will now turn the meeting over to your host for today's call Ms. Wendy Sun Investor Relations Director of thousand. Please proceed Wendy.
Thank you all play there Hello, everyone and thank you for joining us today.
Second quarter. Its one thing you can do one earnings release was distributed earlier today and is available.
Right.
The Belgian dot com as well as on global Newswire services.
<unk> also posted a powerpoint presentation that accompanies our comments to the St.
Right.
On the call today from Boston They have me, so when sand Hill, Chairman and Chief Executive Officer, Mr Shelton, Chief Financial Officer and.
Tracy Li our watch Pleasant.
The business development.
Joe will review the business operations and company highlights followed by Mr. Yu, who will discuss financials and guidance if at all will be available to answer your questions. During the Q&A section that follows.
Before we begin I would like to remind you that this conference call contains forward looking statements. They think the meaning of the Securities Exchange Act of my teams of people and you ask Paul I figure, where T Litigation Reform Act of 1995.
These forward statements are based upon management's current expectation and tower market and operating conditions and relates to events that involve known unknown risks uncertainties and other factors all stage I'll take hold to predict and many of which are beyond the company's control, which may cause the.
Company's actual results to differ materially from those in the forward looking statements.
Further information regarding these and other risks uncertainties or factors is included in the company's filings with the U S. SEC and E announcement on the website of Hong Kong Exchange. The company does not undertake any obligation to update any forward looking statements except as required.
And the applicable law.
Finally, please note that unless otherwise stated all figures mentioned during this conference call are in a and B. It is now my pleasure to introduce our chairman and Chief Executive Officer. Mr mentioned to me sounds. Please go ahead.
Well, thank you and thank you all for joining us.
Where should start progressing achieving those strategic KOL personal goals in the second quarter.
So the smart city.
Age of luck here, where the second quarter was the first big promotional events quarter coming out of Korea.
China.
We weren't able to deliver a father, Jimmy gross of 23% year over year.
The particular, Brexit borrower comprehensive restructure and the service offerings.
We made a significant minerals.
And they're executing Omnichannel strategy for Europe.
Penetrating into the luxury sector.
Which are our reported expense.
On the Mexico Smart clever as we first alluded to.
Two in the first quarter results.
The better quality initiatives for PCR, that's negatively impacted the gross up of apparel and accessories categories, especially for international sportswear brands.
The impact continued into the second quarter and they smell, both larger and longer than we initially expected.
Indications of impact the total open orders overall logistics services declined by 29% year over year.
For the quarter.
Total net revenues increased by 7% non-GAAP net.
Income for the quarter rose by 4% year over year.
Additional impact before increasing investments for the future growth.
Moving on to slide number three during.
During the quarter, we saw demand to flourish for private mi and non traditional channels don't see more channels accounted for 34% of total G. M. B a increase of 7% from 25% in the same period last year.
As we execute our omni channel strategy, we are able to help our brand partners generate incremental sales.
And the customers from a variety of emerging channels.
The luxury premium sector continues to be one of our key growth drivers demonstrating both strong growth momentum and the high emergence profile.
Following our acquisition of Fuzhou, we visited the headquarters of several European luxury in the premium brands.
We received very positive feedback regarding the broad awareness saw substantial activities.
China's e-commerce market.
During the quarter, we on boarded seven brands partners in luxury and premium sector.
Have laid out a very strong pipeline.
We observed that the auditions with chemo force. The brands are also planning introductions force across other e-commerce channels.
We believe this will be a significant driver over the coming years.
Let's move to <unk>.
Our M&A progress.
Operationally, we continue to make structural improvements to our business as we make strategic investments. So he has all of our competitiveness.
Value proposition.
Believe these structural improvements will position us well to deliver long term growth by providing our clients with better and what kind of an E Commerce solutions.
Now please turn to slide four.
During the quarter.
Warehouse and logistics from we've made two strategic investments volume.
The largest premium warehouse capacities and allow us to expand our verticals coverage.
<unk> Dot as Richard says, we've included our integrated logistics and delivery resources.
To achieve meaningful original cost advantage useful Joel.
Following the end of the quarter, we also announced our potential strategic partnership with China, All along with its equity investments in our logistics service subsidiary.
Our logistics business group, that's long been well recognized in the industry. That's one of the leading providers in a highly customized and premium logistics services.
No we've expanded capacity and a more comprehensive service capabilities.
We believe our future solutions will continue to drive further value in the January the business lease and financial returns.
During the quarter, we were particularly pleased to onboard a leading domestic sportswear brands.
That's where a customer for warehouse and logistics services.
This could potentially be an entry point for additional brands partners work with us for their E Commerce operations.
Moving on to slide number five.
Yeah, there are some non pulp off investments and partnerships made to bolster our logistics capabilities during.
During the quarter, we also acquired <unk> fashion.
E Commerce solution provider that is focused on bringing international fashion brands in China.
This will allow us to further penetrate the brands in the fashion sector, extending our leadership position.
There is also a profound progress integrating our investments from previous quarters.
We have started to offer our ecommerce solutions to Fusan fashion group brands, and we will be exploring a chunk of development.
Of special offer products.
Later this year.
If I click the business development progress is well on track we co launched a comprehensive package for our brand partners.
Cosmetics earlier this month and we will also become just France operating partner operations partner for his many programs.
We anticipate more breakthroughs for the S. M C G categories in the pension the mini program ecosystem later this year.
Regarding food yet as I mentioned earlier, we have successfully chunky acquire you'll put branded partners and.
The field hub business lease during the quarter.
On top of luxury in the premium sector, which I think is also actively penetrating a participate in your business development progress in the broader apparel category.
We are pleased that we saw a substantial progress in extracting value from our various acquisitions and the strategic alliance this year.
New partners join the Baldwin family with a rich portfolio of Glen upon us.
But there is for them, it's tough business cooperation.
That's our business school has not been very much we're going to no longer disclose or number of brands partners going forward.
As such metric currently only captures brands install a patients and he is no longer appropriate to evaluate our full business potential going forward.
Turning to page six I want to give an update of our business.
Process reengineering.
As technology empowers future success, we continue the integrating technology into our operations and our service models.
For our brands on US we have had some solid results from our year long trials with several proof of concepts and prototypes.
You will see our business office in centers.
In the first quarter, we applied such model brother.
Fashion apparel business yielded and offer comprehensive review and evaluation. We know have decided it is time to replicate such model.
Companywide.
Part of the transformation of our business, we started to do a technology powered Mito office.
To further improve our service quality and reduce operational costs.
We are integrating our technology infrastructure and the management applications into our daily operations and our ultimate goal is to make our ecommerce operations more digitalized.
Device and a systematic.
We believe such initiatives will drive up our economies of scale in the long run.
Andy to promote resource integration efficiency improvements and the competitive in these enhancements.
Backed by our comprehensive comprehensive Middle office, our original service centers or RSC.
When the schools are all Perceval, we have moved about 1000 employees through these rfps and the initial trial of generated over 20% efficiency and accuracy improvements.
We are migrating more business units and functions.
Our original service centers over the next 12 months.
Such initiative will become effective driver of margin expansion next year.
Lastly, we continue to invest in our people and organizational structure.
We truly believe that people are the greatest asset of an organization and as such we have strategically growing our management team in particular to support the broadening of our Omnichannel services.
We have also enhanced our compensation policies HR training system and employee culture.
This enables us to attract and retain the best talent in the industry and to ensure that our people together with the company.
The upcoming new headquarters move is on track and we believe the expansion of upwards off our working environment and to support our growing team.
Who's the efficiency and the literature, a culture of cutting edge innovation.
Overall, the second quarter has certainly being a better visit protocols above address for sure. We will continue to work quite loosely.
Further enhance and grow our business well.
Well, we anticipate ongoing headwinds from BC in the second half of this year.
Shopping increasingly pervades People's Daily life. Therefore, we believe the comprehensive sweep of ecommerce solutions.
We deployed is key to continuously improve the shopping experience for customers.
Ever changing e-commerce dynamics are presenting us with both challenges and opportunities. We are actively evaluating the markets and we will review our priorities and make changeover strategic medium term.
The plan accordingly.
Ultimately, we believe set by focusing on our core business proposition.
Empowering our brand partners to connect with consumers.
Barack reach her convenience we are kind of we will continue to be the partner of choice for all our existing and future partners.
I'll now pass the call over to Arthur to go over the financials. Thank you.
Okay. Thank you.
Hello, everyone.
Please turn to page number nine.
We saw healthy growth in total T M b wage increased by 23% to $15.7 billion.
I'll, let DCP Olson TMT rose by 5% to.
One 1 billion and non distribution P. M b increased 25% to $14.6 billion.
Operating income.
By category, we continued to see strong momentum in the electronics and I I'm C G categories.
Both girl you over 100% year over year.
This is mainly due to all the progress in Albany kind of countries, especially tasty.
Content mini programs.
The luxury sector continuous exclude performance from last quarter weighed high double digits year over year.
On the other hand.
Our apparel and accessories category declined 23% year over year, we faced mainly due to the negative impact of the bite her phone initiative called D. C. I some international brands happening.
While we anticipate the impact of PCI is likely to continue in the second half of this year, whereas.
I like to see some new business from major at all might take apparel and sportswear brands.
The night, if I can.
Yeah.
Now turning to page number 10.
Total net revenue increased by seven per ton to $2.3 billion.
<unk> sales revenue decreased by 5% and service revenue increased by 9%.
Given that the maturity of the PCI impact is happening in the sportswear category.
And that's most of these brands dominate walkways off I'm, a pool and two and consignment model.
Paul has negatively affect service revenue.
Our product sales gross margin was 16, 2% last.
Lastly, flat comparable rate a year ago.
But improved from 15, 4% last quarter.
Our overall gross margin was sick pay.
Painful 6%.
Six to eight bps from six 4% a year ago.
Our take rate for the non distribution model with nine 1% down.
Down from 10, 4% a year ago.
This reduction in take rate was expected and so we made progress in our omni channel strategy.
In addition, as PCI, we deal the revenue contribution of the consignment model.
So with the change in revenue mix led to a NOLA takes.
Take rate for non distribution model isotope.
If we look at take rate of the conflict Memorial itself, it's actually shows an improvement year over year to 12, 7%.
Now, let's turn to operating expenses on page number 11.
Fulfillment expenses decreased to 516 million.
I'll phone orders were lower in the quarter due to the impactful Pcr.
As a percentage of G. M B, a fulfillment ratio improved to three 6% from $4 five four times, a year ago driven by efficiency improvement.
Our sales and marketing expenses were 648 million and as a percentage of TMT capped relatively stable I full 0.1 per ton from a year ago.
This is a planned date, resulting from the improved effectiveness of our teachers KOL marketing services and efficiency gains offset by the investments in talent to build a stronger.
From the digital marketing capability.
Our technology and content expenses were 150 million.
As a percentage of itself can be improved with Eric <unk>, 7% from 38% last year.
Mainly due to the right in stock comp for incremental investment.
In fact, the patient's improvement.
Although G&A expenses increased to 19.8 million, making played well in line with our expectation.
Predominantly reflects the.
The majority of investment we have made this year to support the launch of apparel.
Fortunately, we recruited new talent, especially for our expanding omni channel services in conjunction with upgraded compensation packages for our critical roles.
In order to attract and retain the base of talent in the industry.
And secondly, we also incurred additional expenses related to our new headquarters.
And suddenly professional fees increased year over year due to our increased I'm on a activity is in the foot off of this year.
And finally, we also saw a new place in the account receivable policing.
As a result.
G&A expenses as a percentage of G M B inquiry slightly to 36% from <unk>, 4%.
Now please turn to page number 12.
Reflecting our additional investment and.
The impact from BCS.
Non-GAAP income from operations was $162 million.
And by 14% year over year.
Non-GAAP operating margin was seven point there all the time.
On slide number 13.
Non-GAAP net income attributable to ordinary shareholders totaled 161 million.
The increase of 3% year over year.
The basic and diluted non-GAAP E T. Eight yes, what two point, they're all full two points there one respectively for the quarter.
Now turning to page number 14.
We generated a positive operating cash flow of $499 million.
And used $213 million for our M&A activity during this quarter.
I felt to them, but it's fun for a ton of Hawaii.
Had a full point 5 billion in cash cash equivalents and short term investments wage.
Wage rates are binary policy level based on all the normal operational activity.
And lastly, 18th of May 2021 our board of directors authorized a share repurchase program, allowing us to repurchase up to 125 million.
One of our service.
So two 100.
121, we have repurchased a total of $12.5 million of our eight yet.
All of these facts.
Short term impact from BCS.
We have made good progress during quarter, two but two.
<unk> on our strategy to deliver sustainable and profitable growth.
In the second half of the year.
We'll continue to have a plant in light yellow capability and expanding our business both organically and inorganically.
We remain confident in our business model and we believe boatmen will deliver unique value proposition to our customer in the long term.
This concludes our prepared remarks, thank you everyone.
You are now.
We're now ready to begin the Q&A session.
Okay.
Yeah.
Yeah.
Hello Al Queda.
As a reminder to ask a question you want to press star one on your telephone.
To withdraw your question press the pound key.
Your first question comes from the line of Alicia Yap of Citigroup. Please ask your question.
Hi.
Good evening management. Thanks for taking my question I have a question related to these hum.
Sportswear brands that mansion I'm, just wondering has the consumer sentiment.
Uh huh.
I H issue because it seems like the all kind of due to China.
Like top sportswear.
I actually see income solid recovery from these corporate sportswear.
I'm not sure.
And actually made it to the east I'm just wondering also overhaul.
Consumer consumption sentiment.
Apparel and also does this question, especially huh.
Are you seeing any slow down.
Putting things burden that's on Beach House.
I mean, I agree and do you anticipate.
Some of them.
Consumption.
Paperboard.
Two continue into Q4 Q promotion, that's too bad and also curious to hear if there's any.
Preparation.
By brands for dish.
To pick paths Lucky I think Christie.
Hum.
How long or something that would be great. Thank you.
Hum.
Thank you Alicia and it actually is still quite large question. So of course that long to I go to the question like the besides E taxing.
Especially for the small category so far the besides I think it does continue to Maxine Carr work and this is passing the sports category and it has lasted longer than we expect otherwise improving trains we do see healthy. It's gonna include maybe the odd.
Maybe I'll start off and ask a quarter all in the past.
Quite a quite a softball, and the impact on the business in a sense, Italy with vaccine and consumers are purchasing passion nice clean inspection and the like the celebrity endorsement and innovation that southeast Asia can round out our perama like virus continue to cause some disruption.
Too many apparel brands some 19 in the second half after a year. So we do see there is a potential.
So the type of another stock so that's why some of that I mean.
What about phototoxic, it's part of entertainment and we work with the client to sell on to accelerate our own channels. All play at the plate in recent months you will see our nocturnal comed in the last few months they will have very aggressive.
A movement and a new channel development and the army to drive incremental sales and also to reduce the stock pressure caused by the D. C. I and also to come down as much I think that's highly trafficked area to focusing on those dynamics.
Our experiments.
And also I believe that two that came out in this environment I want to see in the left the happier the traffic GAAP between brands, who have become larger we believe the brands, which we are studying right now still have the competitive merchandising strategy and also it would be I suppose by those assembled marketing spending so with things.
Combined we saw things team further strengthening our operational advantage, where they all path organically to be pocket all coming.
And that definitely will have an impact and also one thing I want to highlight is the winter Olympics will be heard in February last year. So we anticipate maybe theres a boost also winter clothing and also smart.
How can the 19th category and also currently we are already talking about resource allocation with him all starting from this month actually and for the second part.
To discuss about the overall consumption and also the consumer and they are they aren't their attitude towards the overconsumption. One thing I want to highlight is if you see the overall data that's worth a half a year of twins I'll go over them I can skew on the life like they grow like 17% that's one day.
So you can see a steady momentum they still present, but the opposite thing gene. We expect about two months downtime due to doing two o'clock quit shopping behavior are highly driven by the low price scaling ethics 18. So basketball July into August has always been a relatively sluggish time period. So after the 618 and the motor.
They were living in complex on the virus has no again, there's the alignment about public health, which come from Pennsylvania.
And they said that consumers desire to buy and some.
Some deadline daytime you can see that total online condition assembled at it's still grow back to wake up and go to class and easily break down into category, we see apparel home appliance.
And then he also the slowdown in momentum.
That's not really in the healthy when they take them to come into life has increased pretty substantially.
Standalone, so from our point of view.
We think the market has shown some oh between Jamba downtime part how do we still have their comments and let's see adopting the funding area. Firstly the potential in the new channel development with increased topic. So you've locked up on the major marketplace and this is driven by the change out and we will do that.
And the busy time duration.
Here. So that's why I think also firmly in place how about omni channel strategy and the second is the lightning categories like snacks really healthy all dogs and also about coming to life.
We have a trigger to slide four the great performance in and that's a half a senior and the third is we think that falls into high quality brands work in more advantage on the traditional path of them. That's why we will further differentiate out myself in terms of the French election, and also our operation service offering I hope.
So I'm all for your questions. Thank you.
Kim Thank you.
Yeah.
Your next question comes from the line of Thomas Chong of Jefferies. Please ask your question.
Thanks management for taking my question can management share some update about the potential synergy with a high now and also how should we think about our M&A strategy going forward and I'll be glad to see more investment cooperation. Thank you.
Oh Hello, this is off of it yeah.
So I think we recently announced of a potential.
Partnership with tiny out. So there are two main factors we've taken into account when we have this tough market.
One is we will be able to enjoy better economy of scale.
We got into tiny all makes and all nightclub a pulse.
Pulse for radio for pulp and also to reach out to our multinational customer and secondly.
There is a very good synergies between what time, you're always good at and what Photronics Kodak photo and they use a virus plus it takes a full cause harm.
Facebook contact them or not.
On top of my Hum the surveys in the low 54 luxury for the sportswear and tiny always small a fulltime Tom.
Standard.
Therefore, we think the combination both two way, Ohio path to win more market share. So that's on the China part.
And overall when we look at although I'm on these properties for the second or the second half of this year.
Actually for some KOL key area to create value. The first one we're looking at building additional acquiring additional capability for clothing to deliver more value for the customer. So we are looking at CRM. We are looking at like screaming and also.
With the data services. So these are the capability, we're looking forward to be able to more quickly.
Our value proposition.
And secondly, as we all know.
Hum.
T P and also the JV partner Oh, we are still in a very diversified market place.
What we're looking for ways to deal with the consolidation so all the reasons.
All the recent deal wait for inflation.
Is proof that we only successful income yourself expanding our market share in the apparel category. So we will continue to look for opportunities for further consolidation.
And it's definitely.
We'll looking to use more M&A opportunity to enhance our connection with the brands to other recent deal waste a false impression pool has created is a good example, where.
And current management company income create more value for the brands by working more closely together, we will continue on that.
And finally, we are looking at some.
A web cast them alternative for the overseas expansion.
We're thinking of replicating caldron a capability.
Overseas market.
And mainly the South East Asia, where there has a great similarity between the Chinese market and the South East Asian markets. So that's about all I mandates strategy going forward.
Oh.
Got it thank you.
Thank you.
Yeah.
Your next question comes from the line of Ken how off T. H capital. Please ask your question.
Yeah good evening.
And then I have a couple of questions. The first one is regarding the dnb compensation.
So I wonder what's the.
A different category you know, what's the contribution from different categories, such as apparel consumer electronics a M E T.
Right now.
That's number one number two.
Acquire more brands domestically and internationally, so I wonder what's the D. M. D contribution you know from a different partner.
The third one is regarding the omni channel.
So we saw a tick tock or our guidance has a e-commerce promotion.
Just a last couple of days I Wonder if you guys participated in it.
What's the what's the result of that.
I can see that.
That's a great question. Thank you.
Okay, I will I will take the first two ice cream attendance because they can take the last one yeah. So in terms of the P. M. B IPO tend to slide number five on the right hand side you can see all the electronics now accounts for 25% of the T M B a weight a thorough.
About 100% overlap in different times of year over year.
And if you look at the Oh I'm C. T. It's actually a comfortable 20 times, the apparel and accessories are totally accounting for 35%, but I mentioned earlier, it's actually declining 23% year over year due to the PCI impact mainly.
On the sports.
The men and women in clothing and.
But within this overall category luxury it's actually performing better girl.
It's a high double digits.
Oh, Yeah post Brexit and finally, the applying and you saw some painful about 10% of our overall TMA. So that's the compensation of our T M B a.
In terms of the brand partner.
We may know alternates we have been working mainly waist deep global health brands and are the majority of our revenue contribution from the large global brands, so far behind and patents in this quarter, what how can this concludes the program.
When several new contract from a major demand takes a sportswear company in China and also a major.
Electronics.
Kind of our brands in China, we're making really good progress in the major domestic brands in China I mean, the key is to quit baidu. So if a customer wants to grow their business and we're looking for bolt wins will help them deliver despite it, especially as we see more instrument from hotel might take.
Our partners at this moment in time.
So that's my question for the top two jobs.
They simply to the Doe in situations, especially in the past the August 18th promotion I actually I think first of all the rapid spillover that Tony has indeed, the Dubai irritate skus or sign for me.
Nice to see their channel so the traditional ecommerce platform if something changes that is not true at all.
In this part I want to divide into two angles first of all I think in the past at the mouth. It either in the August 18 majority offer Jeremy is still driven by the Kols are lifestyle. So from that point of view, we can see actually brands, who used to fly to house, one cannot like him he got telia.
And nowadays they do have small twice some of the other channels and a certain portion of their boundaries shifting to doing two in the morning, all celebrities indicative of I also opening open accounting daily accommodation is longer but I think about brands. It's bring more choice and also I think a really.
To a financial benefit for them too.
The other angle I want to emphasize is on the shelf life.
<unk> seen.
We also I think Belgium team also successfully launched them. All then king Ah self testing projects and are in Europe.
So to your mouth.
[laughter] grants to verify the incremental value I'll tell you my opinion channels are in that you know in the past few months. Some good news is.
Oh actually theres, a lower overlapping wage income consumer between billing and also the traditional channel are across different category I think is less than 20% is 10.
Relative to 10 to 20 different right and also it's also close to stratify approved that ill say they can't have differentiated different product strategy, which means the top selling product.
But it's only slightly overlapping with the top selling products are doing well, which is a very I mean hospitals all brands if they want to differentiate the two channels.
Also we are also seeing some good signs on the consumer I'm doing also things.
Lethal lung.
Younger like a three or five years younger than the R. A T.
Came out our client base, but also about our thoughts on the other side I think.
And a stable monthly sales and also the traffic cost in a sustainable post the outcome if need to verify it in the longer income and a sunbelt in front of you will continue to invest in our operations and also our all of our capability in this area and the first part of the attention from us.
Thank you so much for the answers.
Once again, if you wish to ask a question press star one on your telephone until they draw. Your question touched upon key please limit your question to two questions at a time and give me touched star one again, if you have a follow up question. Thank you.
Your next question comes from the line of Charlie Chen of China Renaissance. Please ask your question.
But I think that's about that sure taking my question actually I have only one question related to regulatory issues.
No. That's a Chinese government has conducted a series of regulatory activities.
To basically a regulation the internet industry.
And which includes prevention of personal data abuse et cetera. So.
How does this the regulator it specifically for a personal that ideas how would this action impact your business in terms of your relationship with spread ponders will they increase or decrease the investment in digital marketing and then a little bit challenged always that there are they did do marketing activities.
So have.
Have you done anything she precision herself in preparation for this kind of potential changes. Thank you.
Okay. Thank you for the question.
Yes, as you mentioned briefly that there is a lot of different regulation.
Going.
From this different aspects.
Let's talk about the consumer our information protection and data security, Yeah I think.
We have already received the acknowledgement.
Jim already.
The.
Reactions.
Reactions when even take together on the T mobile space the newly.
In place.
Regulation for consumer.
Data protection.
I think from the system.
The view.
We are almost ready to come back to the T Mall in Europe.
You know keep us from the sensitivity off our consumer data so in general.
Business process will be a smooth.
No matter you know.
What kind of a new programs added even through this process so for from the consumer.
Nothing changed all of this process will be normal.
You can go ship so that is the number one.
Number two for your question about the.
Brands perception for this in their actions I think for revenue.
Right now is not very clear because.
New system is not in place yet so off of that we know that the hall.
We are going to do.
Two the digital marketing you know you know different ways, but right now I think the brands are quite ready for this change and I don't think there will be big.
A big change for their.
There are pictures of marketing expense on Tmall platform and the Baltimore already to help them keep doing things in a smart way to consume consume digital marketing investments. So that is basically I think if it is not that big.
For the for the general business process, yes, but we are we would take this very seriously.
Thank you.
And just one little points, so I've seen since so they've been in that we have been continuously maintenance that you might come in for the technology also now has a stronger safer security and privacy capabilities within our kids. So we have achieved level three classification.
Forward that they have secured paid from the government.
Will differentiate us from our competitors.
Okay.
Your next question comes from the line of choice here from Bank of America. Please ask your question.
Hi, good evening.
Arthur and Wendy Thanks for taking my questions I have two questions. The first one is related to the the technically gross cost me recall this quarter, we have seen.
Like F N B G.
Actually very strong and like you mentioned and I say, well at night and boss sportswear and electronic things annual decline, it's going to get more color at all I think in terms of the quarter and fourth quarter.
Our you know.
Outlet for athletic kind of great brands.
And the second question as we have seen.
The GAAP between at the end of the growth in revenue as well it seems like you've got pretty wide.
Just want to get that more detailed alcoholic.
Or how we should actually understand it and what's the trend going forward. Thanks a lot.
Okay.
Sorry, I think there are second class or southern tier for acuity.
Sure I think the the GMB growth and our revenue growth this quarter. It seems like a pretty wide gap I'm just wanted to understand how this actually what's the what's the reason behind and going forward should we how should we expect that gap to narrow.
Thanks.
Alright, thank you.
Okay. So I think as hopper yeah I.
I think as I mentioned in the prepared remarks.
The increase in the G. M B, mainly contributed by our omni channel strategy and mainly from the JD channel and also the mini program channel and those two channels are.
We are strong income is healthy.
Thank you Mike.
And you're done.
Congress being held by the other party please wait for a moment.
As long term rates.
Mhm.
Hello can you hear me guys.
Oh, Yeah, yeah, yeah. Thanks, Paul Yeah, Okay, I will continue.
So.
So in the second half of the year, where we only see continued growth in the electronic and C.
Key category, we trade.
Mainly driven by omni channel strategy from J D and from a and from Dominion program rigor.
Regarding to the second question.
I think.
You mentioned the take rate is actually.
I told him. So this is anticipated we are now deploying more resources into the omni channel the new China.
I tried to explain in the.
The last time, a lower margin than the mature to China in the chemo. So therefore, as we grow faster in the omni channel.
Basically in the mini program, we are still in a stage of making big investments to grow the business, but over a longer period of time. So after we have built a significant a size of the business I'll. Let you must men will have a greater return on the we will see the margin improve.
But in the medium.
And longer term and we see no reason why the new China cannot be as profit is the traditional channel. So this is what we are looking for.
Yeah.
Absolutely.
Okay. Okay.
Yeah. Thanks.
Your next question comes from the line of actually shoes from Credit Suisse. Please ask your question.
Hi, Thanks management for taking my question there too from a first thing I wanted to check how many brands have already passed here Hum.
Don't even platform or have launched a peaceful story.
From our communications with the international brands.
What do you think are holding some of them back even my impression is that most of the international brands have been more cautious in testing this new channel.
And my second question is about the apparel growth if we exclude the names that have been impacted by the D. C. I issue what would what it would be a that draws for the rest of the our brand portfolio. Thank you.
Hmm.
Regarding the pipeline on the ethylene part actually I think I agree with you.
Right now the current players.
Driven by the local brands and most of them actually to complain.
If I could implement a clean room operation strategy, it's not a very traditional I mean, I'll say, it's a it's a formal channel dynamic.
Our strategy on Italy, I mean regarding the <unk>.
Overseas our brands right now I think right now the first wave of.
Categories do I'm not a pilot in the smallest category followed by some of the consumer views and also a cough my part and I want to emphasize that even the brands they opened their flocks yourself channel.
The benefits lineup majority driven by that came out like cleaning which means.
Our economy, I mean environment on the delays not very mature right now it's still driven by the Ah that's vital supply chain and also by the Ocala yourself.
On the other handle we also see that I mean, the channel value part is a heartbeat.
Uh huh.
It's where our exact from the AR from the plant itself. That's why they opened the eyes actually stop and they want to try to bring angles are being done that stuff in your mouth. So we retrieved a pizza box with Toysrus omnichannel.
Hi, Akshay, it's Oskar here on your second question could you repeat your question once again, sometimes I wasn't sure I'm, 100% clear about your question.
Yeah, Yeah, because we already disclosed that the apparel category declining 23% year over year.
Just wanted to get an idea about a brand portfolio, that's not impacted by the specie I issue like if we separate the brands into two groups and how much is maybe.
Unpack two games growing.
Yeah, I think if you look at our overall with portfolio. So we have a wide range of different portfolio. So even though Barton is traditionally very strong in the sportswear in APA.
Zero waste to sportswear and apparel are impacted by the PCI, but within this category the luxury it's actually a spotlight where we have growth in the high double digits year over year. So that's one of the category, even that's where you've seen the widely Ah I mean.
Why the category apparel, it's actually growing outside of the apparel IPO look has D. C. T. I know youll do kind of extraordinary even our omnichannel strategy, we're actually grow apartments housing so some of the category even grow.
Hum in a high.
The high double digits or even over 100% year over year. So this is.
A proof of the fountain business model, where we have a wide range.
Different category wasting Baldwin Unhealth not gone through a difficult time makes the PCI Terry.
Yeah.
Yeah.
Okay. Thank you.
Hi, good afternoon.
Okay.
Your next question comes from the line of Andre Chang of Jpmorgan. Please ask your question.
Thank you well things, an author and Wendy <unk>. My question is regarding the fast million occurring in the fire.
There are a lot of changes in the regular that her from and the overall consumption front. So I wonder what's your premium about how to use the cash.
Half of this year and next year, how should we think.
Think of the no no the investment and also the no impact.
The nonoperating upfront so youth and me like one of those items, we should pay attention to.
Second half this year into next year.
Okay.
For the question I think first of all I would like to rethink guidance Biogen is overall, our operating cash flow is positive which means we are able to create supply for all hotels, which is a very important factor if you're taking into account in our current situation where.
Our guidance in a smartphone device most difficult so waste that we put in place five full points 5 billion income with a wage we can either use it too. So two of our operation Oh, we can make the investments to build our capabilities.
To grow faster so as I mentioned in the question.
Our full difference I ran a hole that you said you might come in so.
Overall, we were kind of more cautiously during this period because English Terry.
Hi, Facebook team. So we will we will.
Put small emphasize that liquidity over the whole company and when we select the targets for acquisition or target for investment, we will be more cautious and we will make.
You might come in along with have a higher certainty that will be more successful. So that's how we're going to plan to use the cash.
Your next question comes from the line of Robinson.
Ask your question.
Hi management. Thanks for taking my question I guess, Robyn asking on behalf of John Choi I've a follow up question on the take rate trend I'm just.
This quarter the decline I think management mentioned that is because of the D. C. I and also new channel contribution, but this quarter to non T. A non tmall mixing, especially lower than <unk>, but the year on year decline is even more so how should we think about the trend in the second half which factor.
Between the PCI and also new channels impact.
Impacting the take rates more and should we expect the take rate to decline by over a one percentage point every corner.
And also my second question is on the revenue.
I will look in the second half if you look at the true cake or this quarter is growing at mid teens measurement deep bench and I mentioned, the domestic sportswear brands will help to offset but I think usually it takes a few quarters to pick up so shall we expect.
<unk> will also grow at mid teens should we expect a meaningful rebound in 2022. Thank you.
Okay.
The first question on take rate I think there are two factors impacting the take rate number one and the largest impact tasty Omnichannel strategy I mentioned earlier, we're in you might have been saying so that's will dilute our take rate.
But also the second factor is the PCI.
We know the the PCI impacted category I traditionally bloating high take rate categories. So if you take the BDC I impact alcohol thing if you look at our non MPT fusion model, Idaho, where we have a consignment model excluding.
Besides in taxi if I play shows improvements were 12, 7% year over year. So basically it's actually if we take all the PCI and we take out our omni channel strategy and then it's actually an improvement year over year and as I mentioned earlier up.
Over a period of time why don't we have the economy of scale for those new channels. There is no reason why we cannot get back to the normal take rate actually we are currently enjoying in the chemo channel, but that's a take rate on the second question in terms of the growth of the P. M D.
We are confident that even wait the PCI impact for the third and fourth quarter, we still have a high confidence in all of our omni channel strategy and the Bcf impact probably will likely to be that pure play until fall.
The strong pipeline in our Omnichannel.
Kind of customer we are confident we will maintain a very good growth rates in terms of the dnb.
Got it thank you.
Thank you seeing no more questions in the queue, Let me turn the call back to MS. Wendy Sun for the closing remarks.
Thank you for that in closing on behalf of the management team, we'd like to thank you for your participation in today's call. It feels like we're and it further information please feel free to reach out to us. Thank you for joining US today. This concludes the call.
Thank you.
On the call you may now everyone's peanuts.
Okay.
Yeah.
Yeah.
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