Q3 2021 Vipshop Holdings Ltd Earnings Call
Ladies and gentlemen, todays conference call is due to begin trucking I've been touched on your lines will remain on music hold because maybe some guys. Thank you for your patience.
[music].
Ladies and gentlemen, good day, everyone and welcome to VIP shop Holdings Limited's fourth quarter like do you plan to our earnings conference call. At this time I would like to turn the call Jeff.
VIP shop.
I'll think Leslie convictions stripping.
Thank you operator, Hello, everyone and thank you for joining VIP shop at third quarter can you 'twenty One earnings conference call. We just today are Eric Chen our co founder Chairman and CEO and David <unk> our CFO.
Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Potential risks and uncertainties include but are not limited to those outlined in our safe Harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward looking statements may be made.
Please note that certain financial measures used on this call such as non-GAAP operating income non-GAAP net income and non-GAAP net income per ads are not presented in accordance with U S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP.
Maris.
With that I would now like to turn the call over to Mr. Eric Shen.
Okay.
Good morning, and good evening everyone.
Welcome and thank you for joining our third quarter 2021 earnings conference call.
During the third quarter, our business demonstrated resilience, despite macro headwinds and the general weakness in the retail industry.
We continued our efforts to execute on our merchandising strategy, while refining our operations.
Everything we do as a business is intended to strengthen our core competence for long term growth.
As a result key operational metrics, including our overall user base DNV and a pool achieved the year over year growth specifically total active customers increased to 43 9 million and the total GMB grew by.
5% to RMB 14 2 billion.
Our most valuable customer group continued its strong momentum during the quarter.
Super VIP members grew over 40% year over year and contribute contributed more than one third of our total GMB.
In the third quarter.
Folks our strengthen our position in the value proposition as a leading discount retailer among our brand partners and our customers.
In line with this goal, we prioritize co brands to better match trophy and the Resourcing for them.
And the optimized our customers' operations.
Especially for high value customers, including our Super VIP members, we are happy to see some encouraging results from these initiatives.
For example, during this two per Brandon day sales events in the quarter.
Multiple brands recorded higher than expected sales with a few even hitting their highest single day <unk> in recent years.
These brand partners are increasingly aware that VIP shops remain reliable platform for them to increase.
Efficiencies.
As this perception is strengthened more brand and effective motivated to maintain a closer relationship with us and the supply of VIP shop with the Greek verticals.
<unk> unique and the price competitive product.
This was further evidenced in the past a culture for by the solid increase in the number O S P youth and the value of merchandising.
Well as improving quality branded product.
Built on our platform.
Moving to the custom side in the surf culture, we will more integrate in our approach to managing our existing and potential customers.
We are committed to driving new customer growth, but are now doing this in a more efficiency and effectiveness. We we have put the Greek emphasize only capture being active customers and the more importantly become better engaged with.
The Super VIP members.
We have seen rapid growth in our number of Super VIP members, who compared to regular customers and the significantly more resilient in term home consumption boost higher retention rate and the generally higher.
Flu.
Consistent.
And the sustained.
In fact, we aim to increase our competitiveness in China's discount retail market.
Going forward we.
We will create more business.
Synergy by empowering our co brand partners and optimize user experience to drive the solid quality and sustainable growth of our <unk>.
Denise at this point, let me hand over the call. It 12, our CFO Terry <unk>, who will go over our financial results.
Thanks, Eric.
Hello, everyone.
In the third quarter of 2021.
Our top line growth was in line with our expectations despite external challenges.
Thanks to the faster implementation of our merchandising strategy.
Refining operations.
I believe so.
<unk> contribution of our high value customers helped to improve our overall average revenue per user.
We also continue.
To develop to.
To deliver solid profitability.
That's rehab cruise her discipline in spending and more focused on improving operating efficiency.
Yeah.
Looking ahead, we will continue to thrive.
Bose.
Our merchandising and operational sites to deliver steady financial performance.
Now moving to our detailed quarterly financial highlights.
Before I get started.
I would like to clarify that all financial numbers are presented below are in renminbi and all the percentage changes are year over year changes unless otherwise noted.
Total net revenue increased by seven 5% to $24 9 billion from $23 2 billion in the prior year period.
Primarily driven by our growth in the average revenue per user.
Gross profit was $4 8 billion as compared with $4 9 billion in the prior year period.
Gross margin was 19, 4% as compared with 21, 1% in the prior year period.
Total operating expenses was $4 2 billion as compared with $3 9 billion in the prior year period.
As a percentage of the total net revenue.
Total operating expenses was 17.0% as compared with 16, 9% in the prior year period.
Fulfillment expenses the loss of $1 6 billion.
Largely stay flat.
Compared with the corresponding period in 2020.
As a percentage over total net revenue fulfillment expenses decreased to six 5% from seven zero percent in the prior year period.
Marketing expenses.
We're 1.2 billion compared with $1 1 billion in the prior year period.
As a percentage of the total net revenue.
Marketing expenses was five zero percent as compared with four 9% in the prior year period.
As an allergen content expenses.
Our $366 8 million as compared with $305 1 million in the prior year period as a percentage of total net revenue technology and.
<unk> expenses was one 5% as compared with one 3% in the prior year period.
General and administrative expenses were 1.0 pellet as compared with 848 6 million in the prior year period.
As a percentage of total net revenue.
General and.
Could have expenses was four 1% as compared with.
Three 7%.
In the prior year period.
Income from operations plus.
778.
8 million as compared with $1 2 billion in the prior year period.
The margin was three 1% as compared with five 4%.
Sure.
Non-GAAP income from operations.
Which.
Excluded are shared based compensation expenses and amortization of intangible assets.
From business acquisition.
One 1 billion as compared with $1 5 billion in the prior year period.
Non-GAAP operating margin was four 2% as compared with six point.
4% in the prior year period.
Net income attributable to VIP shops to shareholders.
$628 4 million as compared.
Compared with $1 2 billion.
In the prior year period.
Net margin attributable who VIP shop shareholders was two 5% as compared with five 4% in the prior year period.
Net income attributable to <unk> stock.
Well you have yourself to shareholders per diluted ads.
Decreased two zero.
Zero point 92 from one zero in the prior year period.
Non-GAAP net income attributable to VIP shops shareholders was $1 3 billion.
As compared with $1 4 billion in the prior year period.
Non-GAAP net margin attributable to we have yourself shareholders.
Four 1%.
Start with six zero percent in the prior year period.
Non-GAAP net income attributable to VIP shops to shareholders per diluted ads.
Decreased 2150 from 2.01 in the prior year period.
As of September 32021.
Company had cash and cash equivalents.
Strictly cash.
$13 2 billion.
And short term investments of $3 7 billion.
Looking forward to the fourth quarter of 2021, we expect our total net revenue to be between $35 8 billion.
And $37 6 billion, representing a year over year goes through.
Approximately zero percent to 5%.
Please note that this forecast reflects our current and <unk>.
Preliminary review of the market.
And operational conditions, which is subject to change.
With that.
Now I would like to open the call to Q&A.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad.
And we wait for your name to be announced if you wish to again sitting here a question from Christopher Rolland Ohashi. Once again it is star one on your telephone keypad. If you wish to ask a question. Please note there might be a slight pause as it relates to questions.
Yeah.
The first question comes from the line of.
Thomas Chong from Jefferies. Please go ahead.
Okay.
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Are you kind of woman she holds that you see.
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Few questions.
Thank you Bobby.
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Oh, Yeah go ahead Jason.
Thank God.
Gotcha.
So you didn't get to.
Come down would you say that you bought them.
So I would translate myself. So my first question is about at VIP. So how should we expect that got them trained at the VIP, Yes, well I think Jamie in Q4 and next year.
And my next question.
On the competition landscape, especially and discount retail sector and any thoughts on the lifestream economies. Thanks.
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<unk> seen some numbers around how much of the <unk>.
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Oh.
Thank you Sofia.
Okay.
We have been focused on.
Adding <unk>.
I can remember.
We've seen solid increases.
40% the third quarter.
<unk>.
To improve their experiences.
Or was that more high value.
It could be converted into S. VIP members and Uh huh.
If you have already noticed probably noticed that VIP members.
Care to rattler users.
Yeah absolutely.
The retention rate.
Higher in the future we expect to do.
We will continue to contribute more to our platform.
So they already are.
One third also over one third of our total GMB.
Last quarter.
In the past in Q3, we also further extended and optimize the SDI team membership privileges.
To try to.
The user growth for example, we provided extra 5% with benefits.
Lending to them.
Sure Colby.
Right.
Dedicated Super VIP membership stores and Oh.
Sales days for them.
<unk>.
We also have.
This platform benefits.
<unk> a buy one get nine campaign together, we've done a lot of the other platforms. So.
So we've seen very solid growth.
Members.
Hum for the foreseeable future we will.
<unk> to extend the Sci team members and.
They all contribute.
Eight to nine times.
In terms of approval as compared to a regular user.
Expect that they will contribute more to the bottom line.
Okay.
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You should highlight who quite student woman-to-woman it doesn't get adjusted.
We're also getting some causes for the pseudo machine treating some choose not to compromise the.
The most unusual woman chooses to use mulch and Jamba Ching Kwan with secured debt.
<unk> <unk> with Mizuho Pumpkin pie can you call them, a bulk pool women could.
<unk> got good museum, hopefully you'll come to a halt.
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So much and that Nick.
Gastonia Mas is shocked when we look about <unk> future.
Our merger with high yield.
In terms to your question on competition competitive landscape.
Shopping is fundamentally different from other marketplaces platform, we are keenly focused on discount.
And we are testing the potential of becoming Chinas online outlet, we have to be more professional in the mall.
Oh, what do you need a discount.
And long term.
Motto.
We see.
Middle class in China, increasing and their spending power growing we believe we still have.
Plenty of room to grow.
We do notice that live streaming platforms.
They do a chat to user traffic.
What we sell.
So far they are more oh for part of the brand's amounted multichannel marketing strategy that brings incremental traffic.
Hum.
No matter, whether its shelf space.
Oh, so video based content to E. Commerce, we believe it really really depends Oh, how good is your merchandise and from the perspective of a customer base.
Uh huh.
Two of our customers actually our customers clearly value orientated VIP shop brings them content branded products with competitive price as well as a hassle free return change services.
And it's not to say answer Brent good quality input pricing with services. So.
So we believe our customers will have their oh.
<unk> and make the right choice.
We believe we are still leading this.
Huh sale off of Brent.
Sentiment.
Do you have that.
A lot of room for growth.
Yeah.
Thank you.
Once again, ladies and gentlemen, it is star.
And followed by the number one on your telephone keypad. If you wish to ask a question. Once again it is star one on your telephone keypad, if you wish philosophy question.
There might be a slight pause as we collect the questions.
Yeah.
We have the next question comes from.
And there might be a slight pause as it relates to questions.
We have the next question comes from the line of <unk> Zhang from Th capital. Please go ahead.
So can you hear me.
Yes.
Okay. Thanks management for taking my question, but well have two my first one is about your marketing and user base.
I know your marketing efforts in previous quarters to walk quite impressive. However, we have noticed that the number of sponsorship in TB kills came down this quarter. So I was wondering if you can shed some light in the on the marketing strategy and how that will continue to.
Feel the growth of your user base.
And some highlights on your pro glass all male customer appreciation will be great. The second one is we have noticed that you.
<unk> established several new companies naturally you'll know it looks like that your business scope was expanded into new areas.
Such as consumer finance result, and advertising et cetera.
So can we assume that you are stepping into a new business to diversity our revenue growth.
That's it thanks, let me translate myself.
Well you know when you go into you know should play.
Nick.
Cellphone.
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Q2 should that much you don't.
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You mentioned that you've got currency.
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Jim called out all year, our legal channel shelf.
Do you feel comfortable with that.
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I see it which she touches.
Sneak a PV with Cingal.
Okay.
And to your first question our marketing strategy.
We actually had been continuously investing in acquiring new users.
But in the past we have I think.
Not being not especially on the new customer acquisition.
Recently, we were more integrated and allocating our marketing stores in terms of existing and potential customers.
Especially when we found is that people that used to come to our platform.
And.
These inactive customers actually.
<unk> spent all that money to acquire them back then a new customer. So we are just trying to be more efficient and effective in terms of the TV drama or sponsorship Oh, it's.
It's not a regular thing not every quarter, we're going to do.
Spend money on sponsorship, but we are continuing to do so depending on whether he said right drama TV drama under the right user group for us.
Are also leveraging other new media formats, such as you know ability the little Red book and doing lots of tests further on.
Or is it customer acquisition channels too.
To attract a younger shoppers to our platform.
Uh huh.
In terms of Ah Okay.
Male customers the contribution from male customers increased by actually around 3% in terms of the number of customers a year over year and we've seen the increasing proportion of male customers come to our platform to buy.
It's weird or sports shoes and bags.
We will continue to drive the growth.
Male customer.
Yoga when Keith I wouldn't think that there's plenty of colorful bushing gunshots without them.
The woman chooses vault <unk>.
One there's digital Mr. Zou Tao.
And what because of synergies.
Yeah.
The bulk of <unk> tissue.
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The more woman chooses to Lehigh assortment.
Number one the meals switching in the mill women's would there be other form yet.
Total title the chimneys, shuang youll be at the year to get them done light.
One woman.
So as you want to use the wheel I wouldn't kind of awakening Hudson, Montana Thunder juices cheeses.
Yeah.
That's just don't keep those hires is to show that I tip my hat to the to your hobbies.
As Phil.
New ventures, we recently established actually for the consumer finance entity, we've long ago applied license for that.
That sounds to me, it's just a whole things are.
It doesn't mean that we're going to have new business.
Remember we are still keen focus this time itself a friend.
We haven't spent too much here.
Christine I don't know other business, we think that this town center for brands.
Three market and it has a lot of growth potential.
We're focused on.
Online.
Online.
Our business as well.
Offline business has a complementary to our overall business.
Yeah.
The next question comes from the line of <unk> from Daiwa. Please go ahead.
Okay. Thank you for managements to Greg I'll say, it's true in golf.
From the time all types of on behalf of John Choi.
We understand the field.
She is well off of our call.
<unk> contributed substantially to our ARPA growth is called her a want to have a better understanding.
Oh, the new does the conversion rates from here.
Fair to true all arvad, she all programs and Oh.
That's a narrative to convert if you will and also do we have additional room for improvement.
Improvement in so far as a reaction.
So that's my question. Thank you.
Uh huh.
Alright.
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Superfan IP.
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Womens issue of SBA, Peter visual woman and she is she wants at Wheeler.
Peter.
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Okay.
In terms no question has to be on T. I'm not sure you saw.
You mean by conversion rate, but there are.
Number so I can give it to you for reference that's compared to a regular user.
Retention rate and a much stronger.
Their consumption pattern had been much more resilient.
We believe that there is still a lot of room for team members to improve their hospital.
So we have a.
Consistently for the past several years.
The solid increases.
Uh huh.
Our team members.
In addition to apparel related categories.
We can also offer them.
It's a product well he's sci team members. So we can see there is a lot of them fall.
So off of growth.
Our team members.
Hi, Ken.
A little.
So our platform we do have.
Considerable.
Number of thought.
They call it high value customers.
And who have higher pending frequencies anti empowers so we can work.
We were trying to convert these high value customers, who are Super VIP members of course, so we do have brand new customers, who become our Super VIP.
And well by providing.
You know targeted a membership benefits.
And services for this people in.
Two to improve there.
Our experience on our platform.
So so that more and more high value users.
Can be converted as well she'll supervoting members and compared to a regular customers Super VIP members to have much higher retention rate.
We don't have a conversion rate.
We do have a higher retention rate and of course in our pool.
Is significant higher than the regular customers.
So I just want to add this thank you.
Oh.
Oh, sorry, sorry.
So give us a more interest into new channels, such as baby and short videos. So.
So from a mentioned pushback here. So our returns that we think have the highest ROI and do it.
With a relatively longer lifetime value Oh, I understand that some charnel users who may not have strong such a appetite. So I'll just kind of ritual a while ago.
Kevin there are incompatible with our profile.
So I wish I say to myself Oh.
Gotcha Gotcha.
Well most of them with engineering with all of the Coca Cola is yeah.
I'll ask Paul Krump, you're talking maybe a horizontal shifts here or a whole all countries in which they said there was one year ago.
Sure.
Sure.
Hi, Joe.
Oh on the Israeli own photo harsh I laid out was that a woman trunk, whether you call. It goes through the Python.
Sure.
Contango should position.
Now I will mention that piece as to who we are.
But he was the highest since day, one so the team to Cook.
Cook Cook.
He jumped so cheap to assortment W. Cushing could we ultimately who put the Mckinsey who are currently managing cotton the bulk ortho in bulk for Newbuild hotel at multiple leasing agenda digital Ashish <unk> Hulio, our digital the Mattoon Malines Wonder, what Michelle said to sort the eastern shelf on swap.
<unk> thought she says those who what where you got a couple one is would there be Duncan I'm kind of supine stringent wafer completed.
<unk> dot.
My son, like Tencent Goldman <unk> two.
Kind of beef, we liked that Josh.
So you show in the cheesy when Michelle Malkin said this she has seen the pink is something that will persist.
Pocket in Egypt, if you treat all the shelf them out as it was yesterday.
From a bulk coyote and booking pie the Johnstown yielded all critical with software that I see.
Are we still mainly rely on Turkey, and Martin for customer acquisition, including Tokyo, Wechat et cetera.
Also a sponsor.
TV dramas and variety shows and also our pre installation app on mobile phones.
And for some are innovative.
So for some.
New emerging channels like I really believe we actually have two type songs.
I think one is actually with a targeted trying to looking forward to talking to transaction.
As you know trying.
Trying to increase customer awareness.
Sharp, we are exploring different channels and we will use multiple.
Channels to acquire customers.
Thanks.
[laughter].
Thank you.
The next question comes from the line I'll say Charles Zhang from CIBC. Please go ahead.
Hi management I take home from say I think they are thanks for taking our question.
We have one question regarding to the fourth quarter guidance, how should we interpreted this guidance is conservative or what's the newest trends. We are seeing in November and December and my second question is regarding to the inventory trend what is the trend of the amount of our industry inventory if they are impacted by that.
Weak macro so the industry to have more inventories or have we experienced a shortage of supplies from overseas. Brent. So industrial has left inventories how would this impact our business I remember watching that I found out what the wouldn't hit.
But when do you go with you she thought when you sell them with people that shrinking a woman gets much easier to do that.
It should be a powerful and the highest dishwasher woman cant dollar you see Jacob contest for sure that you said you had a you said you found out you said ticked up but I'd be glad to take that.
You said you can quantify you shouldnt see them able it could be a partial accretion that you said you got Schuster one title that that she has and what did you what musharraf end up we thought about I'm sure somebody owns about the only way you're going to ship quite you quote from Cui more that you're going to you just given that you're cutting costs, you're trying to put some cream or should that be answer that should be Jacob you don't go out of Westwood and shops.
Uh huh.
Jacob Kruse from Cui Cui Cui Chico I used your shorts, you should want mail kind of highway that you said you got to keep high tissue Yeah sure. Yeah, We got you.
The quotes that are coming in but surely the windshield I'd almost say, what's your took godaddy got <expletive>. How did you go put them away more shipyards, either I don't want to go with them and you saw that take a year.
You will see that but when he asked me some guys yeah.
Okay.
We are simply not eager when producers are women.
So the three cylinder.
Sure.
Our pension a woman city of conduct we also women's via the wide pool, Hi, seal, who look negative trading between Keystone each down the bulk of women. Some fits the strong see some seat either shut down to zero for duty free and with some new each maybe in England.
England.
So if I look at Billboard that solely habitual switch the Merlin Wonder woman two key Jubilee all kind of think a woman seeking the Cvs target.
Which is a C T cell to the hydro portfolio. Some seeded switch helps sort of put together.
Four Wheeler the SRU assume we can quit a Nick junior in Suzhou Chongqing site, we like Hi, Sue.
<unk>.
The opinion Dunkin' Donuts, please a woman who am I going to lease with <unk> will be catch up.
So the guidance for Q4 is based on.
Factors, especially the external environment is not optimistic there are lingering uncertainties affecting consumer sentiment.
So our guidance on that.
Zero to 5%.
Apparently not high.
And we have a third that are for example, during the double 11 event.
Orders placed on our platform our husbands jewelry too you know many of the places I'd be.
The third phase of the COVID-19 cases here and there.
And in terms of the double 11.
We did see some good developments and.
We expect our anniversary event.
Eight.
To say a relatively better.
Autumn and winter clothing sales picked up.
Uh huh.
The temperature.
As a temporary.
Temperature is getting at the weather is getting closer.
So we do see some.
On a positive side.
Yeah.
Currently the thing you'd need a suit, which we didn't do screen laywoman pieces day.
On <unk> when the cases are to gel tube BNP.
When that one could you tell me we haven't been placed on mute, yes, bulky Tom Gibson, Meanwhile, EMEA cotai to how each of them.
So shortly.
Sorry, its digital Gentlewoman's somewhat guy good sheets, which is the my yoga media, who you support ops visual <unk> and Jim.
And Uh huh.
Q4 guidance I, just want to add extra internally you know we are upgrading our business strategy to focus on our core brands, our colleague and friend and Oh.
They thought on quantity unqualified one this will actually have more or less impact on our business in the short term, so but you want to give ourselves some leeway.
So to do our business.
Thiago entity that wouldn't make a quote from the Queen more nimble woman Mooching Huntington Kita could simply more okay.
Meanwhile, the juice, the cheese and booking either you choose to tweaking the she shops I mean because of <unk>.
And even back then.
And finally on the booking show Formula to meet the Millennium mine that gives a woman she is.
Mike.
<unk>, how about the total nekoosa.
Well my open door Nicos <unk> Gupta <unk> team to the lean when the hydro choose appears let's say she is coming out of them and give them a full quarter now, Ohio, and they do fluctuate sunlight that shouldn't sound bite the ball.
Some charity work special womens.
Fortunately I cut through what most women with normal what's what are they getting by the core you know she is still headwind but.
In terms of the inventory, we think that the current things like inventory in the car industry. Okay. Actually if you look at Q3 and Q4, we see no I wish I can throw off in a COVID-19 cases offline business is actually not doing well so they haven't.
A lot of that.
Our inventory for to clear goods.
Discipline to you now.
Clearing inventory for all the buttons on Palmer. We also have a you know other hum like.
May 12th Kishore products customized.
Well it is from partners.
Here are more unique and a better price to merchandise from our brand partners.
So we are listings that inventory level.
It's fine and Oh, we are able to leverage our core competencies to carry more inventory from our brand partners.
Yeah.
Thank you very helpful.
Thank you we have the next question is coming from the line of choice.
Bank of America. Please go ahead.
Thanks management for taking the question My question was actually a record in our.
The offline outlet business, just trying to understand I think in the printed quarters I'll offline all that business, Indeed had a quite solid growth.
Just want to catch up on like you know this quarter's growth for all outlets with our going forward Capex plan and also have we seen any impact from the pandemic to affect our offline traffic in these outlets.
And also like what's the contribution revenue contribution after it was like you offline on that and also our.
Fly story. Thank you.
Well I'll take on this question.
So even though the COVID-19 impact.
In this period and our offline businesses still grow but quite good I think roughly around 10%.
In this quarter and.
And the providers are all offline no not the offline because I mean the.
All of that essentially all of this.
Close quite significantly and then.
I'll ask.
Provided a six 7%.
Of our total portal.
Total revenue yeah.
Hello, Jim.
And also the Capex plan for outlets or like Shanghai related.
We will continue to grow that business.
Single year, we will build.
We will build.
Tour Street, New new are less so.
We do add a couple.
You all as this year and we will continue to do so in the next three to.
Five years.
We are regionally plant and for each each of the depends.
It depends on the size of the new U S.
Requires.
Five to maybe 800 million RMB.
Got it thanks.
Yes.
Yeah.
Yeah.
Yeah.
Thank you.
The next question is from the line of Naphthalene from high tolerance myself. Please go ahead.
Washout, how to sessions all our debt is a desert like dish or what not.
Once you know sugar gives a quick order.
So why is that.
Languishing nature tend to be you know what.
How long do you get a pool that was I'll say does she core lab, usually so did they pick up your holidays yet to go.
Oh for sure how long they'll go Mad Egypt, Neil how touching a little chunk plus two of them. It's just Ken they do a lot more.
I think I just wanted to check.
No.
Yes.
Thanks for taking my question and my question is regarding their use of cool bar dose active calculus until they are quality Lafayette, just trying to understand if there's any difference that we can do it has compelled with the passive fragile cosmos say a pool pappas category shopping.
Frequency and attachment et cetera. Thank you.
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The most social women's Shuang <unk> women tongue.
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The opportunities to sell some human women's adoptions I think that is something you can put it in terms of how the chin fishes among pneumonia Shuang <unk> tour that pollute a woman without you can quit the.
<unk>, even further to the cool nights.
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Kim Lee from.
The moment, you just see the highest of the.
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Houston, the Malinois SCHUNK Peugeot women.
Nick has shown really include the young.
Which is a huge could've been done some leaning in leaning who you want put it in <unk> Suzhou, which is the nature of your Superfund that should tell you what the mill or is she wants to women of yoga and you haven't done the how do you want to.
<unk>.
Yeah.
Oh.
Okay Oh.
Well.
For the for the use of T metric I think you probably notice that our overall a pool a decline actually 7%.
Q2, but managed to return to positive territory in Q3.
Because we continued to invest in growing our Super VIP members.
They're spending power.
<unk> seen a.
We'll continue to increase ever.
Every metric.
Super VIP members.
And Oh, we do believe there is a lot of room for us to grow our pool going forward.
In terms of shopping preferences.
Apparel is do the most preferred category for most of our consumers.
Tradition stays relatively stable. We've also seen a very good momentum in sportswear and shoes.
In terms of user mix actually loose thing I've I've, just mentioned with things.
<unk> contribution from male customers as well as Oh from a tier.
Tier one cities.
We are strong you know people in year.
10 days and so we do see very good.
Good momentum in growing our customers.
And we believe that well.
<unk> be able to continue to expand our customer base.
Yes.
And how about the attention.
So it sort of goes to allow their children She's gonna Jacob.
Yeah.
Women.
It seems in the liquids window cheaper with D. A.
<unk> clearly.
Clearly tied to the PMI.
Retention rates.
Our retention rates for newly accident.
Added customers.
While the past year remains relatively stable.
Got it thank you.
Yeah.
Thank you.
Because of time constraints that concludes today's question and answer session. At this time I will turn the conference back to Jesse for any closing remarks.
Thank you for taking the time to join US today, if you have any questions or follow up. Please don't hesitate to contact me. We look forward to speaking with you next quarter.
Yes.
[music].
[music].
Ladies and gentlemen, good day, everyone and welcome to VIP Shop Holdings Limited fourth quarter like do you plan to our earnings conference call. At this time I would like to turn the call Geoff Meacham.
Vishal.
<unk> of Investor Relations. Please proceed.
Thank you operator, Hello, everyone and thank you for joining VIP shop third quarter can you 'twenty One earnings conference call with US today are Eric Chen our co founder Chairman and CEO and David <unk> our CFO.
Power management begins their prepared remarks, I would like to remind you that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 1995.
Forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Actual risks and uncertainties include but are not limited to those outlined in our safe Harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward looking statements may be made.
Please note that certain financial measures that you have found this call such as non-GAAP operating income non-GAAP net income and non-GAAP net income per ads are not presented in accordance with U S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP.
Chris.
With that I would now like to turn the call over to Mr. Eric Shen.
Okay.
Good morning, and good evening everyone.
Welcome and thank you for joining our third quarter 2021 earnings conference call.
During the third quarter, our business demonstrates the resilience.
Met coal headwind and the general weakness in the retail industry.
We continued our efforts to execute on our merchandising strategy, while refining our operations.
Everything we do as a business is intended to strengthen our core competence for long term growth.
As a result key operational metrics, including our overall user base, DNV and op, who achieved the year over year growth.
Typically total active customers increased to 43 9 million and the total GMB grew by 5% to RMB 42 billion.
Our most valuable customer group continued its strong momentum during the quarter.
Super VIP members grew over 40% year over year and contribute contributed more than one third of our total dnb.
In the third quarter, we focused our strengthen our position in the value proposition as a leading discount retailer among our brand partners and our customers.
In line with this goal, we prioritize co brands to better match traffic and the Resourcing for them.
And optimized our customers' operations.
Especially for high value customers, including our Super VIP members, we are happy to see some encouraging results from these initiatives.
For example, during this two per Brandon day sales event in the quarter.
Multiple brands recorded higher than expected sales with a few even hitting their highest single day <unk> in recent years.
This brand partners are increasingly aware that VIP shop remain reliable platform for them to increase.
<unk> efficiencies.
As this perception is strengthened more brand and effective motivated to maintain a closer relationship with us and the supply of VIP shop with the great work.
Mary Kate so unique and price competitive product.
This was further evidenced in the past quarter by the solid increase in the number OSP youth and the value of merchandising as well as improving quality co branded product available on our platform.
Moving to the customer site in the surf culture, we will more integrated in our approach to managing our existing and potential customers.
We are committed to driving new customer.
Close but are now doing this in a more efficiency and effective way we have put the greet emphasize only capture being active customers and more importantly become better engaged with our Super VIP members.
We have seen rapid growth in our number of Super VIP members, who compared to regular customers and the significantly more resilient in term home consumption, both higher retention rate and generate higher.
Through these consistent.
And the sustained.
We aim to increase our.
Our competitiveness in China's discount retail market.
Going forward we.
We will accrete more business.
Synergy by empowering our co brand partners and optimize user experience to drive the solid quality and sustainable growth of our business.
At this point, let me hand over the call to our CFO Dave.
We see who will go over our financial results.
Thanks, Eric.
Hello, everyone.
The third quarter of 2021, our topline growth was in line with our expectations despite external challenges.
As to the effective implementation of our merchandising strategy.
Refining operations.
Notably.
Increasing contribution of our high value customers.
To improve our overall average revenue per user.
We also continue to develop to deliver solid profitability as well.
We had credits her discipline in spending and more focused on improving operating efficiencies.
Looking ahead, we will continue to drive business synergies both.
Our merchandising and operational sites to deliver steady financial performance.
Now moving to our detailed quarterly financial highlights.
Before I get started.
Like to clarify that all financial numbers are presented below are in renminbi.
All the percentage changes are year over year changes.
As otherwise noted.
Total net revenue increased by seven 5%.
$104 9 billion.
$23 2 billion in the prior year period, primarily driven by our growth in the average revenue per user.
Gross profit was $4 8 billion.
Compared with $4 9 billion in the prior year period, and gross margin was 19, 4%.
<unk> was 21, 1% in the prior year period.
Total operating expenses to loss of $4 2 billion as compared with $3 9 billion in the prior year period.
As a percentage of the total net revenue.
Total operating expenses was 17 zero percent as compare it was 16, 9% in the prior year period.
Fulfillment expenses the loss of $1 6 billion.
Largely flat as compared with the corresponding period in 2020.
As a percentage of total net revenue fulfillment expenses decreased to six 5% from seven zero percent in the prior year period.
Marketing expenses.
1.2 billion compared with $1 1 billion in the prior year period as a percentage of the total net revenue marketing expenses was five zero percent as compared with four 9% in the prior year period.
Technology and content expenses.
$366 8 million as compared with $305 1 million in the prior year period.
As a percentage of total net revenue technology and content expenses was one 5% as compared with one 3% in the prior year period.
General and administrative expenses were 1.0 pellet as compared with 848 6 million in the prior year period.
As a percentage of total net revenue.
Administrative expenses.
Expenses.
Four 1% as compared with.
Three 7%.
In the prior year period.
Income from operations plus.
717.
8 million as compared with $1 2 billion in the prior year period.
Operating margin was three 1% as compared with five 4% in the prior year period.
Non-GAAP income from operations, which is.
Excluded are shared based compensation expenses and amortization of intangible assets, resulting from business acquisitions.
$1 1 billion as compared with $1 5 billion in the prior year period.
Non-GAAP operating margin was four 2% as compared with six point.
4%.
In the prior year period.
Net income attributable to VIP shops to shareholders was $628 4 million as compared with $1 2 billion.
In the prior year period.
Net margin attributable to VIP shop shareholders was two 5% as compared with five 4% in the prior year period.
Net income attributable to <unk> stock.
We have your shops to shareholders per diluted ads.
<unk> decreased to.
Zero point 92 from one zero in the prior year period.
Non-GAAP net income attributable to VIP shops shareholders was $1 3 billion.
As compared with $1 4 billion in the prior year periods.
Non-GAAP net margin attributable to we have yourself shareholders.
Four 1% as compared with six zero percent in the prior year period.
Non-GAAP net income attributable to VIP shops to shareholders per diluted ads decreased 2150 from 2.01 in the prior year period.
As of September 32021.
Company had cash and cash equivalents.
The restricted cash.
$13 2 billion.
Short term investments of $3 7 billion.
Looking forward to the fourth quarter of 2021, we expect our total net revenue to be between $35 8 billion.
$37 6 billion, representing a year over year growth rates.
Approximately zero percent to 5%.
Please note that this forecast reflects our current and preliminary review of the market.
And operational conditions.
Which is subject to change.
With that.
Now I would like to open the call to Q&A.
Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad.
And we wait for your name to be announced if you wish to again similar to a question from Christopher <unk>. Once again. It is star one on your telephone keypad. If you wish to ask a question. Please note there might be a slight pause as it relates to questions.
Your first question comes from the line of.
Thomas Chong from Jefferies. Please go ahead.
Yeah.
Oh, Oh go ahead.
Or to be <unk> by as VIP.
Is that a woman can you hold that.
Thank you Roman.
<unk> got some quantity.
Thank you <unk>.
Hum.
Oh, Yeah go ahead, JC salaries that Jason.
Jason would you think.
Thank you.
Joey I just you guys.
Joe.
Let me show you think getting Genco will.
Mcguire.
Ken Donaldson D bench aboard James jumping between calls so I would translate myself. So my first question is about.
S. VIP, so how should we expect that volume trend.
Thank you.
Randy in Q4.
Yes.
And my next question.
About the competition landscape, especially and discount retail sector.
Hey, Scott.
Last year in the economy.
Oh, what actually dissect your S S VIP will be coming down.
It could be a huge out there S VIP subsidiary.
VIP that sometimes puts fulfillment <unk> Conn women's CVT piece to this as well.
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And then my tongue in cheek.
The project has reopened to.
<unk> was a win win.
Thank you Sofia.
Your question Hominis, VIP, we had been.
Adding <unk> to our platform.
The solid increase over 40% in the third quarter.
Thank you.
To improve their experiences.
Is that more high value users could be converted into the SDI team members.
Hi.
You've already noticed you've probably noticed that ex VIP members as compared to regular users.
The opco and the retention rates are much higher in the future we expect.
We will continue to contribute more to our platform.
As they already account.
So one third of Alpha over one third of our total GMB for the past quarter.
In fact in Q3, we also further extended and optimize that.
VIP membership privileges.
To drive that.
The user growth for example, we provided extra 5% with benefits.
Lending to more of a quarter and we also had.
Dedicated Super VIP membership stores and Oh.
Sales days for them.
And.
We also have a cross platform benefits.
Including <unk> nine campaign together with lots of other platforms.
So we've seen very solid growth in house VIP members.
For the foreseeable future, we will continue to expand the Sci team members.
As they all contribute.
8% to nine times.
In terms of <unk> as compared to a regular user.
We expect it will contribute more to the bottom line.
Yeah.
Okay.
Yahoo, and <unk> tend to the teams and good.
For the inkjet and.
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The bulk would be women tissue, we should assume at GTT.
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<unk> three scaled Sawyer the motion that's been south with lots of.
Towards the lots of issues.
We will miss challenging pieces.
Thank you so much.
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The most social women choose to use as much in Jamba Ching Kwan women use secured debt.
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So motion that Nick.
So in Gastonia, Melissa will resume capacities with attune.
St Joe.
With high yield.
In terms now question on competition competitive landscape.
VIP shop is fundamentally different from the marketplace platform. We are keenly focused on comp sales for brands and we are testing the potential of becoming China online Hoffman.
Have to be more professional in the mall.
To discuss.
We believe this comp sale is a resilient and lumpy.
Motto.
We see a.
Middle class in China, increasing under spending power growing we believe we still have a.
Plenty of room to grow.
We do notice that live streaming platforms.
They do have a chat to user traffic.
What we sell.
So far they are more all or part of the brand's mountain multichannel marketing strategy that brings incremental traffic.
Hum.
No matter, whether its shelf space.
A short video based on content sales to E. Commerce, we believe it really really depends.
How good is your merchandise and from the perspective of our customer base.
It was kind of perspective of our customers actually our customers clearly value orientated VIP shop brings them content branded products with competitive price as well as a hassle free return like change services.
And it's not to say answer Brent good qualities with pricing with services. So.
So we believe our customers will have their awareness and make the right choice.
We believe we are still leading the.
Hmm sale off of friends this market segment.
Do have a lot of room for growth.
Okay.
Thank you.
Once again, ladies and gentlemen, it is star followed by the number one on your telephone keypad. If you wish to ask a question. Once again it is star one on your telephone keypad, if you wish philosophy question.
There might be a slight pause as we collect the questions.
We have the next question comes from.
And there might be a slight pause as it relates to questions.
We have the next question coming from the line of <unk> Zhang from Th capital. Please go ahead.
Hello can you hear me.
Yes.
Okay. Thanks management for taking my question, but well have two my first one is about your marketing and user base.
I know your marketing efforts in previous quarters were quite impressive. However, we have noticed that the number of your sponsorship and television shows came down this quarter. So I was wondering if you can shed some light in the on the marketing strategy and how that will continue to.
The girl stop your user base.
And some highlights on your pro glass, all male customer appreciation will be great and.
The second one is we have noticed that.
<unk> established several new companies literally you know it looks like that your business scope was expanded into new areas.
Such as consumer finance.
Dog and advertising et cetera.
So can we assume that you are stepping into a new business to diversity our revenue growth.
That's it thanks, let me translate myself.
We went out when you go into you know Xi'an Hawaii.
Nick.
<unk>.
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Thank god for that should be helpful.
Two tissues that much you don't.
I mean, why shouldn't I don't see the Eagle Ford.
Okay.
But when he said why are.
Some of them don't make a onetime about thinking you can kind of tell me the confidence youll foliage, Jim called out all year, our legal channel shelf you.
<unk> got four ships.
You called me back initially Sundar.
Paul with Opdivo in TR Tusa women is that this huge hosel nimmo of meal coach who cook.
And that will continue into <unk>.
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We're missing a fortune to sue them at least some might call attention of Mayo, who many of you may lie we think we might see some yield which you see what medical Google <unk> <unk> Du <unk> leasehold in speaking solely shipping on coach.
Maryann woman.
She doesn't it.
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Because all of those help buoy Priscilla Mitchell as a cut to the <unk> switch over on the highway side.
So that will ensure the digital <unk>.
Okay, we actually have been continuously investing in acquiring on new users.
But in the past we have.
Not being not efficiency, new customer acquisition recently, we were more integrated in allocating our marketing stores in terms of existing and potential customers.
Specially when we fall and does that people that used to come to our platform.
And.
[noise] inactive customers actually we tend to spend all that money to apply them back then a new customer. So we are just trying to be more efficient and 10 being effective in terms of the T V.
Drama or a sponsorship.
It's not a regular thing not to every quarter what going to.
Spend money on sponsorship, but we are continuing to do so depending on whether it's the right drummer a television drama ended a right user group Forum. We are also Larry King other new media formats, such as you know ability to redbook and going to tap.
Further for the customer acquisition channels to to attract younger shop for his car platform.
Uhm.
In terms of <unk> male customers the contribution from male customers increased by actually around 3% in terms of the number of customers that year over year, and we've seen the increasing proportion of male customers come to a platform to five minutes weirdest, both wearing shoes and bags.
Oh, we will continue to drive the the the growth of male customers.
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Make a salt Lake, Michigan show you that just don't eat those fries too Joseph I come either to your hobbies.
Uhm.
New venture so we recently package at a cable to a consumer finance entity, we've long ago applied license for that.
Just to open.
It doesn't mean that we're going to have a new business lines remember, we're still became focused discounts. They also correct.
It hasn't been too much.
Ah Paris thing.
But we think that this time for friends is is a free market and it has a lot of growth potential.
Focused on online online a business as well.
Online business as a complementary to our over or business.
The next question comes from the line of <unk> from <unk> go ahead.
[noise], Okay. Thank you for Benjamin to Grand Okay. Sure. This I'll take them go from one time all types of all on behalf of John Choi, We understand Super V. I P. If awhile awful alcohol [noise].
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Especially in near Tears too Culverted is here with her and also do we have a additional room for improvement.
So far I said reaction.
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Kind of challenge.
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That's okay.
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The snake.
You should see some dark and cozy.
Okay.
In terms of question F. B I T I'm not sure if what do you mean by conversion rate that there have.
Number so I can give it to you for a reference.
Here to a regular user.
Yeah.
Potentially harmful I'm much stronger amir consumption patterns.
<unk> believes that there is still a lot of room for.
Members to improve the hospital.
Cause we have I think consistently.
Consistently for the process never years.
<unk> <unk>.
It increases.
S B I T members and in addition to apparel related categories.
We can also offer them standardized to product well.
I can remember.
Yes, there is a lot of room for.
So that's V I P members.
Okay. Okay.
A little so so our platform and we do have a considerable.
Number of thought.
We call it high valued customers.
And who have higher spending frequencies in volume powers.
So we can work we were trained to convert this high level customer. So too are super vacuum members of course, so we do have brand new customers a whole become are Super V. I P. S.
And well by providing you know targeted a member of the benefits.
And service has a for this people and.
To improve their.
Experienced platform. So so so that the more and more high value of users.
Can be converted to prevent him members and compared to a regular customers Super V. I P members to have much higher retention. So if we don't have a conversion rate.
We do have a higher retention rate and of course, an annual our pool is is significant higher than the regular customers.
So I just want to add this thank you.
Oh, Thanks, Oh, sorry, sorry may I have a full life, so give a interest into new channels, such as being a baby and I showed up videos.
Oh, so from a magical horseback here. So returns always seem to have the highest oh, I and you're with or without a relatively longer lifetime value I understand that some charlie over there or somebody not to have strong such a appetite. So I'll just call the ritual while ago, given there are incompatible with our profiles.
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We still mainly rely on attacking mark for customer acquisition, including doing Telecom, We Chatted Center, we also.
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Yeah, you are emerging channels like Phillip really we actually have two type song.
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To shop, we are exploring different China.
We will go ahead, you multiple you no channels too.
Customers.
Thanks.
Thank you you have the next question comes on the line and I'll say songs I'm from C. I C. C. Please go ahead.
Hi management I'd stay at home from today I think they thanks for taking our questions. We have one question regarding to the fourth quarter guidance, how should we interpreted this guidance. If it comes out of it is what's the new trend. We are staying in November and December and my second question gets regarding to the inventory.
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In terms of the England, we we think that the current family, England train our car industry. Okay. I'd say, there's no cats, two three and you can always say yeah.
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Thank you very helpful.
[noise]. Thank you have you have the next question was just calling because my mother tries to do so.
Ankles Atlantica. Please go ahead.
Mm. Thanks management for taking a question. My question was actually regard an hour in the offline outlet business just trying to understand I think independent quarters I'll offline all that business. Indeed had a quite started gray I just want to ketchup on like you know just cause.
<unk> outlet with our going forward Capex plan and also have we seen any impact from the pandemic to affect the hour all flying traffic and this outlet. Thanks and also like what's making any contribution in revenue contribution off that was like you know offline on that and also our.
Or you know I'll fly store it thank you.
Oh I'll take on this question, Okay. So even though the COVID-19 impact in the spirit and are offline businesses still uhm grill quite quite good I think it's roughly around and you can 18%.
In this border and.
And the provider.
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And also the cutbacks plan four outlets all I changed I related.
We will continue to grow that business and every single year, we will build we will build.
Two or three new new or less so what are you. We do at a couple of you all as this year and will continue to do so in the next five years so that.
We all regionally plaid and for each each of the.
It depends on the size of the new new Alice.
Thus requires.
Five two maybe two 800 million man Army.
Got it thanks.
Yes.
Thank you.
You have the next question is from the line of not believable from high tolerance myself. Please go ahead.
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Having noticed that overall Apple decline actually 7% E Q2, but managed to return to positive territory.
Three.
Because we continue to embed.
Throwing a super V I P members.
Spending power, we've seen I'll continue to increase.
Every match.
Super V I P member.
Yeah, we we do believe that there is a lot.
For just grow Apple not going forward.
In terms of sauce shopping preferences.
Tara Ah is to the amount of the preferred categories on most of our consumers that's contribution stays around to my stable and I've also seen very good momentum in both weird.
In terms of using a mix actually this thing confirmation newest thing.
Increasing contributions from now customer.
Well as from Pier, one city hasn't really I saw him.
You know people in your 10 days.
So we do see very.
Good momentum email curling our customers.
We believe that.
Be able to continue to expand our customer base.
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Yeah retention rates for newly accident added customers for the past year remained relatively stable.
Got it thank you.
[noise]. Thank you.
Is it time constraints that concludes today's question and answer session. At this time I will turn the conference back to Jesse for any closing remarks.
Thank you for taking the time to join US today, if you have any questions or fall out. Please don't hesitate to contact me, we'll look forward to speaking with your next quarter.