Q4 2021 Vipshop Holdings Ltd Earnings Call

Ladies and gentlemen, good day, everyone and welcome to VIP Shop Holdings limited fourth quarter and full year 2021 earnings conference call.

At this time I would like to turn the call to Ms. Jessie Zheng VIP shops head of Investor Relations. Please proceed.

Thank you operator, Hello, everyone and thank you for joining VIP shop fourth quarter and full year 2021 earnings conference call with US today are Eric Shen, 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 up 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 statement in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this quarterly extend 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 measures.

With that I would now like to turn the call over to Mr. Eric Shen.

Yes.

Good morning, and good evening, everyone welcome and thank you for joining our fourth quarter and the full year 2021 earnings conference call.

We are delighted with our Saudi the business performance in <unk>, Despite a slow fourth quarter impact by the challenging.

Panel environments.

For the full year total active customers increased by 12% year over year to 93 9 million <unk>.

<unk> lower by 16% to RMB 191 5 billion.

Notably Super VIP X two customers grew by 50% to six media and the contributed 36% online DMV.

Driven by steady growth in both customer base and the average revenue per customer.

Our total revenue for the year increased by 15% year over year to RMB 117.

<unk> 1 billion.

non-GAAP net income for the year exceeded RMB 6 billion and the net margin remained above 5%.

Our solid operational and financial performance was led by continuous business our progress on our strategic position.

As a discount pet film for branded products.

Exceptional value.

To further enhance our coal competitive during the second half of 2020 , one we focused more on co brand and the high value customers to further strengthen our value proposition with them.

Among many things, we rely and upgrade value channels on our platform to better empower brands. Upon this and the enhanced shopping experience for customers.

We're encouraged by the business synergy generally from then initiative.

For example, multiple brands recorded their highest single day, <unk> and listen the year during the Super brand day, and today's top led sales events.

Many more brands came to us providing our customers with more unique and price competitive products.

We are pleased to see that the contribution from co brand for the part of the year significantly improved from a year ago with the dnb growing faster than the overall <unk> on our platform.

So they are deepening the relationships with our brand partners, we were able to better corporate reach with co brands Omega for VIP shop product.

In addition to.

To address the needs of younger customers. We are also consistently added a new and trendy brands to our platform.

As we brought in more quality brands and products, we were better positioned to leverage integrate operations to improve customer stickiness and our pool.

In particular Super VIP member outperformed in most all operation metrics.

They have a very high retention rates and new up at around eight pounds than that of non <unk> customers.

We expect this paid membership program to cover more high value customers on our platform.

Looking into 2022 and beyond we will firmly execute on our merchandising strategy, two <unk> and the increasing share of call. It a product from carefully select planned pilot.

To achieve this we will keep allocation more new source to accelerate the closing.

Co brands differentiate our offering further flu made for VIP product.

And to introduce more popular and high end plans.

In addition, we will continue to optimize our operations, we will improve the effective customer acquisition.

Luke personalized.

Commendation enrich the shopping experience and effective targeted marketing for new and existing customers.

We expect these efforts.

Collectively the three drivers of quality and sustainable growth.

Our customer and revenue for the long term, while consistently delivering daily and the house profit.

At this point, let me hand over the call to our CFO , David <unk>, who will go over our financial results.

Thanks, Eric and Hello, everyone.

<unk> hundred one was a year of challenge and uncertainty. Despite this we achieved a solid performance thanks to our continuous efforts in executing the merchandising strategy.

Refining operations.

Total revenue for 2021 increased by 15% year over year.

Driven by steady growth in both customer placed an average revenue.

Customer.

Though the fourth quarter came under some pressure.

Net margin attributable to VIP shop shareholders for the year.

Main resilience with sequential improvement in the fourth quarter due to disciplined operation.

It does that by more prudent marketing strategy through integrated customer acquisition.

Going forward, we remain committed to delivering steady profitability with quality top line growth and creating long term value to our shareholders.

Now moving to our detailed quarterly financial highlights.

Before I get started I would like to clarify that all financial numbers presented below are.

That may be and all the percentage changes are year over year changes unless.

Otherwise noted.

Total net revenue for the fourth quarter of 2021 was $34 1 billion RMB.

Compared with $35 8 billion RMB.

In the prior year period.

Primarily attributable to softer consumer demand.

Discretionary categories impacted by the macro economy, and COVID-19 pandemic.

Gross profit was $6 7 billion RMB as compared with $7 8 billion RMB in the prior year period.

Gross margin was 19, 7% as compared with 21, 9% in the prior year period.

Total operating expenses decreased to 250 billion RMB from from $5 4 billion RMB in the prior year period.

As a percentage of total net revenue total operating expenses.

Chris The 214, 6% from 15, 2% in the prior year period.

Fulfillment expenses was $2 2 billion, RMB, which largely stayed flat as compared with the corresponding period in 2020.

As a percentage of total net revenue fulfillment expenses was six 4% as compared with six 1% in the prior year period.

Marketing expenses decreased to $1 1 billion RMB from $1 7 billion RMB in the prior year period.

As a percentage of total net revenue marketing expenses decreased to three 4% from four 8% in the prior year period.

Primarily attributable to more prudent marketing strategy.

Technology and content expenses increased to $443 zero million RMB from $272 4 million RMB in the prior year period.

As a percentage of total net revenue technology and content expenses was one 3% as compared with 0.8% in the prior year period.

Sandro.

<unk> expenses were $1 2 billion RMB as compared with $1 3 billion.

Billion RMB in the prior year period.

As a percentage over total revenue.

General and administrative expenses was three 5%, which stayed flat as compared with the corresponding period in.

<unk> countries.

Income from operations.

Was one 8 billion RMB as compared with $2 6 billion RMB in the prior year period.

<unk> margin was five 4% as compared with seven 2%.

In the prior year period.

non-GAAP income from operations was $2 1 billion RMB as compared with $2 8 billion RMB in the prior year period.

non-GAAP operating income margin.

Was six 1% as compared with seven 9% in the prior year period.

Net income attributable to the Yadkin shops to shareholders was $1 4 billion RMB as compared with $2 4 billion RMB in the prior year period.

Net margin attributable to VIP yourself shareholders.

Four 1% as compared with six 8% in the prior year period.

Net income attributable to VIP shops to shareholders per diluted ads was <unk> 2.07, RMB as compared with 3.51 RMB in the prior year period.

non-GAAP net income attributable to the shops to shareholders was $1 8 billion RMB as compared with $2 6 billion RMB in the prior year period, non-GAAP net margin attributable to yourself to shareholders was five 3%.

As compared with seven 2% in the prior year period non.

non-GAAP net income attributable to react yourselves to shareholders per diluted ads was two six for RMB.

Compared with $3 seven zero RMB in the prior year period.

As of December 31, 2021, the company had cash and cash equivalents.

Restricted cash of.

17, 2 billion RMB and short term investments of $5 4 billion RMB.

Now I will briefly walk through the highlights of our full year results.

Total net revenue for the full year of 2021 increased by 14, 9% year over year to $117 1 billion RMB from one <unk>.

101.

<unk> 9 billion RMB in the prior year, primarily driven by the growth in the number of total active customers.

<unk> margin increased by eight 6% year over year to $3 1 billion RMB from $21 3 billion RMB in the prior year.

Gross margin was 19, 7% as compared with 29% in the prior year.

Income.

From operations for the full year of 2021.

$5 6 billion RMB as compared with $5 9 billion RMB in the prior year operating margin was four 8% as compared with one 8% in the prior year.

non-GAAP income from operations was $6 6 billion RMB.

As compared with.

$6 8 billion RMB in the prior year non.

non-GAAP operating income margin was five 6% as compared with six 7% in the prior year.

Net income attributable to <unk> shareholders.

$4 7 billion RMB as compared with $5 9 billion RMB in the prior year.

Net margin attributable to shareholders was 4.0% as compared with five 8% in <unk>.

Prior year.

Net income attributable to <unk> shareholders per diluted ads was 6.75, RMB as compared with 856 RMB in the prior year.

non-GAAP net income attributable to VIP shops to shareholders was $6 <unk> billion RMB as compared with $6 3 billion RMB in the prior year non-GAAP net margin attributable to VIP shops to shareholders was five 1% as compared.

With six 2% in the prior year.

non-GAAP net income.

<unk> shareholders per diluted ads.

867 RMB.

As compared with 9.08 RMB in the prior year.

Looking forward to the first quarter of 2022, we expect our total net revenue to be between 27 zero billion RMB.

Eight 4 billion RMB.

Representing a year over year decrease rate of approximately 5% to zero percent.

Please note that this forecast reflects our current <unk>.

And preliminary review of the market and operational conditions, which.

It's subject to change with that I would now like to open the call to Q&A.

Thank you ladies and gentlemen, we will now begin the question and answer session. If you wish you ask a question. Please press star one on your telephone and wait for your name to be announced.

If you wish to withdraw your request please press the pound or hash key.

Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Hi, Good evening, Thanks management for taking on my questions.

My first question is relating to the consumer sentiment.

We are seeing right now.

Let me comment about how it is different in Q4, and so far right now in Q1.

Because when I look at the guidance.

Seems that is a negative five 2%.

And I would just similar to the guidance in Q4. So just wanted to see if any changes in terms of our thoughts on macro headwinds and secondly, I also wanted to get a sense about how we should think about that would be coupled with the momentum.

In Q2 and coming quarters.

Then finally, I think is more relating to competition.

Can management comment about the.

Live streaming online shopping on competition in China, and how it affects our business.

Any thoughts on how we can separate out or quantify the impact on competition and the macro headwinds to <unk>.

Internationally. Thank you.

Hi.

Okay.

Yes.

Thank you.

Yes.

Thank you.

Yes.

So I appreciate it.

Yes.

Okay.

Sure.

Okay.

Yes.

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And maybe to the other places ive.

In terms of first a question on consumer sentiment.

We have seen that.

Really weak.

Good quarter.

Ed.

Cause that warmer weather and the way it has.

We're ready on COVID-19 cases.

And in the first quarter, it's getting slightly better.

Part of that.

The weather is good.

<unk>.

But still we are.

<unk> impacted by the COVID-19 cases.

So seasonality to play some role.

Our business performance.

We are taking much apparel.

Category.

Platform.

Hi, This is Sean.

Sure.

The other thing.

Yes.

The move will mention that began in Q2.

He routinely induces a good each and what was challenging.

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It doesn't really engage that arlene R&M to <unk>.

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And curious about the recovery chanting cutting corners.

It's really hard to.

Predict one now given the many uncertainties going wrong.

Especially.

See that there are steel cases of COVID-19.

Still too early to tell whether the consumer trend is building.

Weather.

When the consumption.

Going back.

But overall, we should see a relatively stable growth for 2022.

Hmm.

We don't.

Back to too much.

Swings in our business performance.

Going to be.

Right.

It's stable.

Please send them in tissue Sean.

They wanted to take.

Turning to the kitchen.

Looking type thing.

Yes.

Thank you Cynthia.

Right.

Yeah.

Okay.

Well Tien tsin.

Yeah.

Some of them are kind of <unk> on year, Peter Congdon cases.

Is there any family you shared some woman digital industrial adjusted gains on the program.

<unk> is a three women's as you heard us against onto the income of about two so I think keeping it that went in there you can see.

As a woman she is.

<unk> will continue to support the in some cases for.

<unk>.

So we are hoping sharpshooter mechanism, which is always part of our surgeon.

Yes, just as soon as you close with two T spot.

Because some of them.

Glen.

Yeah Vincent this is Matt.

And when they will shorten I've got that.

Well Mitchell one youll, so youll see the.

From a bulk would support an origin, which was tempting to support forecasted.

Tableau at the <unk>.

So should the economy.

In terms of competition, we haven't seen too much change recently, we believe it's getting relatively stable.

Yes.

We think that lags.

Streaming platform.

That would take and what they can take.

Uh huh.

From <unk>.

Shell space to ecommerce platform.

We didn't see all competition is getting worse.

Not worried because as long as they get the right merchandising merchandising for customers.

Please come to us.

In terms of the impact from macro and the competition, it's really hard to call.

Because you can not to predict.

Reliably.

NAPCO is going to play out.

On the competition side, we are pretty sure that.

The impact is already there.

So Sami.

Okay.

Thank you. Our next question comes from Alicia Yap from Citigroup. Please ask your question.

Hi, good.

Good evening management, Thanks for taking my questions.

I have a couple of questions here I guess first one is a question related to the inventory status.

For the Winter Olympics merchandising so have you.

<unk> been discussing with your brand partners, all maybe I'll mention I think partners.

Adding to the one and the inventory situation do you see any opportunity that VIP shops had get some of this product.

That is kind of lap over and given the timing do you think you will be a benefit more for the fall and winter season later in in late 2022, or do you think there could be some winter clearance activity that you can leverage later in March or April promotion periods.

Okay.

I don't want you to ask someone else Lee from Glenn Engel.

Good morning.

Go ahead Sean.

Okay.

Okay.

And then to the CTO.

Sure.

Viewpoint.

With your passion.

Arne you mentioned that youre going to see a hydro.

Sure.

Thank you Doug.

Thank you Kevin.

Yes.

The more women condos usage gives us some key European Mercury Uzi.

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As a woman may conduct short usually something.

Suddenly we will do more because it's fully seal, partially a philosophy with parts.

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And without <unk>.

Personnel, who conduct certainty that's a good <unk> in the <unk>.

Hi, Timna sufficiently to Romania.

Hum.

With regard to which is to shoot at some job.

In terms of the.

Inventory related to Olympic.

Winter Olympics.

We haven't seen a very strong a buildup in England.

Inventory. So we do see is that well what companies have been growing their business on our platform.

<unk> bought in recent years.

But they did not provide any dedicated inventory in terms of that.

Our scheme at fourth where etcetera, we think that they have a normal level of inventory both weird.

So there is no.

Anticipation that we're going to benefit from any excess inventory related to Winter Olympics.

Yeah. Thank you can I follow up one questions on user growth strategy. So can you elaborate what are the current plans that you are thinking in terms of.

Two.

To help to boost your new user acquisition later this year. Thank you.

Catherine This is John .

Thanks, Sean.

Okay.

Thanks, Sean.

Okay.

No.

Will <unk> tune in this the whole women's saw the hit towards the disclaimer, which you'll put on mute.

Dr <unk>.

The <unk> plant.

Open banking usage.

<unk> got a lot of fixed and mobile in the fires as the push outs that you won't put on mute.

Social media.

The issue on the junior in Q2, the <unk> and <unk> when the Hiseq Ali what Youre seeing.

The <unk>.

Good news.

Loosen the mobile media focus on me and will be tallied.

And that just 70, what we assume high single digit account with a project in buildup.

In terms of our user growth strategy I think from the fourth quarter of last year, we had been.

Acquiring quality users in a more efficient and they get back to the way, we don't want to blindly spend money in older channels kind of quite low quality customers. Instead. It we're trying to do it in a balanced and prudent way.

Through integrated customer acquisition.

This year, we're going to continue to invest.

A lot of efforts in acquiring new customers.

At the same time, we're going to improve that retention of our existing customers.

We will maintain a decent level of marketing spend in new user acquisition.

Okay. Thank you Jesse.

Uh huh.

Oh.

Alicia.

Couple of more.

Number one is.

We've seen.

A number of our Super VIP increase.

Year over year, so thats one of the key indicators that are the quality of our customer base.

He is getting better and then we will also seeing that our our pool stabilized and have a slight increase.

Actually starting last quarter, so we've seen that trend.

I see okay. Thanks, Thank you Debbie for the additional color so central.

Thank you as a reminder, if you wish you ask a question. Please press star one on your telephone. Please ask your questions in English and Mandarin.

Our next question comes from Robert <unk> from Goldman Sachs. Please ask your question.

Okay. Thank you.

David now San Juan Joanne Hall of Fame Santini.

Santini settlement in Mali, Luna, Shanghai 50 to shoot that gosh, you Julien <unk> satellites elements CTD, we've actually mom Lily colleague to.

Apparently the <unk> Paul.

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Conducting a CTO huge menu kind of minus <unk> <unk>.

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Dr Matsuo, so by the IPO.

No I mean, that's something in Tucson, and in Dubai, and all you need to.

There are no certainties, how women since I assumed the business case.

I'll, let dean Douglas hopefully cheap no elements in our balance sheet.

How long is the net cash flow.

What you want and then zinc.

<unk> previously was a key element on its own we saw.

Yeah.

Do you have.

I'll try to take them up.

Okay.

Do you have down to EPS.

And then.

Thank you.

Taking my question. My first question is on gross margins fourth.

Fourth quarter is traditionally a high high margin quarter with apparel high apparel mix. So given this is not the highest quarter margin quarter. Just wanted to hear how are we thinking about the gross margin trends and the implications for 2022. My second question is is our business reaches a more mature stage and we have very.

Strong net cash balance sheet and sizable earnings per share, we would love to hear management's thoughts on when that could be any potential plans even.

Rewarding shareholders by paying dividends.

The Tivo one without the other one also dividend <unk> to the <unk>.

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Yeah.

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Julian.

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Pursue of Virginia.

<unk>, maybe with us.

In terms of the gross margin.

Although Q4 is that right.

No lower level.

As compared to the full year.

Same quarter of last year.

It really because of the promotions.

Subsidies.

We with it.

Yes.

During the quarter.

But however, because.

During the quarter the winter it was relatively warmer and it didn't.

Effectively motivates consumers.

I'll spend more on winter clothing.

The return on this.

Our marketing spend is not desirable.

But the current level of gross margin as well.

Something that we want for the long term.

Julie bring our gross margin turn more.

Normal level.

In the coming quarters.

Yes.

<unk>.

You don't have to worry about the gross margin going ahead.

Okay.

In terms of the cash use.

As you know, we our board has approved a share buyback plan.

Last year, so we have executed the partially in the last year.

And even that we made.

But good profit profit.

In the year and then.

We still see a healthy profitability.

In the coming year and this year plenty plenty, so the board and the management.

Is considering.

Alternatives among these share buyback and.

This confusion.

And the dividend.

Is.

He has the wisdom the process of we are considering.

And evaluating the options right now.

Thank you. Thank you David.

Yeah.

Thank you next question comes from the line of Natalie <unk> from Haitong International. Please ask your question.

Hi, good evening, Thanks for taking my question.

I have two here.

As long as following up with Alisha <unk> last question about the.

Just a quick question Ken.

Can you elaborate more on later.

Physicians geology.

Last quarter, we can see that would be all sales and marketing is quite controlled especially considering the seasonal pattern. Just wondering any particular spanning channel has seen typically chen branding cabela's problems based that or whatever and all the kind of the sales marketing budget yet.

Preparing for this year could it be more upset.

Absolute number.

Fixed revenue rate ratio, depending on the timing.

Timing of the improvement of the.

Economy consumer confidence just curious how shall we see that churn and.

One is related with our Super VIP, just wondering what the current percentage.

Ascend is up your Super VIP and also that are related to cost.

Corporate margin profile kind of built up by then.

Because they have obviously have a higher pool, which is I think a favorable to the cost of the module maybe but.

Meanwhile, they are in.

Enjoying a deep discount.

Yes.

Would be great if management can share some color on that.

Well taken that by itself.

So would be the one to utilize just been Alicia.

Two cohorts you Shang guang some nowadays.

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Challenging will it.

Each week.

In terms of the latest update on user acquisition strategy.

What do we do differently from the fourth quarter is that.

We strictly follow the LTV model, so evaluate the marketing efficiency.

Spending.

At the wellhead.

How many days to recover.

In terms of our new customers as well.

Our existing customers.

In the past we tend to see it takes longer time for us to recover the spend on new customers. So we did that.

And for the existing commerce, we tended to.

Send out many coupons.

There is a lot of time with advertising, but it turns out not to be very effective. So we also did less on that front.

In Canada, we applied our television model.

In all the channels, including branding as well as TV drama sponsorships as well as advertising I'm sure videos et cetera. So.

We actually did see some positive results.

The fourth quarter.

This year, we are continue.

We will continue to.

Use the LTV model to manage.

All of our marketing spend across different channels.

We do not look at us.

Sure.

And as a member of marketing spend.

Certain percentage also.

Our total net revenues.

As long as the LTV model shows this is a healthy way to do too.

To acquire customers.

Customers will keep doing so.

So we are going to take this a balanced and prudent approach to our marketing strategy.

Dr.

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Nick a consumable.

In terms of their margin profile for SDI team members.

We've just dimension to S. VIP already accounted for roughly 66% of all online that GMB.

Yeah.

The future work going to.

<unk> continued to converge.

More high value customers into <unk> members.

In terms of the gross margin Spi.

Members.

Have a slightly lower gross margin.

And then the overall.

Our gross margin for the company.

And slide a higher return rate, but at CIP proved to be spend much more than a mall.

So it is definitely a very profitable model for the company.

We expect.

As long as more high value.

Customers are successfully becoming Sci team members they tend to come to shop more and spend more.

That's very helpful. Thanks, Joanne Jesse.

Thank you. Our next question comes from Eddy Wang from Morgan Stanley . Please ask your question.

Hey.

David Jaffe Mohawk actually I just thought what's your what's your best <unk> eager to serve just one question. So I'm glad that you waste and conscious entity, so, claiming bulk which would have been the quotes on kona.

On the web.

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Sure.

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Sure.

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Since you sort of consciousness Hibernia lessor does she talks about order book.

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The article my belief that holds what's developing there, but I'm going to about one <unk>.

So a good quarter Jacob Goldberger.

The user engagement.

Sure Jay I'll, let you take that.

So quite a while.

T J, what would put what much of good that's it.

Second quarter was around the themselves.

<unk>. Thank.

Thank you for taking my question. My first question is also about the inventory Destocking. So Sundar you mentioned that.

For the non sports apparel, that's no England.

Issue, but just want to.

Asked if there is adding.

<unk> inventories report the womens apparel, all branded apparel, given the weak sentiment of the apparel in China since the second half of last year and if thats the case.

We have any.

Opportunity for Destocking in the coming quarters. The second question is about <unk>.

Any plan for the.

Category expansion.

Top of the apparel given that apparel sentiments is quite weak.

And if we have more VIP our platform. So we can have.

Demands of different categories, not just about apparel at that pace.

On the margin profile.

Thank you.

Okay.

So the first question ourselves.

Our business model is the is the sales of our consignment inventory so majority of our business towards done through consignment, so our balance sheet.

The inventory balance is.

Is quite small as compared to our total <unk>.

<unk> and.

You can also see the inventory balance is decreasing thanks to our effort to clear some of our aged inventory.

To add some color to this.

Among the inventory balance.

A big portion of that is coming.

Coming from our.

<unk> and Max.

Stores, so they have to carry some.

Inventories so take out take out debt and then the zero inventory we carry for our online business is quite <unk>.

Immaterial I would say, yes, okay.

The <unk> challenges of Cheesable Macondo.

Pilot.

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Bob.

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The most social which is one <unk>.

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Adding to this point in terms of the <unk>.

<unk> from non sportswear apparel.

Do you see some upbeat adding inventory.

From the fourth quarter because of the weather conditions.

COVID-19 cases.

It's going to be interesting for us.

But on top of clearing excess inventory Paul brands also.

Customer.

Product offerings. So we saw some of those core brands.

<unk>.

Trying to secure the best supply from <unk>.

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Thiago <unk> with BELBUCA.

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<unk> witnessed some volume of helping the pushout slowdown here as well.

Many of yards without Youll cookbook them, a bulk whole meals to go the <unk> got to use them.

So as we could.

<unk> called out.

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Dr. Linda <unk> <unk>.

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The most resourceful and duplicate.

Built in the leader in mobile lethal deacon and data must be Houston Zucker with element and we've been pleased Mike <unk>, who can talk the mccormack the teams who can do or should do of lighthouse suites.

In terms of the category expansion.

Pastor winter really weird in apparel.

Related categories.

But it's not enough to meet the diversified need sop.

A doctor in Java consumers. So we are we are really investing additional efforts in bringing more standardized products.

On to our platform.

For example, we've already viewed as VIP.

Therefore.

We have a dedicated channel for the standardized products will be has a.

Very good cosmetic a channel.

Has the phone channel channel to attract a lot of our consumers.

<unk> come to us.

To.

Look for.

Yeah.

Our unique offerings with competitive pricing.

To look for factor.

Standardized products so.

Definitely going to.

Uh huh.

Increase our efforts on this front.

In terms of gross margin for <unk>.

Product.

Probably some of the some of them they have a relatively lower.

Our gross margin, but it's really helping expand our brand portfolio and.

Specialty improved customer stickiness and repeat orders.

So the increase in the proportion of our incentive products. If any will have limited impact on the overall level of gross margin.

And adding to that.

Actually the conversion for standard products is actually higher than that of <unk>.

<unk> really take care categories for the same amount of traffic.

Uh huh.

So so that's something we'll look at.

This year.

Sure.

Yes.

Thank you. Our next question comes from Andre Chang from Jpmorgan. Please ask your question.

Yeah.

So Paul maybe it doesn't get the well itself.

Yes.

On the web.

Can we do.

Too early.

That sounds good.

So.

But what's also potentially a detailed since the same way as I said at all either quartz all types of E. Cigarettes is obviously consulting support.

The share buyback.

Chunghwa.

They wanted to see if at all.

So you can see we saw some other hotels are all quite logging costs.

Chip.

<unk> got a quote on the key part I'll help you with that.

So look at it.

Got it.

Oh.

I will answer the first question. So in this year of 2021 we.

Our capital expenditure is about $3 5 billion RMB. So.

A little bit over half of that are actually for Samsung and then we also have some.

Payments before completion of our existing warehouses.

Which is in the work in progress and then also some are.

Upgrades of our.

Technology and servers and the like so that's pretty much the ballpark that there is a no.

Additional.

Other.

Other expenditures.

The one piece you wouldn't need a sensor network.

Okay Sundance, Utah.

Vince on the hybrid of pretax income in waste.

<unk> <unk> <unk> and in.

<unk> <unk> <unk>.

Genesis will fade from.

That's kind of the team.

Virtually each quarter.

Further the <unk>, she Susan could use a samsung or the digital digital.

Got it.

She's a hydro project continuing women annuity that they've made.

<unk> used to that.

Tissue takeout keep essential median buckets in Chicago.

The more material, which uses digital just finished the year.

You annualize that <unk>.

She said that they'll see the freedom freedom shoot tongue until you can come in Vietnam.

The Wilmington teaching unique sensor all either.

Leland.

In terms of expansion portions that outlet.

Actually the Shan Shan business, they are really doing very well.

Although last year same store performance.

With the relatively weaker because of the COVID-19.

Pandemic.

Excluding that impact the same store performance is actually trending.

Trending very healthy.

Believe that offline outlets is going to present, a large oh.

The ASP of market and is starting to grow very fast in the next couple of years. So we're going to continue our expansion plan.

Turning to add two to three offline powerless each year to capture the increasing consumer demand.

Flying.

We think this all.

The offline outlet business model.

<unk> solid.

Sustainable and a very healthy for the long term.

How about tissue.

Thank you. Our next question comes from the line of Ashwin <unk> from Credit Suisse. Please ask your question.

Okay, and finally traditional line of Sheila <unk>.

Diesel industry issue why you all mentioned that controls on Fisher Cobra, Washington Patch I Hope you all do ship, but no doubt about that Dan just now don't they aren't wishing way people show up on that so far our stickiness.

If I go back a tad xiaomi, saying.

Hello, Thiago and industrial came out she P and handling expense.

<unk> should have been.

You guys talked about in class two I'm sure yeah, Yeah. The only hope you dummy tabs Michele Oh I'm talking of ships are going to on the high end, it's usually all guang a whole lot better what should have a lot of 12 months flash a machine that should.

People that Giga chip pump, where you go up the altra, our students with a bang you shop.

Management for taking my question.

My question is about our strategy.

Strategy shift to focus on our core brands is there any impact on some users' stickiness and the purchasing frequency and my second question is related to related to the shipping and handling expense.

I've seen that the per order expenses are increasing both Q on Q and yeah yeah.

Should we take them.

This new level as they are future reference is that driven by the structural trend in the industry. Thank you.

<unk> as a woman can women.

Jim in the Chilean pesos shopping in cases.

<unk> will then.

Okay <unk> this is the year.

Okay Thats useful.

<unk> <unk>.

The bulk loading John Todd can pass visual with Netsuite, obviously, it's Michele the merger, which uses some digital will ensure that led to maintain pilots called <unk>.

The <unk> <unk>.

How much is the digital the FICO Lula b.

And on the digital.

We hope <unk> digital choose the <unk> T cells can be emptied.

<unk> sure who the.

I'm, assuming some high how the <unk> cause of chocolate.

Understood.

<unk> with its <unk>.

Okay.

In terms of the.

Customer behavior, I think actually the second half of last year, especially from the fourth quarter, we began to focus.

More on core brands, we provided the core brands with the surgeon.

Forward.

In a time of a lot of uncertainties. So we do see.

Many positive developments for example customers who attended the sales event in our history.

Super brand day sales on today's top brand sales as they tend to have a much higher retention rate.

And those customers.

Oh didn't have the opportunity to join this event so that actually gave us very strong confidence to continue to focus on our core brands to provide our customers with.

A good high quality <unk>.

<unk>.

Competitive pricing as long as that we have there right.

Our brand supply for our customers. This thing will come more and spend more.

Okay.

Yeah. So.

We have been we have been trying to improve our efficiencies over our field fulfillment expenses.

Over the years and so the more volume we can achieve and then the more efficiencies we can get so as you can see.

D a.

The number of orders in two.

2021.

It has increased.

As compared to 2020 so.

Also.

We tried.

That includes the <unk>.

Try to find ways to improve our efficiency in our warehouses and then try to reduce the number of returns and exchanges those so we'll oh.

Yes.

The efficiencies.

Having said this we have we have been trying on this for years and we believe that.

We pretty much achieved the optimized.

Efficiency and.

We should be able to find ways, but is it going to be a limited Ltd.

Yeah.

Yeah.

Alright, thank you.

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 I'll follow up please don't hesitate to contact me, we look forward to speaking with you next quarter.

Thank you, ladies and gentlemen that does conclude our conference for today. Thank you for participating you may all disconnect.

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Ladies and gentlemen, good day, everyone and welcome to VIP Shop Holdings limited fourth quarter and full year 2021 earnings conference call at.

At this time I would like to turn the call to Ms. Jessie Zheng VIP shops head of Investor Relations. Please proceed.

Thank you operator, Hello, everyone and thank you for joining VIP shop fourth quarter and full year 2021 earnings conference call with US today are Eric Shen, 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 safe Harbor provisions of the U S. Private Securities Litigation Reform Act of 90 95.

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 statement in our earnings release in our 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 merits.

With that I would now like to turn the call over to Mr. Eric Shen.

Yes.

Good morning, and good evening, everyone welcome and thank you for joining our fourth quarter and the full year 2021 earnings conference call.

We are delighted with our solely the business performance in 171, despite a slow fourth quarter impact by the challenging <unk>.

Panel environments.

For the full year total active customers increased by 12% year over year to 93 9 million <unk>.

<unk> close by 16% to RMB 191 5 billion.

Notably Super VIP active customers grew by 50% to six media and that contributed 36% online <unk>.

Driven by steady growth in both customer base and the average revenue per customer.

Our total revenue for the year increased by 15% year over year to RMB 117.

<unk> 1 billion.

non-GAAP net income for the year exceeded RMB 6 billion and the net margin remained above 5%.

Our solid operational and financial performance was led by continued its business upgrades based on our strategic position and as a discount pet film for branded products at <unk>.

Exceptional value.

To further enhance our coal competitive during.

During the second half of 2020 , one we focused more on co brand and the high value customers to further strengthen our value proposition with zim.

Among many things.

Rely and upgrade value channels on our credit form to better empower brand. Upon this and the enhanced shopping experience for customers. We are encouraged by the business synergy generally from then initiative.

For example, multiple brands recorded their highest single day <unk> and leased in the year during the Super brand day, and today's pop rents sales events.

Many more brands came to us providing our customers with more unique and price competitive product.

We are pleased to see that the contribution from co branded for the part of the year significantly improved from a year ago with the dnb growing faster than the overall <unk> on our platform.

<unk> deepened our relationships with our brand partners, we were able to better corporate reach with the core brands homemade for VIP shop production.

In addition.

To address the needs of younger customers. We also consistently added a new and trendy brands to our platform.

We brought in more quality brand and product, we were better positioned to leverage integrate operations to improve customer stickiness and the op Inc.

In particular Super VIP member outperformed in most all operation metrics.

They have a very high retention rate.

And you are at around eight pounds than that of non SBA P customers.

We expect this paid membership program to cover more high value customers on our platform.

Looking into 2022 and beyond we will firmly execute on our merchandising strategy, two <unk> and the increasing share Oh call. It a product from carefully select blend punit.

To achieve this we will keep education more resource to our synergies the closing Oh the <unk>.

Co brands differentiate our offering further flu made for VIP product and introduced more popular and high end threat.

In addition, we will continue to optimize our operations, we will improve the effective customer acquisition. So Luke personalized recommendation enrich the shopping experience and expect to target marketing for new and existing customers.

We expect these efforts.

Collectively the three drivers of quality and sustainable growth.

Our customer and revenue for the long term, while consistently delivering daily and the house profit.

At this point, let me hand over the call to our CFO , David <unk>, who will go over our financial results.

Thanks, Eric and Hello, everyone.

<unk> 21 was a year of challenge and uncertainty. Despite this we achieved a solid performance SaaS to our continuous efforts in executing the merchandising strategy.

Refining operations, our total revenue for 2021 increased by 15% year over year.

Even by steady growth in both customer base.

Average revenue per customer, although the fourth quarter came under some pressure.

Net margin attributable to VIP shop shareholders for the year remained resilient with sequential improvement in the fourth quarter due to disciplined operation evidenced by more prudent marketing strategy through integrated customer acquisition going.

Forward, we remain committed to delivering steady profitability.

With quality top line growth and creating long term value to our shareholders.

Now moving to our detailed quarterly financial highlights.

Before I get started I would like to clarify that all financial numbers presented at below.

That may be and all the percentage changes.

Our year over year changes unless.

Otherwise noted.

Total net revenue.

For the fourth quarter of 2021 was $34 1 billion RMB as compared with $35 8 billion RMB in the prior year period, primarily attributable to softer consumer demand for discretionary categories impacted by the macro economy.

And COVID-19 pandemic.

Gross profit.

$6 7 billion RMB as compared with $7 8 billion RMB in the prior year period.

Gross margin was 19, 7% as compared with 21, 9% in the prior year period.

Total operating expenses decreased to 250 billion RMB from from $5 4 billion RMB in the prior year period.

As a percentage of total net revenue total operating expenses decreased to 14, 6% from 15, 2% in the prior year period.

Fulfillment expenses was $2 2 billion, RMB, which largely stayed flat as compared with the corresponding period in 2020.

As a percentage of total net revenue fulfillment expenses was six <unk>.

4% as compared with six 1% in the prior year period.

Marketing expenses decreased to $1 1 billion RMB from $1 7 billion RMB in the prior year period.

As a percentage of total net revenue marketing expenses decreased to three 4% from four 8% in the prior year period.

Primarily attributable to a more prudent marketing strategy.

Technology and content expenses increased to $443 zero million RMB for.

$272 4 million RMB.

Prior year period.

As a percentage of total net revenue.

<unk> and content expenses.

One, 3% as compared with 0.8% in the prior year period.

General and administrative expenses were $1 2 billion RMB as compared with $1 fruit.

In RMB in the prior year period.

As a percentage over total net revenue general and administrative expenses was three 5%.

We stayed flat as compared with the corresponding period in.

Your 2020.

Income from operations.

Was $1 8 billion RMB as compared with $2 6 billion RMB in the prior year period operating margin was five 4% as compared with seven 2% in the prior year period.

non-GAAP income from operations was $2 1 billion RMB as compared with $2 8 billion RMB in the prior year period.

non-GAAP operating income margin was six 1% as compared with seven 9% in the prior year period.

Net income attributable to <unk> shareholders was $1 4 billion RMB as compared with $2 4 billion RMB in the prior year period.

Net margin attributable to VIP yourself shareholders.

Four 1% as compared with six 8% in the prior year period.

Net income attributable to VIP shops to shareholders per diluted ads.

2.07, RMB as compared with 3.51 RMB in the prior year period.

non-GAAP net income attributable to the shelf to shareholders was $1 8 billion RMB as compared with $2 6 billion RMB in the prior year period non-GAAP net margin attributable to we have yourself to shareholders was $5 three.

As compared with seven 2% in the prior year period.

non-GAAP net income attributable to reoccur yourselves to shareholders per diluted ads was two six for RMB.

Compared with $3 seven zero RMB in the prior year period.

As of December 31, 2021, the company had cash cash equivalents and restricted cash of.

$17 2 billion RMB.

Short term investments of $5 4 billion RMB.

Now I will briefly walk through the highlights of our full year results.

Total net revenue for the full year of 2021 increased by 14, 9% year over year to $117 1 billion RMB from one <unk>.

101.

<unk> 9 billion RMB in the prior year, primarily driven by the growth in the number of total active customers.

Gross margin increased by eight 6% year over year to $3 1 billion RMB from $21 3 billion RMB in the prior year gross margin was 19, 7%.

As compared with 29% in the prior year.

Income from operations for the full year of 2021.

$5 6 billion RMB as compared with $5 9 billion RMB in the prior year.

Operating margin was four 8% as compared with one 8% in the prior year.

non-GAAP income from operations was $6 6 billion RMB as compared with.

$6 8 billion RMB in the prior year non.

non-GAAP operating income margin was five 6% as compared with six 7% in the prior year.

Net income attributable to <unk> shareholders.

$4 7 billion RMB as compared with $5 9 billion RMB in the prior year.

Net margin attributable to <unk> shareholders was 4.0% as compared with five 8% in the prior year.

Net income attributable to <unk>.

Shareholders per diluted ads was 6.75, RMB as compared with eight point plastics RMB in the prior year.

Net income attributable to <unk> shareholders was $6 <unk> billion RMB as compared with $6 3 billion RMB in the prior year non-GAAP net margin attributable to VIP shops shareholders was five 1% as compared with.

Six 2% in the prior year.

non-GAAP net income attributable to <unk> shareholders per diluted ads.

It was $8 six seven RMB as compared with 9.08 RMB.

In the prior year.

Looking forward to the first quarter of 2022.

We expect our total net revenue to be between 27 zero billion RMB.

$28 4 billion RMB.

Representing a year over year decrease rate of approximately.

<unk>, 5% with zero percent.

Please note that this forecast reflects our current.

And preliminary review of the market and operational conditions, which.

It is subject to change with that I would now like to open the call to Q&A.

Thank you ladies and gentlemen, we will now begin the question and answer session. If you wish you ask a question. Please press star one on your telephone and wait for your name to be announced.

If you wish to withdraw your request please press the pound all hash key.

Our first question comes from the line of Thomas Chong from Jefferies. Please ask your question.

Hi, Good evening, Thanks management for taking on my questions.

My first question is relating to the consumer sentiment.

We are seeing right now.

Let me comment about how it is different in Q4, and so far right now in Q1.

Because when I look at the guidance.

Seems that is a negative five 2%.

<unk>, which is similar to the guidance in Q4. So just wanted to see if any changes in terms of our thoughts on met coal business and secondly, I also wanted to get a sense about how we should think about that coupled with the momentum.

In Q2 and coming quarters.

Then finally, I think is more relating to competition.

Can management comment about the.

Live streaming online shopping competition in China, and how it affects our business.

Any thoughts on how we can separate out or quantify the impact on competition and the macro headwinds.

Internationally. Thank you.

Hi, Eric.

Yes.

Yes.

Yeah.

Thank you.

Yes.

So I'm curious about cleaning some feature that <unk> fashion.

Yeah.

Okay.

Sure.

Yes.

The <unk> JV.

Yeah.

The Motiva wouldn't he just one you shall feed to the mechanical <unk>.

On to <unk> Pacific alone. The Molina, you each of the UAE and mobile <unk>.

B <unk> <unk> each year, the Mapusua defense each.

Two thirds of QE know them and conduct.

Mango deeper penetrating them.

<unk>, we can quite hasn't mine continuing.

Maybe two other Pilatus Eve.

In terms of first a question on consumer sentiment actually.

We have seen that and it's really a week in the fourth quarter.

Because of the warmer weather as well as erratic COVID-19 cases.

And in the first quarter, it's getting slightly better.

Because of the.

The weather is getting colder.

But still we're naturally impacted by the COVID-19 cases here and there.

So seasonality still play some role in our bid.

This performance because we are pretty much apparel.

Category focus.

Platform.

Hi, Carolyn Hewson Shaw.

The key to.

Two our shipyard.

Yeah.

How did you will fulfill the two systems.

The mobile misses that began in Q2.

You're reaching new end users each and what may function, which is the <unk> <unk> good.

Single women Jamba show Peter <unk>, Please feel free to do.

And the woman and she said.

John Non Canada, Inc.

That's really useful.

Certain people are really engaged arlene R&M to shortly.

Diwaniyah police and law could be thought of tissue model.

In terms of the recovery chanting cutting corners.

It's really hard to.

Predict for now given the many uncertainties going wrong.

Especially we see that there are two cases of COVID-19.

Still too early to tell whether the consumer trend is building.

Either.

When the consumption is coming back.

Overall, we should see a relatively.

Stable growth for 2022.

We don't expect too much.

Swings in our business performance.

It's going to be quite strong.

April .

Please send them in pieces sure Steve wanted to take advantage of it.

Pension.

Keep working time Warner niches.

Yeah.

Right.

She is on the oncology shoot Cynthia well intentioned.

Yeah.

Some of them are kind of <unk> on year, Peter can gun cases.

Sure.

Is there any family you shared some woman digital industrial or does it gets on the phone.

Pension unusual <unk>.

Is it three women's as you quoted us against onto the income of about two so I think keeping it that way in that you can see.

Social women.

<unk> will continue to support the in Shanghai.

Got it.

Okay.

So we are hoping shopatron mechanism, which is towards the media part of oxygen.

Yeah sure as you close with two T spot.

To support some of them you're welcome Glenn.

Yeah.

And then when they will shortly like got that.

The bulk would support <unk>, which was tempting to support that puts us as a business.

Tableau had them usable please.

In terms of competition, we haven't seen too much change recently, we believe it's getting relatively stable.

We think that you know.

Live streaming platform.

I would take what they can take in the past.

From.

Shelf space to ecommerce platform.

We didn't see competition is getting worse.

Not worried because as long as they get the right merchandising merchandising for customers they would always come to us.

In terms of the impact from macro and the competition, it's really hard to call.

Quantify because you can not predict.

Reliably.

Weather macro is going to play out.

On the competition side, we are pretty sure of that.

The impact is already there.

Since abbvie.

Okay.

Thank you. Our next question comes from Alicia Yap from Citigroup. Please ask your question.

Hi.

Good evening management, Thanks for taking my questions.

I have a couple of questions here. The first one is a question related to the inventory status.

For the Winter Olympics merchandising so have you.

In discussing with your brand partners or maybe election, I think partners.

Adding to the one and the inventory situation do you see any opportunity that VIP shop can get some of this product.

That is kind of lap over and given the timing do you think you will be a benefit more for the fall and winter season later in <unk>.

In late 2022, or do you think there could be some winter clearance activity that you cannot reach later in March or April promotion periods.

Okay.

I don't want you to ask someone else Lee from Glenn Engel.

Good morning.

Sean.

Sure.

Milton.

And she comes in she is an image of a huge hill.

They're with Nokia and I actually don't have much of a coupon.

Yeah.

That's it.

Was your question.

Our niche of the children, Cynthia Hi, Joshua.

Theaters.

Yes.

From a woman condos, which positions <unk>.

The monthly user.

<unk>.

<unk> three <unk>, the claimant, especially women may come down towards or is this something that you can give us a settlement we will do more quick Joseph C. What's your philosophy, there with partners for <unk>.

Appreciate the view will be done, but we thought it would be the doses yet until the summer social in the may conduct with <unk> with and without <unk>.

Personnel, who conduct certainty that's a good thing the <unk>.

Hi, Timna sufficiently to maintain some of the Tempe.

With regard to which is to shoot at some job.

In terms of the inventory related to the Olympic.

Winter Olympics.

We haven't seen a very strong a buildup in England.

Inventory. So we do see is that well what companies have been growing their business on our platform.

But in recent years.

But they do not provide adding dedicated inventory in terms of you know et.

Such as a scheme.

We are etcetera, we think that they have a normal level of inventory for both.

With.

So there is no anticipation that we are going to benefit from any excess inventory related to winter Olympics.

Mhm yeah. Thank you can I follow up one question on user growth strategy. So can you elaborate what are the current plans that you are thinking in terms of.

To help to boost your new user acquisition later this year. Thank you.

This is Sean do you want that you've been doing with Samsung.

It sounds like a thing.

Hmm.

Sure.

We're meant to just tune in this the whole women's saw that hits <unk>.

Language, which you can put on mute.

Dr <unk>.

<unk>.

Banking product.

<unk> got a lot of fixed and mobile buyers is that push outs that you won't put on mute.

So you saw the Shuang you issue on the Chilean Q2, the <unk>.

<unk> won the Hiseq Ali what Youre seeing now.

Meanwhile, EMEA poly pouch.

Good news.

Loosen the mobile media.

Some of it will be a wheat barley.

<unk>, what we assume high single digit.

Without product.

In terms of our user growth strategy I think from the fourth quarter of last year, we had been.

Acquiring quality users in a more efficient and to get back to way, we don't want to blindly spend money in older channels going to cry.

Low quality customers.

We're trying to do it in a balanced and prudent way.

Through integrated customer acquisition.

This year, we're going to continue to invest.

A lot of efforts in acquiring new customers, but at the same time, we're going to improve that retention of our existing customers.

We will maintain a decent level of marketing spend in new user acquisition.

Okay.

Thank you Jesse.

Uh huh.

Oh Alicia.

A couple more.

Things number one is.

We've seen.

A number of our Super VIP increase.

Year over year, so thats one of the key indicators that are the quality of our customer base.

He is getting better and then we will also seen that our our pool stabilized and have a slight increase.

<unk> actually started last quarter with <unk>.

Seen that trend.

I see okay. Thanks, Thank you Debbie for the additional color sufficient Joe.

Thank you as a reminder, if you wish you ask a question. Please press star one on your telephone. Please ask your questions in English and Mandarin.

Our next question comes from Robert <unk> from Goldman Sachs. Please ask your question.

Okay. Thank you.

David now.

<unk>, San Juan Joanna Holofernes Santini.

Santini element in <unk>, Shanghai 50 to shoot that gosh, you julienne sheet Channelize elements CTD, we've actually mildly colleague to.

Apparently that that'd be helpful.

Yeah in Ohio credential.

I'll come back to you guys.

<unk> huge and as you kind of minus <unk> <unk>.

Dr Matsuo, so by VIP.

No I mean, that's something in Tucson, and in <unk> two dee.

There are no certainties, how women since I assumed the business case.

You're talking about but I'll, let dean Douglas hopefully cheap no elements in our balance sheet.

The net cash flow.

What you want and then zinc.

Right.

Key element on the tone, we saw.

Yeah.

Do you have would you all tend to take them up.

Okay.

Do you have down to EPS.

And then a clinic.

Now we all face.

Thank you.

Taking my question. My first question is on gross margins.

Fourth quarter is traditionally a high high margin quarter with apparel high apparel mix. So given this is not the highest quarter margin quarter. Just wanted to hear how are we thinking about the gross margin trends and the implications for 2022. My second question is is our business reaches a more mature stage and we have a very.

Strong net cash balance sheet and sizable earnings per share, we would love to hear management's thoughts on when that could be any potential plans even.

Good morning shareholders by paying dividends.

Thank you.

The Tivo one without the other one also developed with <unk>.

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<unk> city and it wasn't about potential <unk>.

<unk>.

Pursue a continuum.

<unk>, maybe with us.

In terms of the gross margin.

So Q4 is that right.

Low lower level.

As compared to the full year.

The same quarter of last year.

It really because of the promotions and the subsidies.

With that.

During the quarter.

But however, because you know.

During the quarter the winter it was relatively warmer and it didn't.

Activity motivated to consumers to spend.

Spend more on winter clothing, so the return on this.

I can spend is not desirable.

But the current level of gross margin.

Something that we want for the long term.

Without proactively bring our gross margin turn more no.

<unk> level.

In the coming quarters.

Yes.

<unk>.

You don't have to worry about.

The gross margin going ahead.

Okay.

In terms of the cash use.

As you know, we our board has approved a share buyback plan.

Last year, so we have executed the partially in the last year.

And given that we made.

But good profit profit.

In the year and then.

We still see a healthy profitability.

In the coming year and this year plenty plenty, so the board and the management.

Is considering.

Alternatives, among the share buyback and.

This confusion.

But the dividend.

Is.

He is always in the process of we are considering.

And evaluating the options right now.

Thank you. Thank you David.

Yeah.

Thank you next question comes from the line of Natalie <unk> from Haitong International. Please ask your question.

Hi, good evening, Thanks for taking my question.

I have two here first one is following up with Alisha <unk> last question about the use of acquisition.

Lance you want to elaborate more on your latest user acquisition strategy.

Last quarter, we can see that would be all sales and marketing is quite controlled especially considering the seasonal pattern.

Wondering any particular spanning channel has seen typically chen.

Cabela's problems based that or whatever and all the kind of the sales and marketing budget yet.

<unk> for this year.

Would it be more of that.

Absolute number or fix the revenue raised ratio depending on the timing.

Timing of the improvement of the.

Economy consumer confidence just curious how shall we see that churn and.

One is related with our Super VIP, just wondering what's the current percentage.

Ascend is up your Super VIP and also that are related to gross.

<unk> margin profile kind of built up by then.

Because they have obviously have a higher pool, which is I think a favorable to the cost of the module maybe but.

Meanwhile, they are enjoying a deeper discount so.

It'd be great if management can share some color on that.

They said that they use.

It should be the one to utilize just gun Alicia can go when the.

So it goes on cohorts you sound Gwen some larger size.

What kind of bottleneck in data center with the <unk> go before today, that's harder to get them right now.

So digital is to hold them.

So I'm Glenn <unk>.

Jump to your NGL once you actually go about Jewish equation if at all.

Without that many ships you might go to a bit acreage at all.

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Hello, Colin.

That you signed up.

Hi, I shall go way too yeah, no I cannot kind of our men.

I see that you got a telephone the golar igloo.

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Got you.

How would that change at all just help are you sound as a whole can you go do that <unk> negotiated it doesn't that just.

Uh huh.

The yugo switching data.

And she and I did a chance attitudes and then you will answer this kind of work through that.

So it will be chunky giga that changed Daniela so like all of you.

Did I do a show you that you're supposed to get larger.

Roger subsidiary I know that she is what I'm, saying.

So the the percentage of light like continue the journey. They can tell you something.

Thiago <unk> Super VIP.

Okay, you got them since I had those super agile sugar touch where you're at now.

Yeah Yeah.

So Glen does get go circle solution when the mortgage.

O'neill.

The question I'm going to say no.

Now if only and what some of the applebee's alcohol Canadian markets.

Okay.

The only other question Mr Cool J Jill.

<unk>.

Reality is identical.

Helpful guys.

Okay.

The diesel.

Okay, Vigo and teachers are kind of unique womens.

The suitability hits outlook. When you say you pushed some into 10 business EMEA, where <unk> LTV life. Good good she thought the whole cook timber Cleveland.

<unk> tumor the mobile <unk> shifting Cook will now open. This is Daniel did tongue Dupont the most lethal shifted the sync up with.

The <unk> really allow the lull Cook will go <unk> EMEA.

<unk> got like three <unk> number one media, which category should feel.

<unk> digital LTV.

Number of bulk <unk>.

It was the bulk of the things that you are saying they go so the goodwill down with Bunge, <unk> summit, which is a <unk> <unk> or TV.

So as a team.

I think it's $2 bundle will cut for the <unk> product.

So it is all of it balances look close to this as a whole will be $10 you show them that we lay out our business.

<unk> was the highest as Shang T Street, a woman the LTV.

Condo, but light.

The merge Ancona Xu Lei Zhang.

I think a little bit.

<unk> Mizuho, so that you can get through what LTV.

Not powered.

<unk>.

<unk> holdings at Washington.

So as a woman she is <unk> going to be utilized towards the contingency.

Suzhou Chongqing Sega.

Residual Joe one of the soil dwelling on LTE guys. So it's one of the most challenging will it with each.

<unk>.

In terms of the latest update on user acquisition strategy I think.

What can we do differently from the fourth quarter is that we.

We strictly follow the LTV model, so evaluate the marketing efficiency.

Sure.

Pending.

And as well as.

How many days to recover.

In terms of new customers as well.

Our existing customers.

In the past we tend to see it takes longer time to recover the spend on new customers. So we did that.

And for the existing commerce, we tended to.

Send out many coupons.

A lot of time with advertising, but it turns out not to be very effective. So we also did less on that front.

In Canada, we applied our TV models.

In all the channels, including branding as well as TV drama sponsorships as well as advertising I'm sure videos et cetera.

No.

We actually did see some positive results.

The fourth quarter.

This year, we are continue.

We will continue to.

Our television model.

Manage.

Overall marketing spend.

Its different channels.

We do not look at us.

<unk> absolute number of marketing spend.

A certain percentage of them.

Total net revenues as long as the LTV model shows this is a healthy way to do too.

To acquire customers.

Customers will keep doing so.

So we are going to take this in a balanced and prudent approach to our marketing strategy.

Dr <unk>.

<unk> is great.

Sue will be changed.

The.

<unk> been essentially the shows so the moment is the Wheeler the cellphone.

So to conclude we want in the SBA Pete the most elements I mean, Michael Shelby going to them.

We will now.

The SBA piece the way to the sneaker pujol couldn't deal with Tyler to Mali with Didi <unk> <unk>, we call it India hesitant.

Hesitant and Tina you with Honda good time of the close yet.

So usually there is a doable item.

In the ICU suite, so we saw with <unk>.

Josh how often thats VIP, she wont rely what Neil will go through the coming from New York City.

<unk>.

Nick a containable.

In terms of their margin profile for SDI team members.

We've just dimension to S. VIP already accounted for roughly 66% of all online that GMB.

Last year.

In the future with going to.

Continue to converge.

More high value customers into <unk> members.

In terms of the gross margin FBI.

Members.

Have a slightly lower gross margin.

And then the overall.

The level of our gross margin for the company.

And slide a higher return rate, but SP IP.

B spend much more than that now has to be I can remember so it is definitely a very profitable model for the company and we expect at.

As long as more.

High value customers are successfully becoming at VIP members, they tend to come to shop more and spend more.

That's very helpful. Thanks, John Joanne Jesse.

Thank you. Our next question comes from Eddy Wang from Morgan Stanley . Please ask your question.

Hey.

Justin Hauke actually I just thought what's your what's your benefit <unk> eager to serve just one quick.

I'm, Glenn that UA simple answers entity about doing so, claiming Gulf, which it had been a quote unquote normal.

Also I wanted to I, just saw Cumulus, how about Houston Gulfport sure.

Bringing donated I'd take essentially the raw milk and Microsoft.

Labour Jacob for Shabaniyah civilian Cher Empire, <unk> joke with us.

You got to start Destocking.

It's a single entity.

Oh sure insurance at audio switching back to the IP <unk>.

Sure.

The apartment portfolio lever almost always hard to call. We thought we should use your consciousness habenula sort of towards the low order book.

You'll notice of award you saw.

Quarter two thoughts.

So as you saw.

There are people familiar with the article my belief the whole whats developing there.

So a good quarter.

How the user engagement.

J J.

I'll take the Tulsa quite a while.

Jay will walk through what much of good that's it.

So I think what you are assuming all of that yourself.

I'll, let you a whole lot for defining Asia.

Thank you for taking my question. My first question is also about the inventory defaulting. So Sundar you mentioned that.

For the non sports apparel.

England.

Issue, but just want to ask if there is any.

Inventories report the womens apparel, all branded apparel, given the weak sentiment of the apparel in China since the second half of last year and if thats the case.

Have any opt.

Opportunity for Destocking.

Many quarters the second.

Question is about.

Any plan for the.

Category expansion on top of the apparel given that apparel sentiments is quite weak.

And if we have more ex VIP our platform. So we can meet.

It demands of different categories, not just about apparel that is case.

On the margin profile as a whole thank you.

Yeah.

Among the <unk>.

First question on ourselves.

Yeah.

Our business model is strong.

Is the is the sales of our consignment inventory so majority of our business towards done through consignment, so our balance sheet.

The inventory balance.

It's quite small as compared to our total annual TMT and.

You can also see the inventory balance is decreasing that to our effort to clear some of our aged inventory.

To add some color to this.

The inventory balance.

Big portion of that is coming.

Coming from our.

Troughs and Max.

Stores, so they have to carry some inventory so take out take out debt and then.

The zero inventory, we carry for our online business is quite good.

Immaterial I would say, yes, okay.

<unk> saw the input challenges achieves a woman candle pin pad.

Should that tungsten <unk> Chilean therefore, the 10-Q.

<unk>.

Bob.

And John So you spoke to women's Houston.

And yet what Mr. <unk> has been the one TCE of prostitutes.

Neither cockpits for New awards.

And then to lower the <unk> tumor.

<unk> Corp.

The most usual which is one <unk>.

Neil Ashish.

<unk>.

Adding to this point in terms of the <unk>.

<unk> from non sportswear apparel.

Do you see some upbeat adding inventory.

From the fourth quarter because of the weather conditions.

COVID-19 cases.

It's going to be interesting for us.

But on top of clearing excess inventory for our brand, but we also you know.

Customer.

Product offerings that we saw some of those core brands.

Yes.

Trying to secure the best to supply.

<unk>.

Thiago <unk> with BELBUCA.

The mobile <unk>.

When symptoms or simply <unk> candela, just a woman.

So that was just.

Just a woman Schistocyte th you won't go to <unk>.

So youll <unk> Suzhou <unk> opinion, yet to hear from Intuit.

Core tax condo this full year <unk>.

India is user needs will go up and they get built in the DN <unk> Jeong hwan Machista wasn't the bulk with wawa in digital doped in the quiet time was Houston.

<unk> Q1, just a woman.

I'll say a woman the built in some inputs we use slack.

He didn't boom.

Shlomo if we might.

There was some mention of it.

Mr. William developing the pushout slowdown.

For many of yards without Youll cookbook <unk>, Neil will go the syngas use them to Poland. So too.

We think <unk> Suzhou will continue we say to the built in some way.

Charter is a leader.

So until you Mike.

The most we show a woman duplicative.

<unk> built in the leader in Nicobar lethal deacon.

And that must be <unk>.

That woman, we think Lisa my competitors, who can do the math.

The teams, who can do or should do <unk> suites.

In terms of the category expansion.

In the past a way to really win in apparel.

Related categories.

But it's not enough to meet the diversified needs.

A doctor in Java consumers. So we are we are really investing additional efforts in bringing more standardized products.

To our platform.

For example, we've already to Utah.

IP.

Especially store.

We have a dedicated channel for it.

<unk> products will be.

Very good cosmetic a channel.

Has the phone xiaomi channels to attract a lot of our consumers.

To come to us too.

To look for.

Our unique offerings with competitive pricing.

Timber for factor.

Standardized products. So we are definitely going to Oh.

Increase our efforts on this front.

In terms of the gross margin for <unk>.

Products.

Probably some of the some of them they have a relatively lower.

<unk> gross margin, but it's really helping expand our brand portfolio, and especially improve customer thickness and the repeat orders.

So the increase in the proportion of our incentive products. If any will have limited impact on the overall level of gross margin.

And adding to that.

Actually the conversion for standard products is actually higher than that of <unk>.

Really take care category with the same amount of traffic.

No.

So that's something we'll look at.

This year.

Sure.

Yes.

Thank you. Our next question comes from Andre Chang from Jpmorgan. Please ask your question.

So Paul maybe you don't get the Whatsapp.

Whats thing.

Well.

Well to me at all.

The project itself.

So.

But with all four of them and then potentially a detailed since the same way as I said at all either quartz all types of E. The thickness is obviously consulting support.

The share buyback.

Uh huh.

Somewhat.

I wanted to address this at all.

Could we see you can see we saw some other hotels are all quite logging costs and payroll.

The two portfolios to grow quality acquired I'll help you do that.

Dividend.

So hope it ends up.

Is it.

Oh.

I will answer the first question so in this year.

One we.

Our capital expenditure is about $3 5 billion RMB, so a little bit over half of that are.

Actually for Sunshine and then we also have some.

Payments for completion of our existing warehouses.

Which is in the work in progress and then also some.

Please.

Sure.

Technology and servers and the like so that's pretty much the ballpark, but there is no.

Additional.

Other.

Other expenditures.

Sure.

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Vince on the hybrid it at CN.

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<unk> <unk> <unk> Suisse.

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Genesis will fade from pension.

Pension that will kind of the team.

Three each quarter.

The <unk> woman chooses encourage users of Samsung or the digital.

Okay. Good.

Oh geez.

Colombian woman annuity that they've made.

<unk>.

Tissue takeout, cheapen Sunshine media and Buckeye to much stronger.

<unk>.

The mobile <unk>, which is digital just changed the year Tanya.

Tom you annualize that didn't go through goods cheese.

She said that Youll see the freedom freedom shoot tongue until you can come in Vietnam.

<unk> unique sensor all either.

A levered vehicle.

In terms of expansion portion Shan outlets.

Actually the Shan Shan business things are really doing very well.

Although last year same store performance.

With the relatively weaker because of the COVID-19.

Pandemic.

Clothing that impact the same store performance.

Actually.

Chanting very healthy.

Believes that offline outlets is going to present, a large oh.

Addressable market and is going to grow very fast in the next couple of years. So we're going to continue our expansion plan.

Trying to add two to three offline policy each year to capture the increasing consumer demand.

We think this all.

Offline business model is very solid.

Tenable and a very healthy for the long term.

How about tissue.

Thank you. Our next question comes from the line of Ashwin <unk> from Credit Suisse. Please ask your question.

Finally, traditional and Sheila Oh, well the diesel issue why you all mentioned that construct on Fisher Cobra, Washington Patch I Hope you all do ship, but John look at Badger Hollow, you'll now don't they don't wish you a walk on that thing so far a stickiness equals hang pullback attached on East Asia.

Thiago Thank you Joe.

She will come out in the CPM handling Spanish.

Well it should kind of banking that you guys talked about in class a.

I'm sure Yeah, Yeah. The only hope you tell me you shouldn't see Shaw, Oh, I'm talking the high institutional Guang, a whole lot better what should have been a lot of talk about the flash of gene that you shouldn't use the word that you got to constantly go up they will drive our simpler thing Asia.

Thanks management for taking my question. The first question is about our.

<unk>.

Strategy shift to focus on our core brands is there any impact on some users' stickiness and the purchasing frequency and my second question is related but related to the shipping and handling expense.

It seemed that the per order.

Expenses are increasing both Q on Q and yeah yeah.

Should we take.

This new level as they are future reference is that driven by the structural trend in the industry. Thank you.

To go into and hopefully there's a woman can women.

Jamie in the Chilean peso shopping in cases.

<unk> Cushing pie.

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<unk> of the year.

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The bulk loading Joan Tomich impasse visual one <unk> Michelle <unk> uses some digital will ensure the myeloid zooming team pilots called <unk>.

The Mohawk solar what Melissa <unk>.

Strategically <unk> b.

On the digital.

Quick thought Suzhou <unk> digital choose the <unk> <unk> from BNP <unk>.

<unk> E Mail, originally Shaw, who clearly.

The <unk> the <unk> cause of chocolate.

So that's just the equalizer peak with Australia.

Right.

In terms of the cash.

Customer behavior, I think actually the second half of last year, especially from the fourth quarter, we began to focus more on <unk>.

More on core brands, we provided the core brands with a certain support.

Time off.

A lot of uncertainties, so we do see a.

Many positive developments for example customers who attended the sales event.

Our Super brand day sales on today's top brand sales as they tend to have a much higher retention rate than those customers.

It didn't have the opportunity to join this event so that actually gave us very strong confidence to continue to focus on our core brands to provide our customers with.

Good high quality.

Merchandisers.

<unk> pricing as long as the we have the right.

Brand supply for our customers as they will come more and spend more.

Okay.

Yeah. So.

We have been.

I have been trying to improve our efficiencies over our fuel fleet fulfillment expenses expenses over a years. So the more volume we can achieve.

And then the more efficiencies we can get so as you can see.

The <unk>.

Number of orders in two.

2021.

It has increased.

As compared to 2020 so.

Also.

We tried.

That includes the <unk>.

Try to find ways to improve our efficiency in the warehouses and then try to reduce the number of returns and exchanges.

We'll oh well.

Yes.

The efficiencies.

Having said this we have we have been trading on this for years and then we believe that.

We pretty much achieved the optimized.

Efficiency and.

We should be able to find ways, but is it going to be limited limited.

Yeah.

Yeah.

Great. Thank you.

That concludes today's question and answer session. At this time I'll 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.

Thank you, ladies and gentlemen that does conclude our conference for today. Thank you for participating you may all disconnect.