Q4 2022 Vipshop Holdings Ltd Earnings Call
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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The conference will begin shortly to raise and lower your hand during Q&A you can dial star one one.
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Okay.
Ladies and every.
Everyone and welcome to the Yadkin shop Holdings limited fourth quarter and for yourself as opposed to earnings conference call. At this time I would like to turn the call Jessie Zheng Young you shop head of Investor Relations. Please proceed.
Thank you operator, Hello, everyone and thank you for joining VIP shop fourth quarter and the full year, Tony turning to earnings Conference call. We just 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.
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 statement in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extend to any forward looking statements may be made.
Now that certain financial measures used on this call such as non-GAAP operating income non-GAAP net income and non-GAAP net income for ideas 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.
Good morning, and good evening, everyone welcome and thank you for joining our fourth quarter and the full year 2022 earnings conference call.
In the first in the fourth quarter, we once again demonstrated strong earnings power and made a choppy backdrop.
The top line recovery was impacted by the short term disruption.
Economic activity from the surge of COVID-19 infections infections.
<unk>.
Our panel related <unk> fared better than expected.
Italy down year over year.
We actively worked out merchandising selection to satisfy even though demand.
Customer trends continued to recover year over year, so desire to spend the remainder.
Firstly with customer visits clearly picking up and the X two super VIP customers increased by 13%.
Accounting for 42% of our online spending.
Overall, we are comfortably.
<unk> quality development in 2022.
Delivering record level net income.
RMB six 8 billion while negatively.
So navigating through it.
<unk> challenged year.
Our business fundamentals has been stronger after week in premium.
TBS enhancement on merchandising.
Solutions and technology.
On merchandising, we now have.
A great portfolio of our brand and product.
Offering that reinforce the value proposition of our platform.
With hundreds of brands at the coal our business.
New trendy and high end brand and a lot more selections integration by bringing a new look to our pets.
For the full year 2022 co brand has positive growth on VIP scope with greater contributions to total GMB.
Palo related <unk> outperformance.
Non apparel categories.
The made for VIP shop customized line developing into the more selective collection that enjoyed.
Higher conventions than general merchandise.
Operationally, we are more efficient in deploying resources to best support partners.
Launching in Nook in novel Gauged.
Hello.
Launching <unk>.
<unk> panels to build sales momentum and.
And the increasing customer engagement in a cost effective way.
How we managed to grow the base of quality customer with six 7 million <unk> members repeatedly shopping with us last year.
Technologies become more.
Pre mental in every aspect of our business for example, our fully upgraded merchants platform enabled branded partner to engage in a more measurable way <unk> date.
Such as offering customers insensitive and the generation sale.
Our strong execution in 2022, he was us confidence as we look ahead for the post.
Pandemic.
Opportunity.
We are set to take advantage.
Penn plentiful inventory.
Our professional buyer team continued to be the great advantage as they work more effectively with Ben panel.
Zoe uncertainties do remain follow trend, China reopening we did state we did.
We did see some recovery in spending on apparel and the other is correct Nate items since the beginning of this.
This year, yes.
Is this.
There is opportunities for us to attract new customers and capture more customers.
We believe we are now in the healthier position than before to achieve both growth and profit.
Our profitability and to continue delivering value to our shareholders.
These pumps.
I hand over the call to our CFO David <unk>.
I'll go over our financial results.
Thanks, Eric and Hello, everyone.
In the fourth quarter, we beat our level best to keep that business on track despite despite COVID-19.
COVID-19 questions in China.
We're pleased that our revenues continue to recover well another quarter of strong profitability demonstrated the resilience and strength.
<unk>.
Gross margin increased by two percentage points to 21, 7% from a year ago and actually improved across all categories.
Thanks to enhance their merchandising strategy.
Cost control as well as dedicated management business.
Isn't it the processes.
Operating margin achieved at all time high.
As we consistently focus on operational discipline.
As a result, we have the most profitable quarter in two years with non-GAAP net.
Income.
24% to $2 2 billion RMB and net margin at 7%.
Help us finish off the full year of 2022 at a record level of profitability.
Last year, we generated more than seven 8 billion RMB free cash flow.
Purchased a total of 952 million U S dollar so far.
Under our buyback program, we are committed to delivering value to our shareholders by steadily executing the programs.
Absolutely entered the post the pandemic era following China reopening we are moving quickly, but rationally to seize the opportunities for growth, while allocating our resources, where they will provide faster returns over time.
The same time.
We maintain our focus on everyday operations, who generated synergies and efficiency gains.
We are positive on regaining growth momentum, while sustaining healthy profitability.
Now moving through our detailed quarterly financial highlights.
Before I get started I would like to clarify that all financial numbers presented below are in B and all the percentage changes are year over year changes unless otherwise noted.
Total net revenues for the fourth quarter of 2022 were $31 8 billion RMB as compared with $34 1 billion RMB in the prior year period, primarily attributable to short term disruptions.
Nymex activities from the surge of COVID-19 infections nationwide.
Gross margin gross profit increased by two 8% year over year to $6 9 billion RMB from $6 7 billion RMB in the prior year period.
<unk> margin increased to 21, 7% from 19, 7% in the prior year period.
Operating expenses decreased by six 5% year over year to $4 6 billion RMB from 5.0 billion RMB in the prior year period.
As a percentage of our total net revenue total operating expenses.
Was 14, 6%.
<unk> stayed flat.
As compared with the prior year period.
Fulfillment expenses.
Our $2 2 billion, RMB, which largely stayed flat as compared with prior year period.
As a percentage of our total net revenues fulfillment expenses was six 8% as compared with six 4% in <unk>.
Prior year third.
Marketing expenses decreased by 17, 6% year over year to $944 1 million RMB from $1 1 billion RMB in the prior year period as a percentage of our total net revenues marketing expenses decreased to 230.
Percent from three 4% in the prior year period, primarily attributable to more prudent marketing strategy.
His analogy and content expenses decreased by seven 8% year over year to $408 5 million RMB from 443.0 million RMB in the prior year period.
As a percentage of our total net revenues technology and content expenses was one 3%, which stayed flat as compared with the prior year period.
General and administrative expenses decreased by five 2% year over year to $1 1 billion RMB as compared with $1 2 billion RMB in the prior year period as a percentage of our total net revenues general.
Administrative expenses, plus three 6% as compared with three 5% in the prior year period.
Income from operations increased by 30%.
1% year over year to $2 5 billion RMB as compared with $1 8 billion RMB in the prior year period.
Operating margin increased to seven 9% from five 4% in the prior year period.
non-GAAP income from operations increased by <unk>, 6% year over year to two 8 billion RMB from $2 1 billion RMB in the prior year period.
non-GAAP operating income margin increased to eight seven.
7% from six 1% in the prior year period.
Net income attributable to VIP shops shareholders increased by 57, 9% year over year to $2 2 billion RMB from $1 4 billion RMB in the prior year period.
Margin attributable to VIP shops to shareholders increased to 270% from four 1% in the prior year period.
Net income attributable to <unk> shareholders per diluted ads increased to 366 RMB from 2.07 RMB in the prior year period.
non-GAAP net income attributable to VIP yourself to shareholders increased by 23, 9% year over year to 2 billion RMB.
From $1 8 billion RMB in the prior year period.
non-GAAP net margin attributable to VIP aircraft shareholders increased 270% from five 3% in the prior year period.
non-GAAP net income attributable to <unk> shareholders per diluted ads.
The increase of 236 by RMB from two six for RMB in the prior year period.
As of December 31, 2022, we had cash and cash equivalents and restricted cash.
$23 1 billion RMB and short term investments of.
One 6 billion RMB.
Now I'd like to briefly.
Briefly walk through the highlights of our full year results.
Total net revenues for the full year of 2022 were 100.
And $3 2 billion RMB as compared with <unk>.
$117 1 billion RMB in the prior year.
Gross profit was $21 6 billion RMB as compared with $23 1 billion RMB in the prior year.
Gross margin increased to 21.0% from 19, 7% in the prior year.
Income from operations increased by 11.0% year over year to $6 2 billion RMB from.
Five 6 billion RMB in the prior year operating margin increased to two 6% from four 8% in the prior year.
non-GAAP income from operations increased by.
0.1% year over year to seven 4 billion RMB from $6 6 billion RMB in the prior year.
non-GAAP Op group income.
Margin increased its grew seven 2% from five 6% in the prior year.
Net income attributable to VIP shops shareholders increased by 34, 6% year over year to 6.3.
<unk> billion RMB from $4 7 billion RMB in the prior year.
Net margin attributable to VIP shops shareholders increased to six 1% from $4 zero percent in the prior year net.
Net income attributable to <unk> shareholders per diluted ads increased to 9.83 RMB from clients.
Seven five RMB in the prior year.
non-GAAP net income attributable to VIP shops to shareholders increased by 13, 7% year over year to $6 8 billion RMB from 6.0.
Period RMB in the prior year.
non-GAAP net margin attributable to <unk> yourself shareholders increased to six 6% from five 1% in the prior year non.
non-GAAP net income attributable to VIP shops shareholders.
Diluted EPS increased <unk>.
10, six seven RMB from eight six RMB in the prior year.
Looking forward to the first quarter of 2023, we expect our total net revenues to be between $25 2 billion RMB and the $26 5 billion RMB, representing a year over year increase of approximately zero percent.
5%.
Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change.
Scott.
I'd now like to open the call to Q&A.
Thanks.
I'll ask a question. Please press star one months. If your question has been answered and you'd like to remove yourself in queue. Please press star one again.
So as you. Please ask your question in English and Spanish.
Our English and Chinese.
And our first question comes from Alicia Yap with Citi. Your line is open.
Okay.
Okay.
Alicia Yap your line is open.
Hello can you hear me.
Yes, we can hear you Alisha. Please go ahead.
Glenn is Eliza hall, such as yourself, whether T one with Japan.
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Jack just yet.
Thanks management for taking my question. This is Vicky Wei on behalf of ambitious yet.
I have two questions.
First.
Management view the current competition landscape.
Recent step up marketing campaigns by E Commerce peers have Andy.
On VIP shop.
Moshe this call as well.
My second question is what is the company plans for this year in terms of new user acquisition, and how will that impact margins churn for 2023. Thank you.
Okay.
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Okay.
To answer your question on competition, obviously, there is some bonds.
<unk> e-commerce industry, especially in the shelf model at E Commerce.
Some peers have.
Launched subsidy campaign.
But remember VIP shop remain highly focused on apparel are not standardized eitan and that apparel does not only depend on pricing.
Also it depends on a lot of other factors.
Styles.
This is a much sophisticated segment.
Secondly, even.
At the end of the guidance. So we are trying to secure unique products supplied from our top brands.
Unique styles and at <unk>, we are not looking for as many.
It's possible we are trying to be much more selective at ku.
So we were not.
<unk> work.
This work.
We are trying to grow our business in a healthier we are not going to.
Sure.
Sacrifice profitability.
By using a lot of the subsidies.
Exchange for customer growth.
The key.
The key point for the IP shop two.
Customers took early business.
To reinforce this unique value proposition in discount retail and then naturally.
Customers will have.
Better perception about VIP shop in the world.
Top of mind top of mind with customers as well.
Hum along screaming.
The competition.
Has been already there, but we don't feel any additional pressure on that front.
Our competitive landscape.
Naturally moderated.
On your second question on new user growth strategy.
In this year also.
To achieve quality customer growth.
We are definitely take this opportunity uptake.
During the post pandemic era.
Try and more proactively to acquire new customers, but at the same time, we'll continue to stick to the LTV model to evaluate the rins from different channels to ensure that we are indeed acquiring high quality customers.
So overall, we probably will have to spend a little bit more to acquire customers in absolute amount, but as a percentage of revenue on marketing expenses I should.
Should stay.
Okay.
A very healthy level.
As comparable as we had for last year.
So this is going to.
Continue.
Yes.
No.
I'll continue to stick to our.
Practice last year in terms of customer.
And.
It won't have a pit correct.
Overall profitability.
Yeah.
Thank you our next question.
Q with Bank of America. Your line is open.
Hello.
Hello, Hello can you hear me okay.
Hello, Jessica.
Yes.
We can hear you. Please go ahead.
Sure.
So David and Jessie Congrats on the solid results.
Two questions. The first one is regarding the <unk>.
Low demand we observed year to date have we observed any kind of pent up demand or any behavior changes such as consumption upgrade downgrade of frequency tanks or like you know whatever like track, we observe from the supplier side like brand site.
Any clear goals of clearing the.
Yes.
Clearing the docs are like you know they have a plan of launching new products any color is lumpy. Good. The second question is we have observed in the fourth quarter at the platform DMV actually grow faster than our <unk> revenue.
The cause of all sides perfectly we mentioned we have done like the mix change in our marketplace.
Is there any specific plan in Tennessee in our like Street key marketplace.
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Okay choice on your question.
<unk> consumption trend apparently.
Posted to pandemic, we did see faster than expected recovery in spending in apparel.
Discretionary items.
On the ground with the a lot of people feeling more comfortable with moving our traveling around so they do have strong demand for apparel.
Categories.
We've seen positive growth.
Customer numbers as well as our conversion rate.
So that's on the consumption side.
On the.
On the supply side actually.
There is plentiful, England GE out there.
Because a lot of brand partners had a very tough year.
Sure.
Especially a lot of offline stores.
Actually locked it down due to the Covid impact.
So both on the demand side and down.
The supply side, we've seen.
A stronger momentum than expected.
Yes.
Your second question.
Regarding the Gms and revenue.
Change changes.
Actually our T&D.
Narrow.
Narrow down.
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Our revenue our revenue.
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Most of the towards the year end post pandemic.
Change and a return items were actually up so that is the primary reason for that.
Okay.
Got it got it thanks.
Thank you. Our next question comes from <unk> Shah with UBS. Your line is open.
Your line is open can you tell whether youre.
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Where do you see the margin the shape you won't go down.
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Thank you management for taking my questions I have.
Two questions regarding the margin side.
<unk> is off the net margin so looking at 2023.
Much room can we further optimized our expenses and costs do we expect that the net margin in 2023 continue to improve year on year and are we becoming more confident on the long term net margin target.
And my second question is on the gross margin how should we think about the trends in the first quarter as well as <unk> III and how does management think about the opportunity to further improve on the gross margin longer term. Thank you.
Yes, I will combine the two two questions together.
Our objective for both.
Net margin gross margin to remain stable over the over the over the year.
There could be.
Awesome.
<unk> for us.
We improved the net margin because of the.
February .
Yes.
Yes.
Okay.
The volume.
For procurement cost.
The third.
Maybe a room over there. So we are in terms of the gross margin.
Our aim is to.
To remain stable.
Net margin.
Got it thank you management.
Thank you. Our next question comes from Thomas Chong with Jefferies. Your line is open.
Hi, Thanks management for taking my question could you. Please provide some updates on the business development TMT and consumer sentiment in recent months.
Or would you receive the monthly trend and our outlook for the full year 2023.
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Overall, we are pretty optimistic about the outlook for this year in terms of growth.
After the spring festival actually a lot of people.
Coming back and we've seen a stronger momentum than excepted in terms out there.
Pending.
Apparel and other categories.
And for and this momentum is going to continue into the second quarter, which we expect to we expect to have a stronger recovery.
Partially because of that.
Low base last year, especially.
If you remember last year.
March to May we had a lot of problems such as supply chain disruption lockdowns.
Hi incident, so there's a lot of.
Jack.
For the same period for the second quarter of last year and therefore, the for the second half well for Q3 and Q4 with the Covid thing cleared away.
The momentum should continue into the second half.
We're quite optimistic about our growth outlook.
Thank you. Our next question comes from Natalie <unk> with <unk>. Your line is open.
Okay.
Oh.
It is semi Oh, sorry, good evening, Thanks, Paul I'll take that question.
My question is related with that.
Spending power.
I'll take this.
Just wondering post the pandemic.
And then we will open if any.
Chad it can be upset regarding that kind of the.
Updated operating metrics and then I'll.
So the second question is who is calling the active the.
After paying Costello.
But.
The number of that.
After paying cosmos.
<unk> returned to positive growth in the first quarter. If that is true and just wondering is there a target of your active paying customer growth this year.
What's your thoughts on.
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On customer churn that we've seen apparently customers are becoming more active than before because.
Because of the lifting of the Covid restrictions and.
And as they have become more comfortable with moving around what's happening around so we've seen the shop a lot more than before but the order size average order size remains remains quite stable.
And yes, we are seeing that.
<unk> active customer numbers are going to look positive growth in the first quarter and.
It will continue to grow in the second quarter, because it was all done.
Although nowadays.
For the second quarter of last year.
We had 17% decline in customer numbers because of the Covid impact.
For the full year, we are pretty positive.
The customer trends, what do we all achieve a.
Quality customer growth.
Thank you as a reminder to ask a question. Please press star one one.
Our next question comes from Tien Ho with Th data capital Your line is open.
Okay.
Yes.
<unk> woodman offline what kind of growth.
Okay.
The top line.
Sometimes you can't get themselves.
Our margin in 2015.
So the margin impact.
Cool.
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At the moment going forward. So under this conversation the top line growth become critical.
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Okay.
Okay on the margin side, we are seeing their limiter on the virus came through gross margin because of we don't increase the take rate from brand partners.
In the past year.
So well.
We're very.
Very restrained about providing this.
Unnecessary subsidies, so gross margin would be would be stable for the quarter.
Yes.
For the future.
Net on net margin side with single there is still some room for us to improve the cost structure and the increase of efficiency gains. So there is still opportunity for us to improve.
Net profit margin.
But the most important thing is of course, how to grow the customers in the <unk> right on that that should provide the most upside for any margin expansion.
Hum.
We will focus on.
Data page amendment of all of our business operations.
When you look at quality of growth.
Customer base, we will continue to increase repeat orders from existing customers.
Add quality new customers.
Extend.
Our Super VIP to improve up one the average order size and also we want to improve customer stickiness is through innovative use cases channels.
So improve.
Conversion to serve personalization. So there are a lot of ways to increase.
Our business too.
Abuse.
To build our business momentum.
We are pretty confident that we can achieve quality growth this year.
Okay.
Thank you due to time constraints that concludes today's question and answer session. At this time I will turn the conference back to Jackie when he calls you'll like.
Thank you for taking the time to join US today, if you have any questions or follow up please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.
Thank you. This concludes the conference you may now disconnect everyone have a great day.
Have a great day bye.
The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.
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Okay.
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Okay.
Okay.
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