Q4 2023 Baozun Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun's fourth quarter and fiscal year 2023 earnings conference call. At this time, all participants are in a listen-only mode.
Good morning, ladies and gentlemen, and thank you for standing by a thousand fourth quarter and fiscal year 2023 earnings conference call.
At this time all participants are in a listen only mode.
Operator: After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations for Baozun. Please proceed, Wendy.
After management's prepared remarks, there'll be a question and answer session.
As a reminder, today's conference call is being recorded.
I will now turn the meeting over to your host for today's call Ms. Wendy Sun Senior director of corporate development and Investor Relations. Please proceed Wendy.
Wendy Sun: Thank you, operator. Hello everyone, and thank you for joining us today. Our fourth quarter and fiscal year 2023 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on Global Newswire Services. We have also posted a PowerPoint presentation that accompanies our comments on the same IR website, where it is available for download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer, Mr. Arthur Yu, Chief Financial Officer and President of Baozun E-Commerce, and Ms. Sandrine Zerbib, President of Baozun Brand Management. Ms. Qiu will review the business strategy and company highlights, followed by Mr. Yu, who will discuss the business development of Baozun E-Commerce and our financials and outlook, and then by Ms. Zerbib to share more about Baozun Brand Management.
Wendy Sun: Thank you operator.
Wendy Sun: Hello, everyone and thank you for joining us today, our fourth quarter and physical year 2023 earnings release was distributed earlier before this call and is available on our IR website at IR <unk> com as well as on global Newswire services. We have also posted a powerpoint.
Wendy Sun: The presentation that accompanies our comments to the same IR website, where they are available for download.
Wendy Sun: On the call today from thousand they have Mr. Nathan Xu Chairman and Chief Executive Officer, Mr. <unk>, <unk>, Chief Financial Officer, and the President Falls in E Commerce, and sundry zebu President of thousand Brent measurement Mitch.
Wendy Sun: Joe will review the business strategy and company highlights followed by Mr. Zhou who will discuss the business developments all stars when he called us and about our financials and outlook and then I missed that'd be to share more about thousand blood measurement. They will all be available to answer your questions. During the Q&A session.
Wendy Sun: They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Security Act of 1933 as a mandate, the U.S. Security Exchange Act of 1934 as a mandate, and the U.S. Private Security Litigation Reform Act of 1995.
Wendy Sun: And that follows before.
Wendy Sun: Before we begin I would like to remind you that this conference call contains forward looking statement within the meaning of the U S. Securities Act of 19 said history as a mandate the U S Securities Exchange Act of 19th so to fall as a mandate and the U S. Private Securities Litigation Reform Act of 1995.
Wendy Sun: These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve no or unknown risk and certainty, and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks and uncertainties or factors is included in the company's filings with the U.S. Security Exchange Commission and its announcement notice or other documents published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of today, and the company does not undertake any obligation to update any forelooking statement except as required under applicable law. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may elect to use adjusted in place of non-general accounting accepted accounting principle or non-GAAP in order to reduce any confusion that may arise from our discussion about the financial statements related to the GAAP brand.
Wendy Sun: These forward looking statement are based upon management's current expectations and current market and operating conditions and relate to events that involve no oh, no risk and southern Chase and other factors all fleets are difficult to predict and many feature beyond the company's control.
Wendy Sun: She may cause the company's actual results to differ materially from those in the forward looking statements.
Wendy Sun: Further information regarding these and other risk and southern Chase. All factors is included in the company's filings with the U S Securities Exchange Commission and its announcement no taste or other document published on the website of the stock exchange of Hong Kong Limited.
Wendy Sun: All information provided in this call is as of the date hereof and it's based on the assumptions that the company believes to be reasonable as of today and the company does not undertake any obligation to update any forward looking statements, except as required under applicable law.
Wendy Sun: Finally, please note that unless otherwise stated all figures mentioned during this conference call are in RMB.
Wendy Sun: In addition, they may elect to use adjusted in place of none General accounting accepted accounting principal all non gap in order to reduce any confusion that may arise from our discussion about the financial related to to get read there.
Wendy Sun: Dear all, please turn to slide number two. And it is now my pleasure to introduce our chairman and chief executive officer, Mr. Vincent Chu. Vincent, please go ahead.
Speaker Change: Oh, Yeah, Oh, please turn to slide number two and it is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Vincent You Lisa. Please go ahead.
Wenbin Qiu: Thank you, Wendy. Hello, everyone. Thank you all for your time. 2023 kicked off our journey of transformation. Throughout 2023, Baozun Group demonstrated its resilience and adaptability to transformation. BEC reinforces its omni-channel capability and improved service quality. Consolidating our leadership within the digital commerce ecosystem, EBM contributed additional revenue streams and extended our value creation from supply chain to also the retail chain for few. We also further enhanced our cash generating capability with cost optimization, resulting from process reengineering and a more efficient working capital management. Overall, despite the challenging market conditions, annual operating cash flow and free cash flow both grew by double digits year over year and surged to record highs. This has significantly strengthened the financial health of Total revenues of the group grew 5% year-over-year to $8.8 billion, underpinned by incremental contributions from Baozun brand managers. BBM.
Oh, Thank you Hello, everyone and thank you all for your time.
Speaker Change: Tony It's really kicked off our journey of transformation.
Speaker Change: Raul to 'twenty to 'twenty three.
Speaker Change: Demonstrated our resilience and adaptability to transformation.
Speaker Change: D C reading your forces Omnichannel capability and the improved service quality.
Speaker Change: Consolidated our leadership within the digital commerce ecosystem.
Speaker Change: E. B M contributed additional revenue stream and extends our value creation from supply chain to also supply chain procurement.
Speaker Change: We also further enhanced our cash generating capabilities with cost optimization, resulting from process reengineering and the more efficient working capital management.
Speaker Change: Overall, despite challenging market conditions or annual operating cash flow and the free cash flow both grew by double digits year over year.
Speaker Change: And has surged to a record record highs.
Speaker Change: This has significantly strengthened the financial health of the group.
Speaker Change: Total revenues of the group grew 5% year over year to eight eight.
Speaker Change: Underpinned by incremental contributions from Boston Brenda management B.
Wenbin Qiu: Security Strategy of Premiumization for Gap China and Achieved an Impressive Cross-Margin of 54% for the year. This, in turn, resulted in a much lower operating loss. Far Surprising Our Initial Forecast, This breakthrough in our first year is the result of having established a solid foundation for growth. [inaudible] BBM is a key component of the brand, Baozun Group's second growth curve. Baozun International DZI represents a longer-term opportunity for which we continue to lay the business foundation and the infrastructure. As DBM ramps up its expansion following its acquisition of Hunter IP, BZI will play a vital role in expanding Hunter into Southeast Asia.
Speaker Change: Executing the strategy of premium amortization for gap, China and achieved an impressive gross margin.
Speaker Change: A 54% for the year.
Speaker Change: This in turn resulted in much lower operating losses.
Speaker Change: Far surpassing our initial forecast.
Speaker Change: This breakthrough in our first year as a result of having established a solid foundation for girls and a success you Brian the management.
Speaker Change: <unk> is a key component of Brian.
Speaker Change: Group's second ballroom groups second the growth curve.
Speaker Change: Clothing international.
Speaker Change: Represents a longer term opportunity for which we continue to lay that isn't foundation and the infrastructure.
Speaker Change: S DBM ramps up expansion of following its acquisition of Hunter IP BZ I will play a vital role we expand home 30 into southeast Asia.
Wenbin Qiu: Starting with Singapore and Malaysia, this is a good example of synergy and a collaboration between our businesses. We believe that our expertise in technology applied to operations and business transformation is at the core of Baozun's identity. We're happy to share that Baozun has been acknowledged as a representative vendor in Gartner's 2024 market guide for distributed order management. We are proud to be the only Asian vendor selected alongside global retail service giants such as Oracle, SAP, IBM, and Salesforce. This is a recognition of Baozun's outstanding technical capabilities in the industry. Looking forward, we remain cautious about macro uncertainty.
Speaker Change: Starting with the Singapore and Malaysia this year.
Speaker Change: This is a good example of the synergy and the collaboration between our business units.
Speaker Change: We believe that our expertise technology applied to operations and the business transformation is.
Speaker Change: Is that a core.
Speaker Change: <unk> identity.
Speaker Change: We're happy to share that Boston has been acknowledged as a representative lender in gone. There is 20 to 24 market guide for distributed order management system.
Speaker Change: We are proud to be the army Asian vendor selected alongside global retail service Giants.
Such as Oracle, SAP IBM and Salesforce.
Speaker Change: This is a recognition of clauses all sending technical capabilities in the industry.
Speaker Change: Looking forward, we remain cautious about them backwards certainties, yet we are confident there are ongoing transformation has strengthened our business fundamentals and our value proposition to brand owners.
Wenbin Qiu: Yet, we are confident that our ongoing transformation has strengthened our business fundamentals and our valuable position among brand owners. Our main focus this year is to continue to execute our plans diligently and patiently in a sustainable manner, with a healthy cash flow and a balance sheet. We will be ready to seize new opportunities and provide lasting value to our shareholders. In January, our board also approved a new share repurchase program of 20 million U.S. dollars over the next 12 months. We will execute this program from time to time.
Speaker Change: Or maybe focus this year is to continue to execute our pets diligently and patiently near sustainable manner.
Speaker Change: With a healthy cash flow and our balance sheet, we will be ready to seize new opportunities and to provide lasting value to our shareholders.
Speaker Change: This January or board has also approved a new share repurchase program off 20 million U S. Dollar over the next 12 months, we will exit this program from time to time.
Wenbin Qiu: Taking into account factors such as trading window and marketing fluctuations, let me now pass the call over to Arthur for a review of our financials and an update on our e-commerce business, BEC. Thank you, Sandrine, for more elaboration on BBM. Okay. Thank you, Vincent. And hello, everyone.
Speaker Change: Taking into account factors, such as trading window and the marketing fluctuations.
Speaker Change: Let me now pass the call over to Arthur for a review of our financials and update on our E. Commerce business do you see the unforeseen.
Arthur: San Juli for more elaboration on B B.
Arthur: Okay. Thank you and Hello, everyone let.
Arthur Yu: Let me do a quick review of the financials for the fourth quarter and the full year of 2023, after which, I will discuss our BSEE business in more detail. Please turn to slide number three.
Arthur: Let me talk quake reveal all of the financials for the fourth quarter and full year of 20th anniversary after.
Arthur: After which I will discuss our EC business in more detail.
Arthur: Please turn to slide number three.
Arthur Yu: Baozun Group's total revenues for the fourth quarter of 2023 expanded nearly 9% to $2.8 billion compared to the same quarter last year. Driven by incremental BBM revenue of 458 million, due to a weaker economic environment. Further pursuing a high quality business model, we scaled back on low margin product sales and trained low value added service revenue. Consequently, product sales revenue of e-commerce decreased 23% year over year, notably in the appliance, electronics, and fast-moving consumer goods categories.
San Juli: Both of them groups total revenue for the fourth quarter of 2023 expanded nearly 9% to $2 8 billion compared to the same quarter last year.
San Juli: Driven by incremental <unk> revenue of $458 million.
San Juli: Due to a weaker economic environment.
San Juli: E Commerce revenue declined to $12 4 billion.
San Juli: But pursuing a high quality business model, we scaled back on low margin product sales and trading in low value added service revenues.
San Juli: Consequently paradox sales revenue.
San Juli: O e-commerce decreased 23% year over year.
San Juli: Notably in the upfront.
San Juli: Electronics and fast moving consumer goods categories.
Arthur Yu: This was partially offset by increased sales from the healthcare and beauty categories. Baozun Brand Management generated total revenue of $458 million, a Circumstantial Improvement of 53%. Our total product sales revenue grew by 36% to $1 billion. And the gross profit for product sales more than doubled to $315 million. The gross sales gross margin for Baozun Group totaled 30%, significantly improved from 17% a year ago. The growth of our gross profit and gross margin was mainly attributable to an incremental contribution from BBM. Group income from operations was 6.4 million during the quarter.
San Juli: This was partially offset by increased sales from health care and beauty categories.
San Juli: Both of them in brand management generated total revenue of 458 million.
San Juli: That's so critical improvements of 53%.
San Juli: Yeah.
San Juli: Although total product sales revenue grew by 36% to 1 billion.
San Juli: And the girl with Prophage full product sales more than doubled to $350 million.
San Juli: Product sales gross margin for Biogen group totaled 30% significantly improved from 17% a year ago.
San Juli: The growth of our gross profit and gross margin was mainly attributable to incremental contribution from BBN.
San Juli: Okay.
Group income from operations was $6 4 million during the quarter.
Arthur Yu: Of which the e-commerce operating income was 50.1 million, BBM continued to show good momentum in reducing its operating loss to 43.7 million. GAP's premiumization strategy with discount control, new China for China product launch, and new store openings have all met our expectations. These initiatives will provide a foundation for better profitability in the coming quarters. Sandrine will cover the details later. On the group level, our net loss significantly narrowed to $2 million during the quarter from $256.5 million a year ago, as we incurred a significant one-time fair value loss during the same period last year.
San Juli: Oh, Great E Commerce operating income was $50 1 million.
B B I Havent continued to show good momentum in reducing operating loss to a $43 7 million.
San Juli: Premium amortization the strategy way discount control, new China for China product launch a new store opening have all met our expectations.
San Juli: These initiatives will provide a foundation for our profitability in the coming quarters.
San Juli: Sundry and will cover the details later.
On the group level, our nights' loss significantly narrowed to two 2 million during the quarter from $256 5 million a year ago.
San Juli: We incurred a significant one time favorite baidu loss during the same carried over last year.
Arthur Yu: Excluding the impact of ESOP, amortization, and other non-reoccurring business factors, our adjusted income from operations was $75.7 million during the quarter, of which e-commerce adjusted operating income was $118.2 million, and the BBM operating loss narrowed to $42.5 million. Our adjusted net income was 76.8 million yuan during the quarter.
San Juli: Excluding the impact of Aesop amortization and other non reoccurring business taxes.
Although adjusted income from operations was $75 7 million during the quarter.
San Juli: Oh wait E Commerce, adjusted operating income was $118 2 million and the P. P M operating loss narrowed to <unk> 5 million.
San Juli: Our adjusted net income was 76.8 million during the quarter.
Arthur Yu: Let us turn to a quick full year summary. We ended 2023 with group total revenue of 8.8 billion, an increase of 5% year-over-year. Girls' profits totaled $6.4 billion, an increase of 4% year-over-year. Our adjusted operating loss totaled $23.7 million.
Speaker Change: Lighthouse tend to a quick summary.
Lighthouse: We on the 20th for Phase III waste groups total revenue of 8.8 billion.
Lighthouse: Increased 5% year over year.
Lighthouse: Girls properties totaled $6 4 billion, an increase of 4% year over year.
Lighthouse: Although adjusted operating loss totaled $23 7 million.
Arthur Yu: Please turn to slide number four. This is our cash and cash flow status. As of December 31st, 2023, our cash, cash equivalents, restricted cash, and short-term investment totals 3.1 billion. We continue to improve working capital efficiency through back-end process re-engineering on inventory, billing, and cash collection management. Annual operating cash flow and free cash flow were 454.5 million and 259.5 million, an increase of 19 and 46 percent reflected year-over-year.
Speaker Change: Please turn to slide number four.
Speaker Change: Turning to our cash and cash flow status.
Speaker Change: As of December 31st 2020, a theory.
Speaker Change: Our cash cash equivalents restricted cash and short term investments.
Speaker Change: 3.1 billion.
Speaker Change: We continue to improve working capital efficiency through process reengineering infantry billing and cash collection management.
Speaker Change: Operating cash flow and the free cash flow was 454, five media and $259 5 million.
Speaker Change: An increase of 19 and 46%.
Speaker Change: We're effectively yeah over here.
Speaker Change: Yeah.
Arthur Yu: Now let's dive into our BEC business. 2023 is a year of transition for our BEC business. At the beginning of the year, we set a strategic objective of achieving customer-centric, high-quality, and sustainable business growth for BEC. This guiding principle will guide the team's efforts and allocation of resources throughout the year.
Speaker Change: Now, let's dive into our piece of the business.
Speaker Change: Yeah.
Speaker Change: 2023, a year of transition for our PC business.
At the beginning of the year, we said our strategic objective of achieving customer centric high quality and sustainable business girl for PBC.
Speaker Change: This guiding principle stead, the teams I said and allocation of resources throughout the year.
Arthur Yu: As a result, we have made progress in the following three areas as displayed on slide number five. First, customer satisfaction has increased. We will introduce the Night Hormone Score (NPS) framework in collaboration with Nielsen in 2022. The objective of this initiative is to implement a robust client service quality management framework, defining precise standards for various sources and measuring the outcome.
Speaker Change: As a result, we have made progress in the following three areas.
Speaker Change: As displayed on slide number five.
Speaker Change: Firstly.
Speaker Change: The customer satisfaction and enhancement.
Speaker Change: We introduced a nice promote skull MTS framework in collaboration with Nielsen in 2022.
Speaker Change: The objective of this initiative is to implement a robust client service quality management framework.
Speaker Change: Defining plus high standard for various services and migrating the outcomes.
Arthur Yu: I'm glad to report that our MPS score has improved from 8.07 in 2022 to 8.23 in 2026. This improvement reflects our clients' growing recognition of Baozun's service and directly contributes to our outstanding contract renewal ratio. In 2023, over 97% of our key account clients chose to renew their contracts with Baozun, and I'm pleased that we are well on track to further improve customer satisfaction in 2024. Secondly, we focus on thriving business growth through strengthening our omni-channel capabilities and expanding core product categories. By participating in high-level discussions with brand partners and key market places, we helped our brand partners formulate effective omni-channel go-to-market strategies for sustainable e-commerce business growth in China. This enabled us to acquire over 50 new brands in 2023, including Tiffany, Tumi, and Dyson, just to name a few.
Speaker Change: I'm glad to report that all of the NPS score has improved from 8.07 in 2020 228 point 23 in 2023.
Speaker Change: This improvement reflects our clients' growing right combination of Baldwin sorry.
Speaker Change: Directly contributes to our outstanding contract renewable Rachel.
Speaker Change: In 2023 over 97% of our key account clients choose to renew their contracts with Biogen and I'm pleased that we are well on track for further improve customer satisfaction in 2024.
Speaker Change: Yes.
Speaker Change: Secondly, we focus on driving business growth through strengthening our omni channel capabilities and expanding core product category.
Speaker Change: By participating in high level discussions Wade brand partner and key marketplaces.
Speaker Change: We helped our brand partner formulate effective omni channel go to market strategies for sustainable E Commerce business growth in China.
Speaker Change: This enabled us to acquire of over 50, new brands in 2023, including Tiffany.
Speaker Change: To me.
Speaker Change: And just to name a few.
Arthur Yu: From the product category standpoint, we consistently achieved growth in Baozun's market share within our primary categories of luxury and premium apparel on both Tmall and JD platforms. This has helped us establish a solid foundation from which we will extend our reach into new product categories such as wine and spirits. Health and Beauty and Luxury Automotive in 2024. Given the dynamic nature of the e-commerce landscape, we are strategically investing in interest and content-based e-commerce. In early 2003, we launched our Creative Content to Commerce division, which included a Shanghai-based live streaming center.
Speaker Change: From the product category standpoint.
Speaker Change: We consistently achieved drove emboldens market share within our primary categories of luxury on the premium apparel on both Tmall and JD platforms.
Speaker Change: And this has helped us establish a solid foundation from which we extend our reach into new product categories, such as our wine and spirit.
Speaker Change: Health and beauty.
Speaker Change: Luxury automotive in 2024.
Speaker Change: Given the dynamic nature of the e-commerce landscape.
Speaker Change: We are strategically investing in interests and content based economy.
Speaker Change: In early 2003, we launched our creative content to Commerce Division, which included a Shanghai based of live streaming Santana.
Arthur Yu: This was followed by the announcement of our acquisition of a location. Leading Douyin Partner in November 2023, Leveraging on our established partnerships, we secured several contracts on Douyin Channel with industry leaders like Zara, Marnie, and Coca-Cola, to just name a few.
Speaker Change: This was followed by the announcement of our acquisition of location.
Speaker Change: Leading OEM partner in November 2023.
Speaker Change: Library gene on our established partnerships.
Speaker Change: We secured several contract until we can channel with industry leaders like Zara.
Six.
Speaker Change: Marni on Coco Cola just name a few.
Arthur Yu: Thirdly, we continue our efforts in efficiency improvement and cost control. During the year, we established a Lean Management Committee to drive cost control and efficiency improvement. Our middle and back office functions have become leaner and more integrated through process re-engineering. We also scaled up regional service centers by transferring approximately 770 new positions into these facilities.
Speaker Change: Thirdly, we continue our efforts in <unk>.
Speaker Change: Patients the improvement on impulse control.
Speaker Change: During the year, we established a lean management committee to drive cost control and efficiency improvements.
Our middle and back office functions have become even leaner on the more integrated through process reengineering.
Speaker Change: We also scaled up regional surveys Sanchez by transferring approximately 700 817, new positions into these facilities.
Arthur Yu: Generating an annual cost saving of 24 million, we integrated more AIGC initiatives through strategic partners with industry leaders such as Microsoft and OpenAI. Enhancing the daily operational efficiency of over 3000 employees, Our efforts in working capital management also yielded substantial results, setting new records in both operating cash flow and free cash flow, as mentioned in my financial update. Looking ahead, our primary focus for 2024 remains on executing our business strategy to create high quality and sustainable business growth. We aim to fortify our market leadership position in the luxury and apparel categories. We are also expanding into high-potential categories, such as wine and spirits, health and beauty, and luxury automotive.
Speaker Change: Generating an annual cost savings of 24 million.
Speaker Change: We integrate paid more aig's of initiatives through a strategic partner with industry leaders, such as Microsoft and open they are.
How do you think the operational efficiency of over 3000 employees.
Speaker Change: Oh I thought you were.
Speaker Change: Working capital management also yields substantial results.
Speaker Change: Some new records in both operating cash flow and the free cash flow I mentioned in my financial update.
Speaker Change: Yes.
Speaker Change: Looking ahead, our primary focus for 'twenty 'twenty four remains on executing our business strategy to create high quality and sustainable business growth.
Speaker Change: We aim to fortify our market leadership position in the luxury apparel categories.
Speaker Change: Well also expanding into high potential categories, such as Y on Sperry House and beauty.
Speaker Change: Luxury automotive.
Arthur Yu: We believe this will naturally expand our market share and TAM in brand e-commerce. We will continue to enhance our Omnichannel capability. One of our key focus areas is Douyin, where we leverage location expertise in daily live streaming in conjunction with Baozun's creative content and e-commerce operating experience following the completion of the location acquisition in March 2024.
Speaker Change: We believe this will naturally expand our market share and T M in brand E Commerce.
Speaker Change: We will continue to enhance our omnichannel capabilities.
Speaker Change: Well one of our key forecast I E.
Speaker Change: Where we leverage location expertise in daily live streaming in conjunction waste Baudrons creative content and E Commerce operating experiences.
Speaker Change: Following the completion of location acquisition in March 2020, full we are now well positioned to seize more opportunities from our brand partner and to create additional revenue streams for BDC.
Arthur Yu: We are now well positioned to seize more opportunities from our brand partners and to create additional revenue streams for BEC. In addition to Douyin, we are also working closely with VIP.com and Little Red Book. We are aiming to build an extended ecosystem focused on value for money, content marketing, and traffic acquisition for our brand partners. We are also exploring business opportunities in other emerging channels such as Dewu and Kuaishou. We believe these new opportunities will expand our success across major e-commerce platforms, positioning us for sustainable growth. Lastly, we aim to further grow our high-quality product sales business in the past year and a half. We have been optimizing our product sales business model by emphasizing higher quality. When we refer to high quality, we are aiming for both improved margins and enhanced merchandising and infantry control. As part of this effort, we have elected to terminate certain partnerships where the gross margin level and infantry risks did not meet our standards.
Speaker Change: In addition to <unk>. We are also working closely with VIP dotcom and little Red book.
Speaker Change: I need to build and I extended ecosystem focused on value for money.
Speaker Change: And its marketing and traffic acquisition for our brand partners.
Speaker Change: We are also exploring business opportunities in other emerging channels, such as duo and quite short.
Speaker Change: We believe these new opportunities.
Speaker Change: Our success across major E Commerce platform.
Speaker Change: He asked for sustainable growth.
Speaker Change: Yeah.
Speaker Change: Lastly, we aim to further grow our high quality part I'll say of business in 2024.
Speaker Change: In the past year and Knowhow.
Speaker Change: We have been optimizing our product sales business model by emphasizing higher quality.
Speaker Change: When we refer to a high quality well meaningful both improved margin and enhanced merchandising and inventory control.
Speaker Change: As part of this I thought we have elected to terminate certain partnership where the gross margin level and inventory risks did not meet our standards.
Arthur Yu: In 2024, we introduced a new business model where Baozun serves as the exclusive distribution partner for a given brand in China. This model, this model in-house, managing all sales channels, both online and offline, utilizing our omni-channel digital technology. We are confident that by applying Baozun's leading data and system technology, we can seamlessly integrate online and offline channels to deliver a superior performance compared to traditional distributors. Furthermore, in our product sales business, our self-incubated brand, Udaily Plus, continues to deliver high double-digit growth in beauty and healthcare categories.
Speaker Change: In 2024, we have introduced a new business model, where boating itself as the exclusive distribution partner for a dozen brands in China.
Speaker Change: Its motto this model in house.
Speaker Change: Managing all sales channels, both online and offline.
Utilizing our Omnichannel digital technology.
Speaker Change: We are confident non spike up high in powertrain, leading data and system technology, we can seamlessly integrate online and offline channel to deliver a superior performance compared to traditional distributors.
Speaker Change: Furthermore, with our product sales business.
Speaker Change: All without incubate Hanesbrands you daily Pos continue to deliver high double digit growth in beauty in house kind of category.
Speaker Change: We are convinced that this new initiative will drive the growth in both revenue and profit margin for our product sales business in 2024.
Sandrine Zerbib: We are convinced that this new initiative will drive growth in both revenue and profit margin for our product sales business in 2024. Overall, I believe we have established a solid foundation and implemented the right initiative for our transition. We have confidence that we are now on track to strengthening BEC's top and bottom lines while continuing to generate healthy cash flow in 2024. Now, let's pass on to Sandrine.
Speaker Change: Overall I believe we have established a solid foundation and implemented the right initiative for our transition we have confidence that we are now on track to a strengthening <unk> top and bottom line, while continuing to generate power.
Speaker Change: Free cash flow in 2024.
Speaker Change: Nonetheless patterns with century.
Sandrine Zerbib: Thank you, Vincent and Arthur, and thank you all for joining us today. It is my great pleasure to speak with you. Please turn to slide number 6.
Speaker Change: Thank you Vincent and answer and thank you all for joining US today. It is my great pleasure to speak with you.
Speaker Change: Please turn to slide number six.
Sandrine Zerbib: As you recall, in February 2023, recognizing a golden opportunity to reinvigorate an iconic brand, BBM acquired the operations of Gap Greater China. With a clear vision to transform Gap into a lifestyle brand tailored to the modern Chinese consumer, BBM embarked on a journey fueled by innovation and strategic foresight. Our vision was to reinterpret American style for the modern Chinese consumer by localizing key elements of the CoreGap brand DNA. We pursued the mission to make Gap products and messaging culturally relevant again in Greater China. The goal was not only to revitalize GAP products but also to reignite consumer love and loyalty, moving away from a discount-driven model to one that resonates deeply with the aspirations of the modern Chinese consumer. We took over a business that had just closed 86 stores and was plagued by abnormally high levels of discounts all year round.
Speaker Change: As you recall in February 2023, recognizing a golden opportunity to reinvigorate and iconic brand B B M acquired the operations of gap Greater China.
Speaker Change: With a clear vision to transform gap into a lifestyle brand tailored to the modern Chinese consumer.
Speaker Change: B M embarked on the journey fueled by innovation and strategic foresight.
Speaker Change: Our vision was to reinterpret American style for the modern Chinese consumer by localizing key elements of the core gap brand DNA.
Speaker Change: We pursued a mission to make get products and messaging culturally relevant again in greater China.
Speaker Change: The goal was not only to repeat the lives get products, but also to reignite consumer love and loyalty moving away from a discount driven model to one that resonates deeply with the aspiration.
Speaker Change: Modern Chinese consumer.
Speaker Change: We took over a business, which had just closed 86 stores and was plagued by abnormally high levels of discount all year round.
Sandrine Zerbib: And in just 11 months, BBM's multicultural talent and diverse teams, coupled with impeccable execution and technology-driven solutions, achieved remarkable results. The transformation of Gap China from a discount-driven brand to consumer-centric power health is evident in the following, as indicated on slide number seven. First, team systems and processes. We focused on assembling the right team and implementing robust systems and processes to execute our turnaround strategy effectively. This included restructuring, hiring key personnel, and optimizing operational workflows, as well as putting in place a whole new set of systems to support our business. Then comes the premiumization of the brand.
Speaker Change: And in just 11 months Pbms multicultural talent and diversity.
Speaker Change: Coupled with impeccable execution and technology driven solution itchy.
Speaker Change: Achieved remarkable results.
Speaker Change: The transformation of get China from a discount driven Bryan to consumer centric powerhouse is evidenced in the following as indicated on slide number seven.
Speaker Change: First teams systems and processes.
Speaker Change: We focused on assembling the right team and implementing robust systems and processes to execute our turnaround strategy effectively.
Speaker Change: This included restructuring hiring key personnel and optimizing operational what fluids as well as putting in place a whole new set of systems to support our business.
Speaker Change: Than premium amortization of the brand.
Sandrine Zerbib: We embarked on a comprehensive strategy to elevate the brand by focusing on product design, product segmentation, supply chain enhancements, and improving store image. Our goal was to break free from the cycle of perpetual discounts and focus instead on appealing to consumers thanks to our products and brand image. We introduced a new locally designed China for China product.
Speaker Change: We embarked on a comprehensive strategy to elevate the brands by focusing on product design product segmentation supply chain enhancements and improving store image.
Speaker Change: I would go right to break free from the cycle of perpetual discounts and focus instead on appealing to consumers.
Speaker Change: Thanks to our products and brand image.
Speaker Change: We introduced our new locally design, China for China product aiming to deliver the right product for the right people at the right thing.
Sandrine Zerbib: Aiming to deliver the right product for the right people at the right time, we launched the new products with an integrated go-to-market approach combining celebrity endorsements, new store openings, and social media campaigns. We impose discount control as the key factor driving the increase in gross margin percentage, which has reached about 1,100 basis points excluding royalty.
Speaker Change: We launched the new products for the integrated go to market approach, combining celebrity endorsements, new store openings and social media campaigns.
Speaker Change: We impose discount control is the key factor driving the increase in gross margin percentage, which has reached at that 1001 hundred basis points excluding royalty.
Sandrine Zerbib: We also opened our new store concept, which is more of a boutique as opposed to the previous big box type of concept. We're enhancing the brand DNA, transforming our stores into more than just commercial channels and creating immersive brand experiences. Our stores are now smaller in size but higher in square meter efficiency, optimizing space for a better customer experience. We've implemented scenario-based and serialized co-location of merchandise, creating relevant festive atmospheres that resonate with customers. In-store pop-ups and campaigns are generating social buzz and further enriching the store experience for consumers. Leveraging WeChat and OmniCRM, we're gaining insights into each customer and offering seamless engagement beyond the physical store. We successfully opened 10 new stores in 2023, including a flagship destination store in Guangzhou, as well as new stores in Chengdu, Shenzhen, and Beijing. We've enhanced the retail experience, achieving a 50% increase in square meter efficiency for newly opened stores versus the existing portfolio on a four-year basis. Additionally, our existing stores have seen a notable 19% rise in same-store comparable sales.
Speaker Change: We also opened a new store concept, which is more boutique as opposed to the previous big box type of concept.
Speaker Change: We're enhancing the brand DNA transforming our stores into more than just commercial channels and creating immersive brand experiences.
Speaker Change: Our stores are now smaller in size, but higher in square meter efficiency optimizing space for a better customer experience.
Speaker Change: We've implemented scenario based and serialized colocation of merchandise, creating relevant festive atmosphere that resonate with customers.
In store pop ups and campaigns are generating social buzz and further enriching the store experience for consumers.
Speaker Change: Leveraging wechat and omni CRM, we're gaining insights into each customer and offering seamless engagement beyond the physical store.
Speaker Change: We successfully opened 10, new stores in 2023, including a flagship destination store and Guangzhou as well as new stores in Chengdu, Shenzhen and Beijing.
Speaker Change: We've enhanced our retail experience, achieving a 60% increase in square meter efficiency for newly opened stores versus the existing portfolio and a full year basis.
Speaker Change: Additionally, our existing stores have seen a notable 19% rise in same store comparable sales.
Sandrine Zerbib: Our new stores have been warmly welcomed, not only by our customers, but they have also gained brand recognition within the retail industry. We are proud to report that we achieved our objectives in these areas within the time frame. In fact, in some aspects, such as gross margin, we not only met but exceeded our 2023 target. This demonstrates the effectiveness of our strategies and the dedication of our team in turning around the business. In 2024, based on our Strengthening Foundation, we will continue to build on the momentum to solidify the brand's fundamentals and revitalize growth for the Gap brand in China. While we pursue 2024 top-line growth, safeguarding our gross profits remains paramount. We will achieve this through stringent discount control and increased special production tailored for our online business.
Speaker Change: Other new stores had been warmly welcome not only by our customers.
Speaker Change: It has also gained brand recognition within the retail industry.
Speaker Change: We are proud to report that we achieved our objectives in these areas within the timeframe in fact and so.
Speaker Change: Some aspects such as gross margin.
Speaker Change: We not only met but exceeded our 'twenty to 'twenty three targets.
Speaker Change: This demonstrates the effectiveness of our strategies and the dedication of our team in turning around the business.
In 2024.
Speaker Change: Based on our strengths and foundation.
Speaker Change: We will continue to build on the momentum to solidify the brand fundamentals and will utilize group for the gap brand in China.
Speaker Change: While we pursue 'twenty 'twenty four top line growth safeguarding our gross profit remains paramount.
Speaker Change: We will achieve this through stringent discount controls.
Speaker Change: And increased special production tailored for our online business.
Sandrine Zerbib: We expect that these efforts, combined with continued control of expenses, will lead us to achieve Gap China's turnaround in 2025 as planned. Lastly, we have completed the acquisition of Hunter's Intellectual Property and established a joint venture with Authentic Brands Group, will now co-own Hunter's IP in Greater China and Southeast Asia.
Speaker Change: We expect that these efforts.
Speaker Change: Combined with continued control of expenses will lead us to achieve get China turnaround in 2025.
Speaker Change: <unk>.
Lastly.
Speaker Change: We have completed the acquisition of hunters intellectual property.
Speaker Change: And established a joint venture with authentic brands group.
Speaker Change: We know who own hunters IP in greater China and Southeast Asia.
Sandrine Zerbib: And BBM has become the licensee for operations in Greater China and part of Southeast Asia. Currently, we are in the preparation phase, focusing on tasks like store transfers and product planning. The coming second quarter will be the official kickoff of our endeavors with Hunter.
Speaker Change: And D. B M has become the licensee for operations in greater China and parts of Southeast Asia.
Speaker Change: Currently we are in the preparation phase focusing on tasks like store transfers and product planning.
Speaker Change: The coming second quarter will be the official kickoff of our endeavors with hunter.
Sandrine Zerbib: We have ambitious plans for Hunter's growth, including expanding into new categories and diversifying our distribution channels to unlock the brand's full potential in China, as well as in Singapore and Malaysia in Southeast Asia. Leveraging our Baozun International BZI business units, we aim to further support and accelerate Hunter's business expansion in this region. This concludes our prepared remarks. Thank you.
Speaker Change: We have ambitious plans for hunters growth, including expanding into new categories, and diversifying our distribution channels to lock the brand's full potential in China as well as in Singapore, and Malaysia in Southeast Asia.
Speaker Change: Leveraging out both doing international Dci business unit, we aim to further support and accelerate hunters business expansion in this region.
Speaker Change: This concludes our prepared remarks. Thank you operator, we are now ready to begin the Q&A session.
Operator: Operator, we are now ready to begin the Q&A session. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one other touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Operator: If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our rafts. The first question today comes from Alicia Yap with Citigroup. Please go ahead. Hi, thank you. Good evening, management. Thanks for taking my questions. I have two questions.
Speaker Change: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question today comes from Alicia Yap with Citigroup. Please go ahead.
Alicia Yap: Hi, Thank you good evening management. Thanks for taking my questions I have two questions. One is what is the latest consumption shopping center and then that you have asked us over the past two months in 2020 for what is management expectation.
Alicia Yap: One is, what is the latest shopping sentiment that you have observed over the past two months in 2024? What is management's expectation of the macro overall and the consumption outlook for this year? While we think it's still early, so not sure, have you started to plan for this year's 6-18 promotional festival?
Alicia Yap: And after my call overall, and our consumption outlook for dish.
Alicia Yap: While we think it's still a lease or not sure have you started to plan for day. She has six to 18 promotion that's basketball what do you expect that could be different Michelle let's just previous yes Jordan.
Alicia Yap: What do you expect that could be different this year versus previous years for the June 18th promotion period? And then the second question is about the BBM business. I'm just wondering, have you noticed any meaningful difference in terms of the user spending habits, for example, the average purchasing value at the offline store versus, you know, what you have been operating, which is the online store, the behavior of the user so that you can make some comparisons?
Alicia Yap: Promotion PV and then second question is for that business.
Alicia Yap: Yes.
Alicia Yap: I'm just wondering have you noticed any meaningful difference in terms of the user spending habit. For example, the average pet chasing value all at the offline stalks worse US you know what you have been operating which is the auto.
Alicia Yap: I saw the behavior for the user it that you can make some comparison.
Arthur Yu: And then, if there is, you know, an opportunity for you to acquire or add a few more brands to your BVM business, could you share with us your decision-making criteria and what kind of brands you're most eager to add to your portfolio of managed brands? Thank you. I will take the first one, Alicia, for your question, and then I will pass on to Sandrine and Vincent to talk about the second one. Regarding consumer sentiment, I have to say that sentiment is still not recovered very quickly. And consumer confidence, as we can see from the figures, is still very low. But within that, there are some highlight points where we can see some categories have performed better. For example, outdoor activities, healthy food, and nutrition.
Alicia Yap: And then if Daddy you know opportunity for you to acquire or at feel more threatened to BB&T.
Alicia Yap: Could you share with us your decision making criteria.
Alicia Yap: And what kind of trends that youre, most eager to add to your portfolio. Thank you.
Speaker Change: Okay I will take the first one Alex Yeah, a fair question and then I will pass on to sundry and Vincent to talk about the second one regarding the consumption sentiment.
Speaker Change: I have to say the sentiment is still not recovered very quickly and are the consumer confidence as we can see the figures is still very low.
Sundry: But within that there are some highlight point, where we can see some category has performed Oh actually better for example, all store.
Sundry: Healthy foods and nutrition. So those are the spotlight, which we have seen some good a quick recovery on the consumption.
Arthur Yu: So those are the spotlights where we have seen some good recovery in consumption. Regarding 618, we haven't formally kicked off the plan for 618 that will start in May. However, we have already focused on improving the daily sales, for example, doing a good operation and doing good customer service and trying to engage with the customer, which is trying to build a customer base and getting ready for the big promotion in 618. And the difference I have seen this year is the daily sale becoming more and more important, which means the ongoing operation from a capability perspective is becoming more and more important. So that's for my first question. Sandrine?
Sundry: Regarding 2618, we havent formally kicked off the planning for it takes one eight that will start in may.
Sundry: However, we have already a focus on <unk> to improve the daily sales.
Sundry: For example, we're doing a good operation and doing a good customer surveys and try to engage with a customer which he is trying to deal with our customer base and getting ready for the big promotion at 618.
Sundry: And the different than I've seen for this year is that they lifestyle, becoming a more and more important which means the.
Sentry: Ongoing operation from a capability perspective, it's becoming more and more important. So that's for my first question Sentry Yep. Thank you Vincent.
Arthur Yu: Yeah. Thank you, Vincent. So thank you, Alicia, for your question. So first, the first part of your question is about online versus offline consumer behavior. I mean, it's pretty clear that the premiumization progress that I talked about is going faster offline than online. Nevertheless, online, we have also been able to achieve a much better gross margin than previously. So it's a question of cycle and time. It takes longer.
Sentry: Thank you Alicia for your questions the first to know.
Sentry: The first part of your question is about the online versus offline consumer behavior.
Sentry: It's pretty clear that the premium amortization progress that's a I talked about is going faster offline and online and nevertheless online. We have also been able to achieve.
Sentry: Better gross margin than previously so it's it's a question of the cycle and time it takes longer.
Sandrine Zerbib: Then, regarding your second question, we are actually looking at multiple opportunities, but we are being extremely selective, with these criteria, the four criteria I'm going to say, which are really the key criteria. The first one is obviously the segment and the category in which these brands belong. We're looking for brands that are operating in very dynamic segments, and there are still pockets of growth that are very interesting in China. The second key criteria is that these brands need to have some true potential to develop in the Greater China and potentially Southeast Asian markets.
Sentry: And then regarding your second question, we are actually looking at multiple opportunities are but we are being extremely selective with in mind I would say these criteria the full country I am going to say, which are really the key criteria.
Sentry: The first one is obviously the segment and the category in which these brands belong to are we looking for brands that are operating in a very dynamic segments and there are still pockets of growth, which are very interesting in China.
Sentry: The second key criteria is that these brands need to have some true potential to develop in the greater China and potentially south East Asian markets.
Sandrine Zerbib: The third one is the synergies with our current portfolio, particularly with regard to supply chain, but not only. It's really a synergetic branch we are looking at. And the fourth one is brands that will enable us, through the right transaction, to act on what has been really key so far to the successful progression of GAAP, which is China for China, meaning that we need to be able to work on the product. And the second one, we need to be able to really make a digital difference with our technology leadership. These are really the four key criteria for us. Thank you. The next question comes from Thomas Chong with Jeff. Please go ahead.
Sentry: The third one is the synergies with our current portfolio, particularly with regards to supply chain, but not only it's really a.
Sentry: Synergistic our brands we're looking at.
Sentry: And the fourth one is Brian that's.
Sentry: <unk> will enable us to the right transaction to act on what has been really key so far to be a successful progression of the gap, which is China for China, meaning that we need to be able to work on the product and the second one we need to be able to really make.
Sentry: Digital difference with our technology leadership. These are really the four key criteria for us.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: The next question comes from Thomas Chong with Jefferies. Please go ahead.
Thomas Chong: Hi, good evening. Thanks, management, for taking my question. My question, first, is can you talk about the growth outlook for the Long-T-Mall channels and their contribution to our GMV? And then, secondly, as we highlight in the prepared remarks, we are looking into operating efficiencies to improve profitability. So I just want to get some more color about the trend in our operating expenses and Margin Outlook. And then, finally, there is more about our use of cash and our thoughts about M&A. Thank you. Okay, Thomas, four questions. Yeah, let me, let me take them one by one.
Hi, Good evening, Thanks management for taking my question My question, Let me first.
Talk about the outlook for T mall triangles and contribution to our G. N V. And then secondly, as we highlighted in the prepared remarks.
We are looking at the operating efficiencies improving profitability. So I just want to get some more color about the trend upward.
Speaker Change: Operating expenses.
Speaker Change: And our market outlook and then finally I think it's.
Speaker Change: I'll, Oh yourself patch and I'll talk about our M&A. Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Question, Yeah, Let me, let me take them one by what are the first one outlook for non chemo channel as I mentioned in my earlier part Omni channel is our trend and it's a strategy that will follow in 2024, and we have put a lot of emphasize.
Arthur Yu: The first one, Outlook for the non-TMO channel. As I mentioned in my earlier part, Omni channel is a trend, and it's a strategy we will follow in 2024. And we have put a lot of emphasis on Douyin and Tencent. We are also looking into new channels like vip.com and the rest. We believe given the complexity and the evolution of the China e-commerce landscape, the Omni channel is becoming more and more important. From a number of perspectives, our non-TMO channel has increased. But, however, we are not looking at the number by itself. We are looking at capabilities because the capability will allow us to do Omni channel. It doesn't matter where the traffic goes.
Speaker Change: Between <unk> and Tencent in China. We also are looking into the new channels like the dot com and the rest we believe given the complexity and the evolving of the China E Commerce landscape Omni channel is becoming more and more important.
Speaker Change: From a number perspective, our non chemo channel has increased by five Oh, we're not looking at the number by itself. We are looking at capabilities because that capability will allow us to do omni channel it doesn't matter, where the traffic goes we will be able to adjust.
Arthur Yu: We will be able to adjust along with the brand very quickly and very easily. So that's the first one. Your second question is about operating efficiency. So from the BEC's perspective, we established a lean management committee looking at how to capture the cost of savings and efficiency opportunities in a very structured way. And in that program, we have already delivered very significant savings. So, for example, as I mentioned, our regional service center program has transferred 770 positions from Shanghai to lower cost locations, which generates more than 20 million dollars in savings. That's just one of those examples.
Speaker Change: Long ways the brand more replay can very easily.
That's the first one your second question is about the operating efficiency. So from from the Puc's perspective, what you're stopping aged a lean management committee looking at how to capture the cost of saving.
Speaker Change: And efficiency opportunities and you have a restructured way.
Speaker Change: And in that program, we have already delivered very significant savings. So for example, as I mentioned, our regional service Center program has delivered a has transferred 770 <unk> positions from Shanghai to lower cost locations, which generates more than.
Speaker Change: $20 million of savings that's just one of those one of the example, we have a sense of those examples in terms of how to drive the cost savings.
Arthur Yu: We have a set of those examples in terms of how to drive the cost of savings. In terms of the BBM, we currently focus on two things. One is third-party procurement. We actually put a lot of emphasis on delivering over 30% of savings in terms of third-party procurement. And secondly, it's overhead control.
Speaker Change: In terms of the P. B M. We currently focus on two things one is from the third party procurement, we actually put a lot of emphasize to deliver over 30% saving in terms of the third party procurement and secondly is the overhead control.
Arthur Yu: When we took over the business, we streamlined the overhead to save money. I will pass on to Sandrine to talk about the growth margin improvement in GAAP as well, which is also driving the market improvement.
Speaker Change: When we take hold by the business, we have streamlined the overhead so save the money.
Speaker Change: I will pass on to sundry and to talk about the gross margin improvement in cap Haswell, which also driving the margin improvement.
Sandrine Zerbib: Of course. Well, I mean, for the growth margin, obviously procurement is an important part of it, as Arthur mentioned, but key all year round has been our absolute control over discounts, so that we really bring the – we convince consumers to come and see us and buy our products, be it online or offline, not just because they're discounted but because they are good products with a good brand. So in order to get these results, we had to exercise extreme discipline on discounts.
Sundry: Well I mean for the gross margin obviously, the procurement is an important part of it as <unk> also mentioned, but key all year round has been our absolute control over discounts are.
Sundry: So that we really bring the we convince consumers to come and see us and bio products be it online or offline not just because they are discounted but because they are good products with good brands.
Sundry: So in order to get these results we had to exercise extreme discipline on discounts that's number one but also to bring the right product at the right time in stores, which are more attractive and with the right marketing communication and marketing messaging.
Sandrine Zerbib: That's number one. But also, to bring the right products at the right time in stores, which are more attractive, and with the right marketing communication and marketing messaging. This is in order to attract consumers. Yeah. Thank you, Sandrine.
Sundry: He is in order to attract consumers yeah, that's actually a sundry and on the use of cash and also I mean are you starting to see so for the cash as you were saying because of our high oil free cash flow well keep a relatively high in that position.
Arthur Yu: And on the use of cash and also M&A strategy. So for cash, as you've seen, because of our high cash flow, we keep a relatively high net position. So we will use our cash to deliver shareholder value in both the short term and the long term. In the short term, as Vincent has announced, the board has approved a repurchase program on our shares, and we will start that program once we have the opportunity.
Sundry: We will use our cash to deliver the shareholder value in both short term and long term in the short term as Vincent has announced the board has approved a repurchase program our share on the way, we'll start that program once we have opportunity.
Arthur Yu: And in the longer term, when we're looking into using the cash to do M&A, we are very selective under the current market situation. We're looking at a target for both strategic fit and also higher financial status. So in this way, we will be able to use our cash very effectively to drive longer-term value for our shareholders. So that's my answer, Thomas.
Sundry: In the longer term when we're looking into using the cash to do M&A well very selective under the current market situation are we looking at a target for both strategic fit and also I will say financial state has so in this way we will be able to use our cash very effectively.
Sundry: To drive the longer term value for our shareholder.
Sundry: Yeah.
So that's my answer Thomas Thank you.
Wan Zhao: Thank you. Thank you. As a reminder, if you wish to ask a question, please press star then 1 to be added to the question queue. The next question comes from Wan Zhao with CICC. Please go ahead.
Speaker Change: Thank you.
Speaker Change: As a reminder, if you wish to ask a question. Please press Star then one to be doing into the question queue.
The next question comes from Juan gel with T. I D. C. Please go ahead.
Wenbin Qiu: Hi, good evening, and thanks for taking my question. My first question is that you mentioned that Baozun will launch the footwear brand Hunter in Southeast Asia. Could you please share some details about the strategies of Baozun's international business in 2009-2012? And my second question is that could you please share your investment plan for AIGC and how AIGC will be used in companies' business? Thank you. Okay. Thank you, Wenjiao. Well, this is Vincent.
Juan: Hi, Good evening. Thanks for taking my question. My first question is that you mentioned that Pos and we're launching definitely weird Grand home her into southeast Asia and Korea.
Juan Gel: He will share some details about the strategies all thousands of international business in the 2019. That's all on my second question is that could you. Please share the all in Boston, Washington, D C and Holly I think it would be.
Speaker Change: And companies thinking thank you.
Okay.
Speaker Change: Okay.
Speaker Change: Thank you Juan Jos.
Speaker Change: Hmm.
Vincent: This is vincent.
Wenbin Qiu: The first question is about our international business; we call it BGI. And I think after almost two years of effort. Right now, we have established a full team who can deliver e-commerce services to our target brand, number one, that is, and number two, we also have a brand business team as well. So that means that we can not only provide traditional e-commerce services in this region just like we are doing in China, but we can also help the brand to have an online and offline business omni-channel business in Southeast Asia as well. So this gives us a lot of potential to help brands to expand their business into this region. So right now, we have established several offices in different countries to run a business for e-commerce services and also for brands. So Honda is a good example of the brand business.
Vincent: The first question is about the our international business, we call this busy I.
Vincent: I think after this almost two years efforts right now we have established a full team.
Vincent: Who can deliver ecommerce services to the our target brand number one that is and number two we also established our brand and business team as well.
Vincent: That means we can not only provide the traditional e-commerce services in this region. Its just like we're doing in China, but also we can't help the brands to have the online offline business Omnichannel business in southeast Asia as well yeah. So this gave us a lot of potential with a hell of a brands too.
Vincent: Expand their business into this region.
Vincent: So right now we have four establish a several offices in different countries.
Vincent: To run the business for E Commerce services and also.
Vincent: The branded business. So when there is a good example for the branded business, we are going to open our online stores in offline stores. This year I mean mid mid middle of this year.
Wenbin Qiu: We are going to open online stores and offline stores this year, in the mid-middle of this year. And we're also conducting marketing, you know, for brand marketing in Singapore and Malaysia.
Vincent: We also conducting a marketing for brand and marketing.
Wenbin Qiu: So Singapore and Malaysia will be the first two places we're going to run the Honda business in Southeast Asia. And also, you know, our experiences, data, and technologies will be all utilized in this omni-channel. So that is for your first question. The second one is about AIGC. I just want to talk about this on two levels.
Vincent: Singapore, and Malaysia, Singapore, Malaysia will be the first two places we're going to run their business in southeast Asia.
Vincent: And also.
Vincent: Our.
Vincent: The experiences they are technologists real appeal will be all utilized.
Vincent: Into this omni channel business. So that is for your first question.
Vincent: Second was about the and you see all I just want to talk this in two levels first level is that in the whole group.
Wenbin Qiu: The first level is that in a whole group. No matter if it's BEC or Branded Business BBM, there are two... Business Units, we all use AITC in general, means that when we want to generate, no matter if it's text or photos or videos, you know, we utilize the results from opening up Microsoft, these kind of big players. You know, so you can see AIGC capabilities in almost all functions of our units. So that is, in general, we are adapting this capability from all site players. Secondly, based on that, based on the general capability, we also have some specific directions, so if you want to pour more resources into creating some leading edges for the... Uh, you know, the, the, the, Sponsored ADR Class A So right now, it's still early stage, we're doing some of the, some of the, some of them are proof concepts, some of them are, medium air ball products. But we Thank you. Thank you. The next question comes from Colin Shan with CITIT Securities. Please go ahead.
Vincent: No matter who is b.
Vincent: B C or branded business B B M. This tour.
Vincent: Our business units, we or you do see in general is that when they when we want to generate no matters taxed or photos or videos.
Vincent: With us.
Vincent: We utilize the results from open in America soft.
Vincent: This kind of big players.
Vincent: So you can see ait's capabilities indifferent.
All our functions of our business.
Vincent: Units. So that is in general we are adopting this.
Vincent: Capability from all sides are players secondly, based on that you saw on the German real capability.
Vincent: We also have some.
Specific directions around to pour more resources.
Vincent: Creates some leading.
Vincent: Leading edge for the.
Vincent: You know the the business that will help them.
Vincent: Our guests for their own.
Vincent: Matters.
Vincent: So right now it's still early stage some of them are some of the some of them are.
Vincent: Proof of concepts some of them are.
Vincent: Minimum herbal products.
Vincent: But we hope we can make our progress this year cause.
Vincent: Compared to previous years right now we are we work much more closely with brands, especially our gap and Hunter. So I think we have.
Vincent: Much better results than before in this direction.
Speaker Change: Yeah that is for your second question. Thank you.
Speaker Change: Thank you.
Speaker Change: The next question comes from Colin Shannon with C. I T. I C Securities. Please go ahead.
Operator: Good evening, management. Thanks for taking my question. I'm Collin Shine from CITIC Securities, and I have two questions about BBM.
Colin Shannon: Hey, Good evening management. Thanks for taking my question I'm, calling shying from Citic Securities and I have two questions about P. B N. The first seed that we saw significantly narrowed down of gaps laws in the past quarters.
Colin Shan: The first is that we saw a significant narrowing of the gaps lost in the past quarters, and the off-line SIM store sales achieved double-digit growth in the fourth quarter. During this process, what progress is better than your expectations, and what measures can be further adopted to improve the margin of the gap in the future? And the second question is that, in your experience of running gaps, what's the key know-how of fully running an international brand in China's online and especially offline market directly, and how would that experience be leveraged in your further operations in other brands such as Hunter? Thank you.
Colin Shannon: And they all signed same store sales achieved double digit growth in the fourth quarter and during this process. What progress is Bachelor of your expectation and what imagine what measures can be further adopted to improve the margin of gap in the in the future and the second question.
Colin Shannon: With that in your experience of running gaps, what's our key knowhow of fully running our international brand in China's online, especially offline market directly and how would that experienced below average in your further operations in other brands such as Hunter. Thank you.
Sandrine Zerbib: Okay, thank you, Colleen, for this question. So, on your first question, I think what was a good surprise, clearly, was the faster improvement of the gross margin than we expected. We had planned for an improvement in the gross margin. It was actually at the heart of our plan, but honestly, it has been even better and faster than we had expected.
Speaker Change: Okay. Thank you calling for this question. So on your first question I think what.
Speaker Change: What the good surprise clearly was the faster improvement of the gross margin than we expected. We had planned for improvement of gross margin. It was actually at the heart of our plants. That's a honestly it has been even better and faster than what we had expected.
Sandrine Zerbib: Sponsored ADR Class A, to further improve. It's going to be through, obviously, further working on refining the product and product segmentation. That's pretty clear.
Speaker Change: Of course, there is still room to further improve our overall the fundamentals of the business and but still I think it's important to notice that it's a it's actually the most pleasant surprise I would say now what room, we have.
Speaker Change: To further improve its going to be through obviously further working on refining product and product segmentation, that's pretty clear, but also by using data a week. We explained that in our in the first phase of our work, which was 23, we already did.
Sandrine Zerbib: But also by using data. We explained that in the first phase of our work, which was 23, we had already done quite some work to change all the legacy systems of GAP China and bring a new platform of systems, thanks to Baozun technology. Now really, in the second phase, we want to go much further in terms of data, enabling us to be even more precise in our understanding of consumers and also enabling us to have almost instant reactions in terms of messaging and product once we have this very refined information. So that's for the gross margin. But gross margin also, overall, requires continued discipline. It's a lot about discipline on discounts.
Speaker Change: Quite some work to change all the legacy systems of the gas.
Speaker Change: China and to bring a new platform of systems. Thanks to a thousand technology now really in the second phase we want to go much further in terms of data, enabling us to be even a thinner in our understanding of consumers and also enabling us to <unk>.
Speaker Change: It's almost instant reaction in terms of messaging and product and once we have these very refined our information. So that's for the gross margin, but gross margin also overall requires continued discipline. It's a lot about the discipline on discounts and the overall also.
Sandrine Zerbib: And overall, also, regarding our strategy for growing forward, now I think, clearly, we want to go back to a growth strategy with more store openings, continued improvements in our store productivity, and a multi-channel approach to our online business. So that's for the first part of your question. On the second part of the question, I think, in terms of synergies, clearly, it's going to be about the product machine, number one, and number two, the systems. But in terms of overall learning from the experience, it's also about how important the teams and the people are in this business. It's all about people, and I think this is something we really worked hard to put the right team together, and we're quite happy with our team.
Speaker Change: Regarding our strategy going forward now I think that.
Clearly, we want to go back to a growth strategy with the most store opening a can.
Speaker Change: Continued improvement of our store productivity and multichannel.
Speaker Change: Channel approach to our online business. So that's for the first part of your question on the second part of the question I think.
Speaker Change: In terms of synergies clearly, it's going to be about the product machine number one and number two the systems, but in terms of overall learning and albeit from the.
Speaker Change: Experience. It's also about how important the teams and the people are in this business. It's all about people and I think this is something we really worked hard to put the right team together and we're quite happy with our team, but it's also about constantly trying to enhance.
Sandrine Zerbib: But it's also about constantly trying to enchant the consumer's experience with interesting stores, interesting stories, interesting products. In a time of weaker consumption, this necessary enchantment of consumers is even more important. That's for my answer to your questions, Connie. Thank you, Sandrine, very clear for my question about BBM. And I have a follow-up question about BEC.
Speaker Change: The consumer's experience with interesting stores interesting stories interesting products and this in a in a time of the weaker consumption. This necessary enchantment of consumers is even more important.
Speaker Change: That for me.
Speaker Change: Answer to your question Scott.
Scott: Thank you Jane and there's no clear from my question about PV Ann and I have a follow up question about the P. C.
Colin Shan: And since the beginning of the year, almost all e-commerce platforms are talking about and emphasizing price power. And from the perspective of Baozun and from the perspective of brands, how how do you view the competition and situation of China's domestic e-commerce platforms? And how did you see any changes in consumers' behavior? And how would Baozun react to this trend?
Speaker Change: Since the beginning of the year almost all e-commerce platforms I'm talking about emphasizing about the price power and from the perspective about soon and from the perspective of brands, how how do you view the competition and situation of China's domestic E com.
Ms platforms and how.
Speaker Change: Did you.
Speaker Change: Did you see any.
Speaker Change: The consumption characteristics changes in consumer behavior, and how it evolves in react to these trends.
Arthur Yu: Yeah, thank you, Colin. And it's a good question. Yeah, we have also observed the increase in emphasis on the price point and also the service level from each platform. We believe it's actually a good trend because it will make sure the platform is actually delivering a better service to the brand and also to the consumer. So instead, the latest technology and the transparency of all e-commerce platforms provide a good opportunity for consumers to compare and choose where they buy. And that drives two things.
Speaker Change: Okay.
Speaker Change: Yeah, Thank you, calling and Theres a good question.
Speaker Change: Yeah. What have also offers of the inquiries are emphasized on the price.
Speaker Change: And also the service level from each of the platform.
Speaker Change: It's actually a good trend because they will make sure the platform actually delivering about the salaries to the brand and also to the consumer.
From a consumer perspective quality has always been a theme. So a good quality brands will always have.
Speaker Change: The market value for money doesn't being good quality brands will now be favored by a lot of consumers.
Speaker Change: So instead of the latest technology and the transparency of all the E. Commerce platform provides a good opportunity for consumers, who compare and choose where they buy.
Speaker Change: And that's drive two things number one is how to design a how to define omni channel strategy for those brands on the current E. Commerce dynamic that's very important so that's where our older and can use our experience and our technology to help.
Arthur Yu: Number one is how to define an omni-channel strategy for those brands in the current e-commerce dynamic. It's very important. So that's where Baozun can use its experience and our technology to help. Secondly, is the experience; how to improve the online purchasing experience for the brand to help them to increase conversion. This is also what we can do using data and technology to enhance it. So, we at StatTrend believe we are both in positions; we are very strong in technology, we are very strong in data, and we have a huge amount of experience across different categories. This will allow us to grow our market share in the current dynamic of e-commerce. Thank you, Colleague. [inaudible] The next question comes from Cheryl Wei with HSBC. Please go ahead. Hi, Hi,
Speaker Change: Secondly, HD experience how to improve the online purchasing experience.
Speaker Change: For the brand to help them to increase the conversion. This is also what we can do using the data and technology to enhance.
Speaker Change: So wastes that trend, we believe we're positioned well by restaurant and in technology, We're very strong in data well have a huge experience across different categories.
Speaker Change: Now as to grow the market share in the current dynamic of E Commerce.
Speaker Change: Thank you Connie.
Speaker Change: What I'm, saying.
Speaker Change: Uh huh.
Speaker Change: The next question comes from Charles Wang with <unk>.
Charles Wang: D C. Please go ahead.
Charles Wang: Hi, Hi, Good evening management. Thank you for taking my question I'm, asking Oh, the hassle of Shelley. So I have question regarding the product sales segment, we understand that well about the south has been under a just Montana inter and some challenges for true yes.
Cheryl Wei: Good evening, management. Thank you for taking my questions. I'm asking on behalf of Charlene.
Cheryl Wei: So I have a question regarding the product sales segment. We understand that product sales have been under adjustment and some challenges for two years. How should we think about this trend entering into 2024? So is there any chance we can see this segment, the revenue growth or decline, stabilize this year? And what are the key drivers and the challenges here?
Shelley: How should we think about today's trend entering into 'twenty 'twenty. Four so is there any chance we can see this segment the revenue growth or decline can stabilize this year and what are the key drivers and the challenges here. Thank you.
Arthur Yu: Thank you. Yeah, thank you for the question. For product sales, first of all, we have already started to see stabilization in quarter one, and we will see product sales revenue as our plan starts to increase from quarter two and quarter three onward. For the full year, we expect to see increased product sales revenue from BEC. From the business management perspective, we put a lot of emphasis on better control of the risk from product sales. There are two things we emphasize. Number one is inventory, and number two is the commercial terms. We will make sure we rationalize the inventory level to reduce the risk and enhance our cash flow. At the same time, in the negotiations, we will put strict requirements on our commercial terms to protect our growth margin.
Yeah. Thank you for the question.
Speaker Change: So the product sales first of all it has already started.
Starting to see the stabilization in quarter, one and we will see the product sales revenue.
Speaker Change: Our plan stops to inquiries from quarter to quarter three onward for the full year, we expect to see increased sales revenue from BC from the Oh from the business management perspective, we've put a lot of emphasize on Pfizer.
Speaker Change: Oh Oh.
Speaker Change: Risk from the product sales.
Speaker Change: What sort of advertised wrong.
Speaker Change: Two things number one that inventory and number two is the commercial terms, we will make sure we rationalized the infantry level to reduce the risk and enhance our cash flow are the same time in a negotiation we will put a straight a requirement on our commercial terms to protect our gross margin.
Arthur Yu: So that's the first one. Secondly, as I mentioned earlier, we introduced a new business model for product sales this year, which is focused on acquiring the exclusive distribution ownership for a brand. So in this model, Baozun will have full control of all sales channels, both online and offline. And using our data and system technology, we will be able to enhance efficiency throughout our system. And thirdly, as I mentioned earlier, our own incubated brand, Udaily Plus, has seen double-digit growth. And in 2024, we expect to see that part further increase, and that will also help to drive product sales revenue. With those initiatives, we believe we can drive both the top line and bottom line of our product sales business.
Speaker Change: So that's the first one secondly, a as I mentioned earlier, we introduced a new business model and product sales. This year, which is focus on acquiring the exclusive distribution ownership for our brands. So in this model and we'll have a.
Speaker Change: Full control of all sales panel, both online and offline.
Speaker Change: And using our data and system technology, we will be able to enhance the efficiency through our to our system and we believe we will do better than traditional distributors.
Speaker Change: By using our data and technology.
Speaker Change: And thirdly, as I mentioned earlier, all our own incubated brand, you'll tailor path has seen a double digit growth on in 'twenty three 'twenty four we expect to see that's part a will further increase and that will also help to drive the products sales revenue way.
Speaker Change: Those initiatives, we believe we can drive both the online and we can drive both the topline and bottom line of our product sales business.
Wendy Sun: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for any closing remarks. Thank you, operator. On behalf of the Baozun management team, we'd like to thank you for all your participation in today's call. If you have any further questions, just feel free to reach out to us. This concludes the call. Thank you. Okay, thank you, everyone. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Sponsored ADR Class A
Speaker Change: Thank you.
This concludes our question and answer session I would like to turn the conference back over to Wendy Sun for any closing remarks.
Wendy Sun: Thank you operator.
Wendy Sun: On behalf of the thousand management team well that Keith. Thank you for all your participation in today's call. If you have any further questions just feel free to reach out to US. This concludes the call. Thank you.
Speaker Change: Okay. Thanks, everyone. Thank you.
Speaker Change: Yeah.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: [music].