Q1 2024 Baozun Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and thank you for standing by for Baozun's first quarter 2024 earnings conference call. At this time, all participants are in the listen-only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations at Baozun.
Good morning, ladies and gentlemen.
And thank you for standing by 4000 in first quarter 'twenty 'twenty four earnings conference call.
At this time.
Our internet only mode.
After managements prepared remarks, there will be a question and answer session.
As a reminder, today's conference call is being recorded.
Speaker Change: 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 of Boston.
Speaker Change: Please proceed Wendy.
Speaker Change: Yeah.
Wendy Sun: Thank you, operator. Hello, everyone, and thank you for joining us today. Our first quarter 2024 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com, as well as on PR Newswire services. They have also posted a PowerPoint presentation that accompanies our comments on the same IR website, where it's available for download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer, Ms. Catherine Zhu, the Chief Financial Officer, Mr. Arthur Yu, President of Baozun E-Commerce, and Ms. Sandrine Zerbib, President of Baozun Brand Management.
Wendy Sun: Thank you operator, Hello, everyone and thank you for joining us today, our first quarter 'twenty to 'twenty four earnings release was distributed earlier before this call and is available on our IR website at IR.
The Boston Dot com as well as PR newswire, so they say.
Wendy Sun: They have also of course, they took a powerpoint presentation that accompanies our comments to the same IR website, which now where they are available for download.
Speaker Change: On the call today from both of them. They have Mr. <unk>, Zhu Chairman and Chief Executive Officer, Ms. Katherine Xu Chief Financial Officer, Mr. Sasaki, President, Bob Thomas and some days of it was in 2000 and brand management.
Wendy Sun: Ms. Qiu will review the business strategy and company highlights, followed by Ms. Zhu, who will discuss our financials and outlook, and then by Ms. Yu and Ms. Zerbib, to share more about our e-commerce and brand measurement segments, respectively. 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.
Jill will review the business strategy and company highlights followed by Mr. Zhou who will discuss our financials and outlook and then by Mr. <unk> and MS. Adobe Touchette mall regarding E Commerce, and the brand Magic My segment, respectively, but I'll be available to answer your questions. During the Q&A session that follows.
Wendy Sun: These forward-looking statements are based upon management's current expectations and current markets and operating conditions and relate to events that involve known or unknown risks, uncertainties, 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 statement. Further information regarding these and other risks, uncertainties, or factors is included in the company's filing with the U.S. Securities and Exchange Commission and its announcement, notice, and other documents published on the website of the Stock Exchange of Hong Kong Limited.
Speaker Change: Before we begin I'd like to my view that this conference call contains forward looking statement within the meaning of the U S Securities Act of Nike said his way.
Speaker Change: Monday The U S Securities Exchange Act of Nike City Hall as of Monday, and the U S. Private Securities Litigation Reform Act of 1995.
Speaker Change: These forward looking statements are based upon management's current expectation and how the market and operating conditions.
Speaker Change: Released to you one that's evolved no Oh, no risks uncertainties 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.
Speaker Change: For information regarding these and other risks uncertainties or factors is included in the company's filings with the U S Securities and Exchange Commission and announcements notice and other document published on the website of the stock exchange of Hong Kong limitations.
Wendy Sun: All information provided in this call is as of the date here and based upon assumptions that the company believes to be reasonable as of this date, and the company does not undertake any obligation to update any following statements except as required and applicable to law. Finally, please note that, unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may like to use adjusted in place of non-general accepted accounting principles or non-GAAP in order to reduce all the confusion that may arise from our discussion about financials related to the GAAP grant. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Ms. Lindsay Chu. Lindsay, please go ahead.
Speaker Change: All information provided in this call is that as of the date hereof and are based upon assumptions that the company believes to be reasonable as of this date.
Speaker Change: And the company does not undertake any obligation to update any forward looking statements.
Speaker Change: As required under applicable law.
Speaker Change: Finally, please note that unless otherwise stated all figures mentioned during this conference call.
Speaker Change: In addition, we may elect to use adjusted employee self Mann general economy.
Speaker Change: Accepted accounting principles or non-GAAP now that you would use all of the confusion and our lives from our discussion about financials, where they paid to the GAAP rent.
Speaker Change: It is now my pleasure to introduce our chairman and Chief Executive Officer, Mr. Amazing to me then please go ahead.
Wenbin Qiu: Thank you, Wendy. Hello, everyone, and thank you all for your time.
Speaker Change: Thank you Wendy Hello, everyone and thank you all for your car.
Wenbin Qiu: As you may recall, our primary focus for 2024 is to continue executing our plans diligently and sustainably. I'm pleased to share the progress and the results of our ongoing transformation journey. Please turn to slide number three.
Speaker Change: As you May recall, our primary focus for 'twenty 'twenty four is to continue executing our plans diligently and it.
Speaker Change: So it tend to play.
Speaker Change: I'm pleased to share the progress and the results of our ongoing transformation journey.
Speaker Change: Please turn to slide number three.
Wenbin Qiu: In the first quarter of 2024, Baozun Group achieved a 5% year-over-year revenue growth, reaching 2 billion. This growth was primarily driven by BBM's 66% year-over-year revenue increase and better top-line momentum from BEC. Additionally, our operating cash flow improved by 129 million, reflecting the robustness of our business model and operational efficiency. A closer look at the top-line enable for the quarter.
Speaker Change: In the first quarter of 'twenty 'twenty four bulge.
Baldwin group achieved a 5% year over year revenue growth.
Speaker Change: Reaching 2 billion.
Speaker Change: This growth was primarily driven by pbms, 66% year over year revenue increase.
Speaker Change: And the better top line momentum from B C.
Speaker Change: Additionally.
Speaker Change: Our operating cash flow improved by 129 minutes.
Speaker Change: Reflecting the robustness of our business model and operational efficiency.
Speaker Change: A closer look at the pulp play enables for the quarter.
Wenbin Qiu: For BEC, it's encouraging that service revenue returned to growth after six quarters of year-over-year contraction. This is attributed to our consistent efforts in enhancing client satisfaction, using our omni-channel capabilities, and extending our value proposition to our brand partners. In addition, we introduced a high-quality product sales model by entering into exclusive distribution collaborations with several brands. This exclusivity allows us to make full use of our digitalization capabilities and retail expertise to enable brands to build a consistent go-to-market strategy, which is comprehensive and covers product positioning, marketing, pricing, channels, and the customer's experience, along with daily sales operations.
Speaker Change: Or do you see it's encouraging that the services revenue returned to growth after six quarters of year over year contraction.
Speaker Change: This is attributed to our consistent efforts you hadn't seen client satisfaction.
Speaker Change: Using our omni channel capabilities, and extending our value proposition to our brand partners.
Speaker Change: In addition, we introduced a high quality product sales model by entering into exclusive distribution collaborations with several brands.
Speaker Change: This exclusivity allows us to make for yourself or digitalization capabilities and the retail expertise to enable brands to build a consistent go to market strategy, which is comprehensive and covers product positioning marketing pricing channels and the customer.
Speaker Change: <unk> experience.
Speaker Change: Along with daily sales operations.
Wenbin Qiu: With deeper involvement and alignment in strategy and merchandising tactics, we are confident that we can help brands increase sales and boost their brand equity. We are confident this model will enable BEC product sales to resume growth next quarter and gradually improve BEC's overall margin. BBM continues to make headway in transforming Gap China. Focusing on China by China products and the merchandising tactics that resonate with local customers, DBM delivered solid Q1 results in both top and bottom lines.
Speaker Change: Steve for your government and alignment and strategy and the merchandising tactics. We are confident to help brands increased sales and the boost their brand equity.
Speaker Change: We are confident this model, we enable BC product sales to resume growth next quarter, and then gradually improve pieces overall margin.
Speaker Change: GBM continues to make headway in transforming gap China.
Speaker Change: Focusing on China, but China products and the merchandising tactics that.
Speaker Change: The restaurant with local customers.
Speaker Change: P. B M delivered a solid Q1 results in both top and bottom lines.
Wenbin Qiu: These efforts have had positive market acceptance and increased GAP's growth potential for the second half of 2024. Lastly, we are proud to share another significant milestone in our technological advancement. Our Technology Innovation Center, TIC, successfully deployed over 5,000 partner offline stores for a global electronic brand giant. This involved a full set of demand chain management solutions that manages online DPC, offline retail, and a partner distribution network with up-to-date digital commerce capability. It is fully integrated with the Baozun digital operating platform to ensure a seamless and closed-loop omni-channel digital e-commerce and digital commerce experience.
Speaker Change: These efforts have had a positive market acceptance and the increased <unk> growth potential for the second half of 'twenty 'twenty four.
Lastly, we are proud to share another significant milestone in your technology at the mine Smith.
Speaker Change: Our technology Innovation Center T. I C successfully deployed over five thousands upon their offline stores.
Speaker Change: Global electronic Brian giant.
Speaker Change: This involved a full set of demand the churn management solution that manages online DTC offline retail and upon the distribution network with up to date digital commerce capabilities.
Speaker Change: It is fully integrated with the bolsa in digital operating platform to ensure a seamless and a close loop Omnichannel digital E Commerce digital commerce experience.
Wenbin Qiu: These are highlights that reflect the solid and constant effort the Baozun team has put into effect our ongoing transformation. I'm also proud to welcome Kevin Zhu, our newly appointed CFO, to this call. Catherine brings a wealth of experience and expertise to our senior management team. Importantly, Catherine is no stranger to boccia, as she has worked with us for the past four years in various key functions. With Catherine taking on the CFO role, Arthur is now more dedicated to leading our BEC segment to accelerate its transformation and further growth in 2024. Let me now pass the call over to Catherine for a review of her financials.
Speaker Change: These are highlights that reflect the solid.
Speaker Change: Constant effort.
Speaker Change: The team has put into effect our ongoing transformation.
Speaker Change: I'm also proud to welcome Katherine Xu our newly appointed CFO to this call.
Speaker Change: Catherine brings a wealth of experience and expertise to our senior management team.
Speaker Change: Importantly companies no stranger to bacci.
Speaker Change: She.
Speaker Change: He has worked with us for the past four years in various key functions.
Speaker Change: We've carefully taking on the CFO role arthurs, not more dedicated to leading our BC segment to accelerate its transformation and further growth in 2024.
Speaker Change: I'll pass the call over to Katherine <unk> for a review of our financials.
Catherine Zhu: Thanks, Vincent, and hello, everyone. I'm pleased to speak with you today in my new capacity as Baozun Group CFO. As Winston just mentioned, advancing our business transformation initiatives and driving growth are our top priorities for 2024. Accordingly, my primary objective will be to align our financial strategies with our broad business goals. Fostering both our transformation and progress through fiscal discipline and cost optimization. Now, let me share with you our first quarter 2024 financial results in more detail. Please turn to slide number three.
Katherine Xu: Thanks, Nathan and Hello, everyone I'm pleased to speak with you today in my new capacity as Bolton group's CFO.
Katherine Xu: We have been just mentioned advancing all of this transformation initiatives and driving growth our top priorities for 'twenty 'twenty four.
Katherine Xu: Accordingly, My primary objective will be to align our financial strategies, we sell abroad B This goes but.
Katherine Xu: So it is in both our transformation and the progress through fiscal discipline and cost optimization.
Katherine Xu: Now, let me share with you our first quarter 'twenty 'twenty four financial results in more detail.
Katherine Xu: Please turn to slide number three.
Catherine Zhu: Baozun Group's total net revenues increased by 5% year-over-year to $2 billion. Of this, e-commerce revenue contributed 1.7 billion, while revenue from the brand management segment increased to 313 million. Breaking down the e-commerce revenue by business model, services revenue increased by 4% to $1.2 billion during the quarter. This increase was primarily attributable to double-digit year-over-year growth in revenue from sportswear store operations, as well as digital marketing and IT solutions. BC product sales revenue decreased by 17% to $395 million as we optimized certain product portfolios and pursued a high-quality distribution model. For instance, we proactively optimized our approach to several brands in fast-moving consumer goods over the past few quarters, which led to a 51% year-over-year decline in this category. Please turn to slide number four.
Katherine Xu: Oh, some groups total net revenues increased by 5% year over year to 2 billion.
This e-commerce revenue contribution of $1 7 billion, while revenue from the brand management segment increased to two 330 million.
Katherine Xu: Breaking down the e-commerce revenue by business model services revenue increased by 4% to $1 2 billion during the quarter.
Katherine Xu: This increase was primarily attributable to double digit year over year growth in revenue from sports, we used the operations as well as digital marketing and solutions.
Katherine Xu: D C product sales revenue decreased by 17% to 395 million as we optimize a certain product portfolios under pursuit of ha high quality distribution model.
Katherine Xu: For instance, we proactively optimize our approach to whichever bread and butter.
Katherine Xu: Fast moving consumer goods over the past few quarters, which led to a 51% year over year decline in this category.
Katherine Xu: Please turn to slide number four.
Catherine Zhu: From a profitability perspective, our gross margin for product sales in e-commerce improved by 230 basis points to 13.8% during the quarter. Gross Margin for BPM remained healthy at 53%, and our group's blended gross margin for product sales totaled 31%, an increase of 700 basis points year-over-year. This was driven by improved gross margin on BEC product sales, as well as a higher contribution percentage from BVM revenues. Now to bottom line items. Please turn to slide number 5. Our total operating expenses for the quarter were $1.6 billion, an increase of 7.9% year-over-year.
Katherine Xu: From a profitability perspective, our gross margin for product sales in e-commerce improvements by 230 basis points to 13, 8% during the quarter.
Katherine Xu: Gross margin for BV in remain healthy at 53%.
Katherine Xu: And our group blended gross margin for product sales totaled 31% an increase of 700 basis points year over year.
Katherine Xu: This was driven by improved gross margin of BC part of cells as well as a higher contribution percentage from BB and revenues.
Katherine Xu: Now to bottom line items, please turn to slide number five.
Katherine Xu: Our total operating expenses for the quarter with 1.6 billion, an increase of seven 9% year over year.
Catherine Zhu: This increase was mainly due to additional sales and marketing spending in both the VEC and BPM segments, which was in line with the increase in our digital marketing revenues and the new product launch, respectively. During the quarter, our adjusted loss from operations totaled $18 million. This comprised an adjusted operating profit of $12 million from the e-commerce segment and a BVM operating loss of $29 million. It is worth noting that BBM continued to show good momentum in reducing its operating loss with a $29 million operating loss covering the month this quarter, compared to $35 million for the two-month period in 2023. Turning to cash items on slide No.
Katherine Xu: This increase was mainly due to additional sales and marketing spending in both be easy on the BB&T segments.
Katherine Xu: Which was in line with increasing our digital marketing revenues and a new product launch respectively.
Katherine Xu: During the quarter, our adjusted loss from operations totaled 18 million is comprised and adjusted operating profit of two 1 billion from E. Commerce segment and began operating loss of 29 million.
Katherine Xu: It is worth noting that BPM continues to show good momentum in reducing its operating loss with the 29 million operating loss covering the mouth this quarter compared to 235 million for the two months period 2023.
Catherine Zhu: 6, We improved our operating cash flow by 129 million, where we had a cash outflow of 208 million in the first quarter of last year. The corresponding outflow in the first quarter of this year has been reduced to 79 million. This was attributed to our effective and targeted cash flow management strategy. Notably, the operating cash flow for the e-commerce segment in the first quarter turned positive for the first time since 2019. Also, with better utilization of financial capital and resources, our net interest income increased over 30% to 9 million.
Katherine Xu: Turning to cash items on slide number six.
Katherine Xu: We improved our operating cash flow by 129 million.
Katherine Xu: Well, we had a cash outflow of 208 million in the first quarter last year, the corresponding outflow in the first quarter. This year has been reduced to 17 9 million.
Katherine Xu: This was attributed to our effective in talking to the cash flow management strategy.
Katherine Xu: Notably the operating cash flow for E Commerce segment in the first quarter turned positive for the first time since 2019.
Katherine Xu: Also with better utilization of financial capital and resources, our net interest income increased over 30% to 9 million.
Catherine Zhu: As of March 31st, 2024, we maintained a continuously steady balance in cash and cash equivalents, restricted cash, and short-term investments, totaling $2.9 billion. In January 2024, our board approved a new share research program of 20 million US dollars over the next 12 months. I'm pleased to report that in April, the company repurchased approximately 845,000 ADRs for 2.1 million US dollars through the open market under this program, reflecting our confidence in the company.
As of March 31st 'twenty 'twenty, four we maintain a continuous steady balance in cash and cash equivalents with use of cash and short term investments totaling 2.9 billion.
Katherine Xu: In January 2024, our board approved a new share repurchase program of $20 million over the next 12 months.
Katherine Xu: I'm pleased to report that in April the company repurchased approximately 845000. It is with 2.1 million U S dollars through the open market gifts program, reflecting our confidence in the company.
Catherine Zhu: Lastly, on slide number 7, we have been successful in promoting ESG and integrating sustainability into our core business operations. We prioritize energy efficiency and waste minimization in our warehouse and logistics processes. Moreover, we advocate for sustainable lifestyles among our employees, brand partners, consumers, and other stakeholders, fostering a green e-commerce ecosystem. Thanks to this unwavering commitment, we reduced our 2023 carbon emissions by 28% compared to our 2021 benchmark. I'm also proud to share that CDP raised our ESG rating from C to B this year, a powerful testament to our sustainability efforts. Thank you for your attention. Let me now pass the call over to Arthur to update you on BEC, our e-commerce business.
Katherine Xu: Lastly on slide number seven.
Katherine Xu: We have been successful in promoting ESG on integrating sustainability into our core business operations.
Katherine Xu: We prioritize energy efficiency and the waste minimization, yeah, well warehouse and logistics parts.
Katherine Xu: Moreover, we advocate for sustainable lifestyles.
Katherine Xu: Please brand partners consumers and other stakeholders bolstering our green e-commerce ecosystem.
Katherine Xu: Thanks to this unwavering commitment we reduced our 'twenty two 'twenty three carbon emissions by 28% compared to two hour 'twenty or 'twenty one benchmark.
Katherine Xu: I'm also proud to share that C. D. He raised our ESG rating from C to B this year.
Katherine Xu: Powerful testament to our system's ability efforts.
Speaker Change: Thank you for your attention let me now pass the call over to Arthur to update you on B C or E Commerce business.
Arthur Yu: Thanks Vincent and Catherine, and hello everyone. Now let's take a look at the BEC business in quarter one of 2024. Please turn to slide number 8.
Speaker Change: Hum Kathryn.
Speaker Change: Hello, everyone.
Arthur: I would like to take a look at the piece of business in quarter, one 'twenty three 'twenty four.
Speaker Change: Please turn to slide number eight.
Arthur Yu: The year of 2024 has started off with many challenges and opportunities for the BEC business. Our strategic goal is to drive customer-centric, high quality, and sustainable business growth. And we plan to deliver this goal through three key strategic enablers. Number one is enhancing customer satisfaction. Number two, building a high-quality product sales business. And number three, expanding into new business areas by utilizing our core capabilities. In the first quarter of 2024, we made solid progress in each area.
Speaker Change: Yeah, Oh Twentyish wonderful has stopped at all where you might need challenges and opportunities before the Beasley business.
Speaker Change: All of a strategic goal is to drive customer centric high quality and sustainable business girl.
Speaker Change: And we plan to deliver this goal through three key strategic enablers.
Speaker Change: Number one in hunting customer satisfaction.
Speaker Change: Number two building a high quality product sales business and number three expanding into new business areas by utilizing all of our core capabilities.
In the first quarter of plentiful and therefore, we have made solid progress in each area.
Arthur Yu: Our first strategic enabler focuses on improving service quality to further enhance client satisfaction. Since 2021, we have collaborated with Nielsen to build an NPS (Net Promoter Score) system to systematically gather feedback from our clients. Over the past two years, we have seen an increase in our overall MPS, and the score has improved from 8.07 to 8.23.
Speaker Change: Our fourth strategic enabler focus is on improving service quality to further enhance client satisfaction.
Speaker Change: Since 2008, one to one we have collaborated with Nielsen to built on NPS.
Speaker Change: Knights promoter school system.
Let's say somebody takes a guy that feedback from our clients.
Speaker Change: Over the past two years, we have seen an increase in our overall yes.
Speaker Change: And the school has improved from 8.07 to 8.2 or three.
Arthur Yu: This indicates that an increasing number of clients are now willing to recommend our service, likely leading to organic growth through positive word of mouth. The improvement in our MTS score is largely due to our consistent efforts in maintaining high standards in delivering services. Particularly, our comprehensive digital commerce capabilities across multiple categories, channels, and entire value chains. In Q1, we continued to perform strongly and gained market share in key categories such as apparel, Sports & Outdoor, and Travel & Hotel. Our omni-channel capability is one of Baozun's core advantages and a focus for development in 2024. During the quarter, we not only continued to open stores on traditional marketplace platforms, such as Tmall, JD, and VIP.com, but we also opened over 20 new stores on emerging platforms like Douyin, Poison, and Red.
Speaker Change: And they've indicated that an increasing number of clients are now waiting to recommend or somebody else's.
Speaker Change: Likely leading to organic growth through positive word of mouth.
Speaker Change: The improvement in our M. P. As school is largely due to our consistent efforts in maintaining high standards in delivering services.
Speaker Change: Particularly our comprehensive digital commerce capabilities.
Speaker Change: Multi category channel and the entire value chain.
Speaker Change: In quarter, one we continued to perform strongly and gained market share in key categories such as apparel.
Speaker Change: Both on the old stove and travel and hotel.
Speaker Change: All of our omni channel capability, it's one off Baldwin's Hull advanced histories, and our forecast for development in 2024.
Speaker Change: During the quarter, we not only continue to open stores on the traditional marketplace platform.
T mobile with J D on the VIP dotcom.
Speaker Change: But also opened over 20, new stores on emerging platforms like poison unread, Hello, Cambrian and generate revenue through these new channels.
Arthur Yu: Helping brands generate revenue through these new channels. Additionally, we are continuously expanding our value chain and innovating our service models. We have become the e-commerce logistics service partner for multibrand and VIN corporations, helping them to customize automated e-commerce order fulfillment centers.
Speaker Change: Additionally, we are continuously expanding our value chain and innovating almost series models.
Speaker Change: We have become the E Commerce logistics service partner for multi brands on the.
Speaker Change: Corporation.
Speaker Change: Hi, Ole Kingdom Costa My all told me take E Commerce order fulfillment centers.
Arthur Yu: Supporting nationwide multi-warehouse shipping and improving the logistic service capability, we have also formed a strategic alliance with China Resource Vanguard to explore new retail models leveraging our long-term cooperation experience with Walmart. Based on our outstanding performance, we received multiple Service Provider Awards in Q1. These include Tmall's 6-star service provider.
Speaker Change: Supporting a nationwide multiyear warehouse shipping and improving logistics service capabilities.
Speaker Change: We have also formed a strategic how long wave China resource Vanguard.
Speaker Change: Paul New retail model.
Reaching our long term cooperation experience with Walmart.
Speaker Change: Based on all the outstanding performance, we received multiple service provider.
In quarter one.
Speaker Change: These include T. Most six star service provider.
Arthur Yu: JD.com's Jin Zhuoyue Award, Tansend Smart Retail Annual Service Provider Award, and Douyin's 2023 High Potential Luxury Service Provider Award. This award validates our programs in the Albany Channel capabilities and continues to give us strategic advantages over our competitors. Our second strategic enabler is to build a high-quality product sales business, which we address by focusing on two aspects: Optimizing Existing Distribution Business and Introducing High-Quality Distribution Partnerships. For existing distribution businesses, we have nearly completed the optimization of financially underperforming operations this quarter.
Speaker Change: <unk> Dot com can enjoy your award.
Pennington: Pennington smart read how our new service provider.
And though in 'twenty two 'twenty three high potential luxury service provides a walk these.
Pennington: These awards validate our progress in Albany channel capabilities and continue to give us strategic advantages over our competitors.
Pennington: Yes.
Pennington: I'll have a second strategic enabler is to build a high quality product sales business.
Pennington: We try and by focusing on two aspects.
Pennington: Optimizing existing distribution business.
Pennington: Introducing high quality distribution partnerships.
Pennington: For existing distribution businesses, we have nearly completed the optimization of financially underperforming operations this quarter.
Arthur Yu: At the same time, we have enhanced our governance and talent management by establishing a distribution Business Committee to ensure the quality of the business continues to improve in the future, and to introduce new high-quality product sales business. We continue to expand using an exclusive distribution model for medium-sized global brands. In Quarter 1, we initiated several collaborations in the Lifestyle and Small Appliance categories. In February, we became the exclusive distribution partner for the Canadian fashion brand, Aldo, and are currently working on repositioning the brand in the Chinese market. We have also initiated an exclusive distribution collaboration with the renewed American high-end home appliance brand, B-Cell. We are also working with nukes.
Pennington: At the same time, we have enhanced our governance and Thailand management by establishing a distribution business commentary to ensure the quality of the business continues to improve in the future.
We introduced new high quality products and businesses.
Pennington: We're continuing to expand using an exclusive distribution model for medium sized global brands.
Pennington: In closing were one we initiated several collaborations in lifestyle and small appliance category.
Pennington: In February we become the exclusive distribution partner for the Canadian fashion brands Aldo.
Pennington: And are currently working on a repositioning of the brand in the Chinese market.
Pennington: We also initiated an exclusive distribution collaboration with the renewed American high end home appliance front in B cell.
Pennington: We are also working away it's new.
Arthur Yu: French cosmetic and beauty brand as their exclusive distributor for its China launch with a comprehensive online and offline growth plan. Compared to traditional distributors, Baozun possess digital-enabled distribution capabilities, efficiently integrating online and offline operations and leveraging digital technologies to drive omnichannel business growth. The third enabler is expanding into new business areas by creating new and creating new business models by utilizing Baozun's core capability in data and technology. For instance, we have deployed our technology to help brand partners advance distributor digital transformation and enhance comprehensive omni-channel retail capability. We have also extended our customer service from a client-by-client basis to service cooperation with e-commerce platforms.
Pennington: Our French cosmetic and beauty brand is the exclusive distributor voice, China launch wave comprehensive online and offline growth plans.
Pennington: Compared to traditional distributors Bolton pulses digitally enabled distribution capabilities.
Efficiently integrating online and offline operations and leveraging digital technologies to drive all we need channel business grow.
Pennington: The third enabler.
Pennington: Spending into new business areas by creating new and creating new business models by utilizing importance coal capability in data and technology.
Pennington: For instance, we have deployed our technology to help brand partners advanced these tribute to digital transformation.
And enhance comprehensive omnichannel retail capability.
Pennington: We have also expanded our customer service from a client by client basis.
Pennington: Two surveys cooperation ways e-commerce platforms.
Arthur Yu: Additionally, our self-incubated brand continues to achieve high double-digit sales growth in Q1. Transitioning from Initial Incubation to Rapid Expansion, While growing the top line is our priority this year, protecting the bottom line is also important to us. We are actively promoting lean projects within BEC to further reduce costs. Additionally, we are extending the use of AIGC tools to more employees and business scenarios to enhance operational efficiency. In summary, we achieved solid results in Q1 and are on track with our annual plan.
Pennington: Additionally, all myself incubate hedge Brent continues to achieve high double digit sales growth in quarter one.
Pennington: Transitioning from initial incubation for rapid expansion.
Pennington: Well early into all of the top line is our priority this year.
Protecting the bottom line, it's also important to us.
Pennington: We are actively promoting been perfect waiting b C to further reduce costs.
Pennington: Additionally, well.
Pennington: Hunting the use of ITC truth to more employees and business not really to enhance operational efficiency.
Pennington: In summary, we achieved solid results in quarter, one and are on track with our annual plan.
Arthur Yu: Our goal for BEC is to become the preferred digital commerce partner for our global clients. To achieve this goal, we will continue to focus on our strategic enablers, ensuring robust business growth while further enhancing our digital and omni-channel capabilities. We will share more progress with you in the future. Now, let me pass on to Sandrine for an update on BBM.
Pennington: I'll go for B E. C is to become the preferred features hoak homeless partner for our global clients.
Pennington: To achieve this goal we will continue to focus on our strategic enablers.
Pennington: Ensuring a robust business growth, while further enhancing our digital and omnichannel capabilities.
Pennington: We will share more progress with you in the future.
Speaker Change: Now, let me pass onto a sundry before I place on V. P M.
Sandrine Zerbib: Thank you, Arthur, thank you team, and thank you all. It is my great pleasure to speak with you. Please turn to slide 9.
Speaker Change: Thank you Arthur Thank you team and thank you. It is my great pleasure to speak with you.
Speaker Change: Please turn to slide number nine.
Sandrine Zerbib: We are pleased to report top-line growth and continuous bottom-line improvements for BBM in the first quarter of 2024. While there is a timing impact, as we had two months of reporting in the same period of last year versus the full quarter this time for the 66 revenue growth percent, we achieved strong sales during the Chinese New Year period, supported by a series of new product releases, targeted promotions, and effective marketing campaigns.
Speaker Change: We're pleased to report top line growth and continued bottom line improvements to be B M. In the first quarter of 2024.
Well there is a timing impact as we had two months in reporting in the same period of last year.
Speaker Change: Versus the full quarter. This time for the 66 revenue growth percent.
Speaker Change: We achieved strong sales during the Chinese new year period supported by a series of new product releases.
Speaker Change: I'll get eat promotion and effective marketing campaigns.
Sandrine Zerbib: Leveraging on our efforts in strategic pricing, supply chain, and inventory management, we continue to maintain effective discount control while achieving healthy inventory turnover improvement. During the quarter, the gross margin for BBM remained healthy at 53% post royalties, and our inventory turnover days improved by 20 days to 140 compared to the same period last year. We further improved operational efficiency. Reducing our operating loss to $29 million for this quarter, which covers three months, compared to $35 million for two months last year.
Speaker Change: Leveraging on our assets in strategic pricing supply chain and inventory management, we continue to maintain effective discount control well achieving healthy inventory turnover improvement.
Speaker Change: During the quarter.
Speaker Change: The gross margin to be B M remained healthy at 53% post royalties.
Speaker Change: And our inventory turnover days.
Speaker Change: Improved by 20 days 240 compared to the same period last year.
Speaker Change: We further improve operational efficiency.
Speaker Change: Reducing our operating loss to 29 million for this quarter.
Speaker Change: Which covers three months compared to 35 million over two months last year.
Sandrine Zerbib: Our China for China strategy continues to evolve with promising developments. We are introducing specialized products tailored to specific target audiences and channels, ensuring that our offerings meet local consumer needs and preferences. For example, we recently intensified our efforts for segmented products in the kids and baby and womenswear categories. We noted a significant rebound in our kids and baby stores, marked by improvements in customer awareness and a distinctive brand image which solidified a positive brand perception among our current demographic. The combination of kids and baby and women's wear accounts for less than 50% of sales.
Our China for China strategy continues to evolve with a promising development.
We are introducing specialized products tailored to specific target audiences and channels, ensuring that our offering.
Speaker Change: Meet local consumer needs and preferences.
Speaker Change: For example, we recently intensified our efforts for segmented product in the kids and baby and women's wear categories.
Speaker Change: We noted a significant rebound in our kids and baby stores.
Speaker Change: Mark by improvement in customer awareness and distinctive brand image, which solidified a positive brand perception.
You know current demographic there.
Speaker Change: The combination of kids and baby and women's wear it accounts for less than 50% of cells.
Sandrine Zerbib: Presenting Opportunities for Further Growth. To capitalise on this momentum, we are strategically rolling out new children's wear stores, and we will continue to launch segmented product offerings throughout the year to better meet the needs of our targeted demographic. We are also introducing new women's designers and further enhancing product quality to better cater to the young mom generation. Additionally, our Functional Product Segment, such as UV jackets and cooling products, are performing well and are expected to gain further traction as we move into the warmer months.
Speaker Change: Presenting opportunities for further growth.
Speaker Change: To capitalize on this momentum.
Speaker Change: We are strategically rolling out new Childrenswear doors, and we will continue to launch segmented product offerings.
Speaker Change: Throughout the year to better meet the needs of our targeted demographic.
Speaker Change: We are also introducing new women designers.
Speaker Change: And further enhancing product quality.
Speaker Change: To better cater to the young moms generation.
Additionally.
Speaker Change: Our functional products segment.
Speaker Change: Such as UV jacket, and cooling products are performing well and are expected to gain further traction as we move into the woman moms.
Sandrine Zerbib: Our collaboration with selected IPs, such as ADOT 8 and PALOS, resonated well with our target audience, along with our social media campaigns on Weibo and Little Red Book. Our brand visibility has been significantly boosted. However, there has been some traffic contraction in the fashion apparel segment in recent months.
Speaker Change: Our collaboration with selected IP.
Such as 808, and pallets resonated well with our target audience.
Speaker Change: Along with our social media campaign on Weibo and little Red book.
Speaker Change: Brian visibility has been significantly boosted.
Well they have been some traffic contraction in the fashion apparel segments in recent months.
Sandrine Zerbib: The new stores we opened during this period still demonstrated higher productivity levels, leveraging on our proven new opening philosophy. We plan to expand our physical presence throughout the rest of 2024 to offset the organic decrease in our store count over the past few quarters. We're happy to have gained strong market acceptance from the industry community, including potential IP collaborations, landlords, and potential franchisee partners. With this established ecosystem and partnerships, we are encouraged by the positive momentum in brand equity.
Speaker Change: The new stores, we opened during this period still.
Speaker Change: Still demonstrated higher productivity levels.
Leveraging on our proven new opening philosophy.
Speaker Change: We plan to expand our physical presence throughout the rest of 'twenty 'twenty four to offset the organic decrease in our store count over the past few quarters.
Speaker Change: We're happy to have gained strong market acceptance from the industry community.
Speaker Change: Including potential IP collaboration landlords and potential franchisee partners.
Speaker Change: With this established ecosystem in partnership we are encouraged by the positive momentum in brand equity.
Sandrine Zerbib: We plan to open up to new five stores in the second quarter of 2024 while focusing on optimizing store performance and enhancing the customer experience. Additionally, we will leverage a rapid deployment strategy by opening pop-up shops in strategic locations to gauge consumer interest and test market viability. By executing these initiatives simultaneously, we aim to strengthen our presence, tap into new markets, and capitalize on emerging growth opportunities. Looking ahead to the rest of 2024, we are exercising caution due to the observed slower recovery in consumer sentiment.
Speaker Change: We plan to open up to new five stores in the second quarter of 2024, well focusing on optimizing store performing and enhancing the customer experience.
Speaker Change: Additionally, we will leverage a rapid deployment strategy by opening pop up shops in strategic locations to go to consumer interest.
Speaker Change: Test market viability.
Speaker Change: By executing these initiatives simultaneously.
Speaker Change: We aim to strengthen our presence.
Speaker Change: Talking to new market and capitalize on emerging growth opportunities.
Speaker Change: Looking ahead to the rest of 2024.
Speaker Change: Exercising caution due to the observed slower recovery in consumption sentiment.
Sandrine Zerbib: Well, it may take more time for this sentiment to improve. We remain committed to executing our strategic plan and driving BBM top-line growth in 2024. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.
Speaker Change: Well it may take more time, so these sentiment to improve.
Speaker Change: We remain committed to executing our strategic plan and driving B B M top line growth in 2024.
Speaker Change: That concludes our prepared remarks. Thank you operator, we are now ready to begin the Q&A session.
Operator: Thank you, certainly. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. If you would like to state your question in Chinese, you may do so, but then please also restate your question in English. The first question comes from Alicia Yap with Citigroup. Please go ahead.
Speaker Change: Yeah.
Speaker Change: Certainly.
Speaker Change: A question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: At this time.
Jeff: Yes, Jeff.
Jeff: If you would like to say to your question in Chinese you may do so.
Jeff: Please also restate your question in English.
Speaker Change: The first question comes from.
Speaker Change: So yeah.
Citigroup.
Speaker Change: Go ahead.
Alicia Yap: Hi, good evening, management. Thanks for taking my questions. Congratulations on a solid quarter. I have two questions first.
Speaker Change: Hi, good.
Speaker Change: Good evening management, Thanks for taking my questions and congrats on the solid quarter, Oh I have a two question first so I think during first quarter based on the N. B S stayed out there seems to be faster growth pace. After online shopping we used to deepen our penetration rate in our spend.
Arthur Yu: So I think during the first quarter, based on the MBS data, there seems to be a faster growth pace of online shopping with a deeper online penetration rate in expense on some of the offline retail, maybe even the aggressive pricing discount from the online marketplace. So just wondering how Baozun views this trend as your opportunity. And then, on the other hand, wondering if the Gap offline stores are seeing some of the demands actually shifting to online purchase as we see for the general broad market trend.
Speaker Change: On some of the offline retail maybe given the aggressive pricing. These come from the online market place. So just wondering help on how to view this trend as your opportunity and then on the other hand wondering if you know the GAAP offline store I seeing.
Speaker Change: Some of the demand actually shifting to the online put chase as you know we see for the general broad market trends.
Arthur Yu: Second question is related to Gap. Just wondering if management can provide an update on the overall growth rate target for this year and also any update on the performance of the newly acquired brands like Hunter. Thank you.
Speaker Change: Second question is relate that to gap I'm, just wondering if management can provide an update on the overall growth rate target for this year and also you know any of the update on the performance of the newly acquired.
Speaker Change: Tier brands like the Hunter. Thank you.
Speaker Change: Yeah.
Sandrine Zerbib: Hi Alicia, it's Arthur here. Thank you for the question. I will take the first part of your question and then I will hand over to Sandrine for the gap-related question. I think you are right in terms of online penetration seems to be increasing, but not necessarily at the expense of offline retail. From our observations, some successful brands have started to adopt the omni-channel strategy by fully utilizing the different customer base from each of the platforms.
Speaker Change: Uh huh.
Speaker Change: Yeah. Thank you for the question I will take the first part of your question and then I will handle the sundry for the GAAP related question.
I think you are right in terms of our online penetration I seems too.
Speaker Change: Great, but not necessary at the expense of offline retail because from our observation. Some successful brands has started to adopt the omnichannel strategy by flu by fully utilizing the different customer base from each of the platform. Some.
Sandrine Zerbib: Some brands even try to develop some unique products for some special online platform, trying to utilize their consumer base. And that leads to higher penetration for the online market, but not necessarily at the expense of cannibalization of the offline market. So that's number one. The second thing we have seen is that some successful brands do online merging offline, i.e. OMO strategy, trying to utilize technology and data to create a solution to integrate the online and offline shopping scenario. And that is actually helping to generate organic traffic both online and offline to drive incremental sales. So that's our observation for the first part of your question.
Speaker Change: And even tried to develop a somewhat unique product for some spiteful online platform tried to utilizing their consumer base and that lead to a higher penetration for the online.
Speaker Change: Not necessarily at the expense or cannibalization I'll start.
The offline market. So that's number one the second thing we have seen things from some successful brands what they do is online merging offline I E Oh I'm always strategy.
July: Turning to you July.
July: Use the technology and data to create a solution to integrate the online and offline shopping scenario.
July: It's actually helping to generate organic traffic.
July: Traffic into both online and offline to drive incremental sales so thats our observation.
Speaker Change: <unk> for your first part of the question.
Speaker Change: The sundry.
Sandrine Zerbib: Yeah, thank you, Arthur. And thank you, Alicia, for your question.
Speaker Change: Yeah.
Speaker Change: Thank you Rocco and thank you Lisa for your question. So first then you you ask if this was something we were observing also this potential shifts for gap in fact, it is true that we see overall that the trapping offline.
Speaker Change: Is it decreasing.
Sandrine Zerbib: So first, you asked if this was something we were observing also, this potential shift for GAP. In fact, it is true that we see overall that the traffic offline is decreasing. And it's decreasing faster than the traffic online. Having said this, as Arthur mentioned, it doesn't mean any form of cannibalization.
Speaker Change: And and its decreasing faster than the traffic online having said this as as also mentioned it doesn't mean any form of a cannibalization now concerning your second question.
Sandrine Zerbib: Now, concerning your second question, about the growth perspective for all of 2024 for GAP. We still plan BBM and GAP to have double-digit growth for the whole year, partly because we see the new stores that we are opening performing better than the existing portfolio, and also partly because we plan to continue our store openings with a little bit more than 50 stores to be open for the rest of the year, or in the total year, I should say, because we have already opened two in Q1, and we will have five open in Q2, and the rest in So, now, the last part of your question was about Hunter, and I'm pleased to say that Hunter is very well on track, both in terms of sales and operating results.
Speaker Change: About the growth perspective for all of 2024 for GAAP. We are we still plan B B N to have and gap to have double digit growth for the whole year puppy.
Speaker Change: Because we see the new stores that we are opening two forming.
Speaker Change: Actually better than the existing portfolio and also partly because we plan to continue our store opening with a little bit more than a C. More than 50 stores to be opened in the rest of the year or in the total year I should say because we already opened two in Q1 and we will.
Speaker Change: Have five open in Q2, and the rest in Q3 and four.
Speaker Change: So now the last part of your question was about the Hunter and then I'm pleased to say that Hunter is a very well on track both in terms of sales and our operating results.
Alicia Yap: Okay, thank you so much. I'll get back to the queue.
Speaker Change: Okay. Thank you that much I'd get back to the queue.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Colin Chen: The next question comes from Colin Chen with CITIC Securities; please go ahead.
Speaker Change: The next question comes from Colin Chen with Citic Securities. Please go ahead.
Colin Chen: Good evening, management. Thanks for taking my question. I have two questions. The first is about BEC. In this year, most e-commerce platforms keep emphasizing price competition power. And as a brand partner, how does Baozun balance brands' pricing systems and price competitiveness? And my second question is about BBM. And also this year, did the measurement find that there are different consumption trends and characteristics between GAPs' online and offline performance? And what is your future layout of GAPs offline and online business? For example, will there be different product lines or pricing strategies between online and offline?
Colin Chen: Hi, Good evening management, Thanks for taking my question to.
Colin Chen: Thank you.
Colin Chen: The first is about a b C. In this year most e-commerce platforms keep emphasizing price competitions dry power and as a brand partner, how does biogen balanced brand's pricing system and pricing competitiveness.
Colin Chen: And my second question is about the B M and also in this year.
Speaker Change: Did the management to find that.
Speaker Change: They're different consumption trends and characteristics between gaps online and offline performance and what is your future layout of gaps offline and online business for example, where there be like different product lines, all pricing strategy between online and offline.
Speaker Change: Thank you.
Arthur Yu: Okay, thank you, Colleen. I will take the BEC part, and then Sandrine can comment on the BBM.
Okay. Thank you Colin I will take the BSA part hundred sundry income comments on the P. P M.
Arthur Yu: I think you are right. The e-commerce platforms are more and more putting emphasis on price, a kind of competitiveness. But at the same time, that's not the only tool a brand has to enhance its brand positioning. So, for example, a lot of our clients spend money and effort to build brand awareness, increasing brand equity in order to protect their pricing structure. And some of our clients even follow a full price strategy with a very limited discount.
Speaker Change: I think you are right the E.
Speaker Change: E Commerce platform more and more putting.
Emphasize the price kind of the competitiveness, but at the same time, that's not the only tool O'brien has to enhance our brand positioning. So for example, a lot of our time spend our money and I said to be.
Speaker Change: It's the brand awareness, increasing the brand equity in order to protect the pricing structure and some of our clients are you going to follow a full price strategy with very limited discount.
Arthur Yu: That actually drives a better model for the brand to have sustainable growth because they can use the additional margin to support brand building in the longer term. And that's a lot of our advice to our brand partners to balance the short-term and the long-term. So that's the first one.
Speaker Change: That actually drive a bit.
Speaker Change: Our model for the brands to have a sustainable growth because they can use additional margin to support the brand building in the longer term and then I'll a lot of our advice to our brand partner to balance the short term or long term. So that's the first one.
Arthur Yu: Secondly, we see many brands are focused on new product introduction, which is the key to keep the freshness of a brand appearance to the consumer. As you know, the Chinese consumer is very looking forward to the new things coming up. So with that, a lot of brands are trying to capture the new trend of the Chinese consumer. And also, marketing is becoming more dynamic, including short video, live streaming, and a lot of digital format type of marketing.
Speaker Change: Secondly, we see many brands I focus on the new product introduction, which are so key to keep the freshness of our brand our parents to the consumer as you know the Chinese consumer.
Speaker Change: A very looking forward to the new things coming up so it's not a local brand is trying to capture the new trend of the consumer.
Speaker Change: And also the marketing is becoming more dynamic, including the shelf be deal the life screaming a lot of the digital format.
Arthur Yu: It starts to build a different kind of way the brand is promoting itself. With that, all in all, I think price is one of the tools to drive the brand forward for sales. But to balance the longer term and short term, how to build a brand is also important.
Speaker Change: Marketing start to building a different oh.
Speaker Change: But the way the brands are promoting themself wastes that Oh, you know I think the price is one of the tools to drive the brand forward.
Speaker Change: Sales, but for balance are the longer term I showed him how to build a brand is also important.
Speaker Change: 100.
Sandrine Zerbib: Thank you, Arthur, and thank you, Colleen. So, to answer your question, yes, there are different consumption trends online and offline that we also observe with GAP. As we said earlier, generally speaking, we see a lot of caution from consumers who do not spend lavishly, and this translates differently online and offline. I would say that in both cases, to some extent, it's good value for money.
Speaker Change: Yeah.
Speaker Change: Thank you Arthur and thank you cutting so to answer your question yes.
Speaker Change: Yes, they're all different consumption trend, our online and offline that we also observed with the with gap.
As we said the earlier generally speaking we see a lot of caution from consumers, who do not who do not spend lavishly and.
Speaker Change: This translates differently online and offline I would say that in both cases to some extent it's value for money, but offline we have more of a focus on value and online more of a focus on money.
Sandrine Zerbib: But offline, we have more of a focus on value, and online, more of a focus on money. So what we can see is that, generally speaking, the average price, the UPT, the margin is higher offline than online. But the frequency of purchase is probably more cautious than it used to be. So people are looking for very high quality products, and they are looking for what they see as value in the products we offer offline versus online. We see a trend towards obviously more looking for good prices and good deals, and this has led us to increase the proportion of special online products for the online part of our business in order to maintain our top line without letting go of the control of discounts. So overall, we managed with this to have a lower ticket price for consumers online but keep our good margin. I think this covers the question of choline on BBM. Thank you, Aslan and Sandrine.
Speaker Change: So what we can see is that generally speaking the average price the U P. T. The margin is higher offline and online, but the frequency of purchase this probably more cautious than it used to be.
Speaker Change: So people are looking for very high quality products and they are looking for what they see as value in the products, we offer offline versus online we see a trend towards obviously are more looking for a good price and good deals and this has led us to increase the proportion.
Speaker Change: Of special online products.
For the online part of our business in order to maintain our top line without.
Speaker Change: Without letting go on the control of discounts. So overall, we manage with these do you have lower ticket prices for consumers online, but keep our good margin.
Speaker Change: I think this covers the question of calling on B B M.
Speaker Change: Thank you.
Speaker Change: Syndrome, but answers I have no other questions.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Okay.
Operator: The next question is from the line of Wang Geou, from CICC. Please go ahead.
Operator: Thank you, Aslan and Sandrine, for the answers. I have no other questions. Bye. The next question is from the line of Van Geo, from CICC. Please go ahead.
Speaker Change: The next question is from the line of Gail.
Speaker Change: From the ICC. Please go ahead.
Speaker Change: Yeah.
Gail: Hi, Sucks manageable management for taking my question. My question is Bob Random management business.
Speaker Change: Sure the south because almost all scaffold recently, especially Germany Barra shopping festival and also for the overall brand management business are there plans to incorporate more brands next year. Thank you.
Speaker Change: Okay.
Sandrine Zerbib: Thank you for your question. As we said, we had a very good performance during the Chinese New Year.
Speaker Change: As we Oh, sorry, yeah. Thank you for your question. So as we said we see we had a very good performance during Chinese new year, the rest of the quarter has been a slower.
Sandrine Zerbib: The rest of the quarter has been slower with increasing caution from consumers, which we see particularly in the offline part of our business. As I was trying to explain earlier, there is higher caution that leads consumers to look for value in what they purchase. And the second part of your question was, sorry, I missed it. What was the second part of your question? Yeah, yeah, yeah. My second question is, are there any brands to encourage people to discover?
Speaker Change: We are increasing caution from them.
Speaker Change: Some consumers, which we keep particularly in the offline part of our business as I was trying to explain earlier there is a higher caution that leads consumers to look for value.
Speaker Change: In into what in what they purchase.
Speaker Change: And the second part of your question was sorry, I missed that I missed it.
Speaker Change: What was the second part of your question.
Speaker Change: Yeah, Yeah, Yeah. My second question. It's about are there any plans to enclose yeah, yeah, Okay I got it.
Sandrine Zerbib: Yes, I understand. We are being, obviously look at many, many brands. I cannot guarantee that there will be new brands incorporated this year because we are exercising extreme caution in the way we select the brands, both in terms of which segment they belong to, which category they belong to, and our analysis of their potential in China, particularly in this period of relatively low consumer sentiment. Yeah, some more words to say.
Speaker Change: Yes, I understand we are being we obviously look at many many brands.
Speaker Change: I cannot guarantee that they will be new brands incorporated this year, because we are exercising extreme caution in the way we select the brands both in terms of which segment they belonged to which category they belong to and our analysis on their potential in China, particularly in these periods.
Speaker Change: Relatively low consumption sentiment.
Wenbin Qiu: Yeah, some more words to say, this is for Vincent. For potential new brands, actually, right now, we have, we have a quite strong pipeline for both BEC and BBM businesses. And also, right now, we have a lot of different ways to work with a new brand. We can work with a brand for the, you know, pure e-commerce service, or we can take some exclusivity on distribution, distributorship.
Yes, some more worse, let's say this is vincent.
Speaker Change: For the potential new brands actually rental we have we have acquired strong pipeline for both B C and D. B M business.
Speaker Change: And also ground now we have a lot of different ways to work with a new brand.
Speaker Change: We can work with that Brian you know pure E Commerce service or we can take some.
Wenbin Qiu: And we can also do some M&A or license them. So we have a lot of different ways of working with them. But talking about the M&A, we'll be very selective and careful, just like what Sandrine just mentioned. But right now, we have a lot of different ways of working with that.
Speaker Change: Exclusivity on distribution distributorship, and we can also do some Amazon a license. So we have a lot of different ways working with them, so but talking about the M&A will be a very selective and careful just like what.
Speaker Change: Centered just mentioned yeah, but right now we have a lot of different ways working at that so that is a key message yeah. Thank you.
Operator: That is the key message. Thank you. Thank you. The question comes from Sophie Wong. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Okay.
Sophie Wong: The next question comes from Sophie Wong, PMVI. Please go ahead. Thank you. My question is about the live streaming comments.
Speaker Change: The next question comes from Sophie Wang.
Speaker Change: C N V. I. Please go ahead.
Speaker Change: Okay.
Speaker Change: Continued longer life can come or something.
Speaker Change: <unk> acquisition of who their location.
Speaker Change: Hum.
Speaker Change: Hum change.
Speaker Change: Engagement orange him come from nice.
Speaker Change: Constant channel in travel you can share a.
Speaker Change: Now moving on to think about them.
Speaker Change: James Gurry from last June Congress.
Speaker Change: Yeah.
Arthur Yu: Thank you, Sophie. First of all, our integration with the Hangzhou location is well on track, and with the capability of the location plus the client relationship and tools from Baozun, we have already won a number of new deals, and the teams are very busy every day, working until midnight in order to fulfill the new deals. So that's a good sign. Our goal to acquire the location is to focus on building our omni-channel capability.
Speaker Change: Yourself.
Speaker Change: I think first of all our integration with our Hangzhou location, it's while onsite and waste the capability of location plus the clines a relationship on pause from Boston, We have already won a number of new deals.
Speaker Change: And the teams are very busy every day working on until midnight in order to fulfill the new deal. So that's a good song.
Speaker Change: Or go to a.
Speaker Change: The location is focus on building or omni channel capability, so that sun waste the overall trends branches moving into Omi channel both the traditional E Commerce, China life, Chemo and J D is important but also the new live streaming in China.
Arthur Yu: So that said, with the overall transference moving into omni-channel, both the traditional e-commerce channels like TMO and JD are important, but also the new live streaming channels like Douyin, Little Red Book, and Kuaishou are becoming more and more important. So the acquisition of Location gave us that capability to make sure we can offer that one-stop solution to our brand partners. In terms of the GMV performance, if we look at the live streaming-related GMV we generate, we actually have a high double-digit growth for this year.
Speaker Change: So like Oh in elite whole Red book, I'm quite sure I'd, becoming a more and more important so the acquisition of location.
Speaker Change: That capability to make sure we can offer one stop solution.
To our brand partners in terms of the chicken leaf performance. If we look at the life streaming related G. M believe we generate we actually have a high double digit growth for this year, but the overall size of a small it's still a small proportion.
Speaker Change: You've seen the overall T&D, but we can see that's not the quantity of what we are looking for ways to policy all of our survey and the breadth of our offering which makes it both in a different and that's the reason why we put her I was hoping you might comment I thought home building the location business into the wider.
Arthur Yu: But the overall size is still a small proportion within the overall GMV. But we can see that it's not the quantity that we are looking for; it's the quality of our service and the breadth of our offering which makes Baozun different. And that's the reason why we put a lot of investment and effort into building the location business into the wider Baozun ecosystem.
Speaker Change: And ecosystem.
Speaker Change: Oh, because they're connecting to.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, to ask a question, you may please press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, you may press star then 2. The next question comes from Thomas Chong with Jeffreys, please go ahead. Um, thanks management. Um, thanks for taking my question.
Speaker Change: Ladies and gentlemen to ask a question you May Please press Star then one on your Touchtone phone.
Speaker Change: If you were using a speakerphone please pick up your handset before pressing the keys to withdraw. Your question you May Press Star then two.
Speaker Change: The next question comes from Thomas Chong.
Speaker Change: With Jefferies.
Thomas Chong: Please go ahead.
Speaker Change: Thanks, Matt.
Thomas Chong: Thanks for taking my question.
Thomas Chong: I have two questions. The first one that could management share some recent consumer sentiment and expectation outlook for different categories like apparel F N B G electronic.
Thomas Chong: And my second question, they could management share some color on that 618 shopping festival that consumer sentiment is pretty easy.
Thomas Chong: Okay, thank you for the question. Consumer confidence is still not recovered to the pre-COVID level. We tracked the consumer confidence index, and so far, in the first three to four months of this year, it's constantly below the 90 mark. And that number before COVID was above 110, which means consumer confidence is still not recovered. But on the other hand, we see the trend that some of the categories are doing pretty well.
Speaker Change: Okay. Thank you for the question.
Speaker Change: Consumer confidence has still not recovered to the pre COVID-19 level are we trying to the consumer confidence index.
Speaker Change: And so far in the first three to four months of this year is constantly below 90 day, Mark and that number before COVID-19, it's about 110, which means the consumer confidence has still not recovered.
Speaker Change: But on the other hand, we see the trend of are some of the categories are doing pretty well. So for example in apparel, we see the sports and the old store those are two category, although increase awhile.
Thomas Chong: So for example in apparel we see the sports and outdoor those two categories are doing pretty well and In the luxury, we have seen the jewelry is doing pretty well And also the JD platform is doing better on luxury than Tmall, For FMCG and consumer electronics, it's a mix. We see some brands are doing well and some are not doing that well. The ones doing well all have some good new product introductions. And also the local brands are performing better than the global brands in general. Yeah.
Speaker Change: In the luxury we have seen the jewelry is doing pretty well and also the JD platform is doing a pfizer on luxury than T mobile.
Speaker Change: So as I'm C G on the consumer electronics, it's a mix.
Speaker Change: What do you see some brands are doing well and some are not doing that well are the ones doing while all have some good new product introduction and also the local brands are doing are performing better than the global brands in general.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you.
Alicia Yap: The next question is from Alicia Yap with Citigroup. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Question is from Alicia Yap with Citigroup. Please go ahead.
Alicia Yap: Hi. Thanks for taking my follow-up questions. I have two quick follow-up questions. One is that I noticed the digital marketing and IT solution revenue actually grew quite well on a year-over-year basis this quarter. Is that mainly due to a low base, or is it contributed by newly added brands, or is that because of the strong demand in general? And then, second question on within the online stores revenue, the luxury category on a year-over-year basis looks a little bit weaker. So just wondering, is that within your expectation, or do you think that could be driven by some of the consumption shift away from luxury?
Alicia Yap: Oh, hi, Thanks for taking my follow up questions I have two quick follow up questions. One E stat I noticed a digitize marketing and IP solution revenue actually grew quite well on the year over year basis. These.
Arthur Yu: Okay. Thank you, Alicia.
Alicia Yap: Water is that mainly due to low base or is it contributor by newly added brands or is that because of the strong demand in general and then second questions on leading the online stores revenue.
Alicia Yap: The luxury category on a year over year basis, it looks a little bit weak.
Speaker Change: So just wondering is that within your expectation or do you think that could be driven by some of the consumption shifts away from luxury. Thank you.
Arthur Yu: The first one, digital marketing and IT, is not related to the low base. So that's to start with. What we have seen is that online traffic is becoming more and more expensive, and the different ways of doing advertising online are becoming more and more complex. Therefore, brands need to increase their investment to generate the same traffic compared with the past. So that requires brands to invest more in digital marketing.
Alicia Yap: Okay.
Mark: The first one just for Mark down I E are not related to the low base. So that's full stop with what we have seen is a the online traffic is becoming more and more it's becoming more and more expensive.
Mark: And the different ways of doing advertising online is becoming more and more complex therefore brands needs to increase the investment to generate the same traffic.
Mark: Comparable waste the path so that requests brands to more in the digital marketing and also the content is becoming more important so myself all of our brands are waiting for in mind on content to drive about a customer.
Arthur Yu: And also, content is becoming more important. So many of our brands are waiting to invest in content to drive a better customer conversation from an online perspective. And some of the content, the brands are using China for their China strategy. So, for example, in the past, some of the content was made in Europe and in the US at headquarters. Now, increasingly, with Baozun offering high-quality live streaming centers in Shanghai, we have actually managed to acquire those businesses which used to be done in the headquarters.
Kind of the conversation from online perspective, and some of the content.
Mark: The brands are using China for China strategy. So for example in the past some of the companies are being made in Europe and in the U S.
Mark: I'd had quarter no increasingly wait Bolton offering high quality live streaming center in Shanghai, We're actually Oh, well actually managed to acquire those business, which used to be done in the headquarter. So those are the on the digital marketing.
Arthur Yu: So those are on the So those are on the Our IT is more, our IT capability is helping the brand to increase its long-term capability. And with the top line growth slowing down from the brand, the brands are spending money on transforming their internal processes and systems. And digital is becoming a key for most of our clients. So that's why they start to spend more on IT. So those are on digital marketing and IT.
Mark: I T. A small oh I E capability is helping the brands to increase the long term our capability and the waste of topline growth slowed down from the brands. The brands are spending money on transforming their internal processes and system and strategist hope it's been.
Mark: <unk> are key for most of our clients. So that's why as they start to spend more on <unk>. So those are on the market.
Arthur Yu: In relation to your question on luxury, I think it's a mixed result for the luxury brands. Overall, the sector is slowing down a little bit because of consumer confidence and also consumption. People are spending less frequently on luxury products. On the other hand, some brands are increasing their penetration on e-commerce because, in the past, some of the e-commerce, some of the luxury brands that have low penetration on the online business mainly focus on offline. With those brands starting to move some of their business online, we still see that luxury has an opportunity for Baozun to capture.
Mark: Yeah.
Mark: In relation to your question on luxury.
Mark: I think there's a mixed result for the luxury brand overall the sector.
Mark: Hum are slowing down a little bit because of the consumer confidence and also the consumption people spending less frequent on the luxury products on the other hand, some brands are increasing their penetration.
Mark: e-commerce because in the past some of that E. Commerce are some of the luxury brand they have low penetration of online business minus focus on offline.
Mark: With those brand starts to move some of their business online, we still see the luxury has opportunity for biogen to capture.
Arthur Yu: Okay, Alicia. Thank you, Arthur. Yes. Thank you, Arthur. Thank you.
Speaker Change: Okay. Thank.
Ita: Thank you Ita.
Speaker Change: Yes. Thank you. Thank you.
Thank you.
Wendy Sun: This concludes our question and answer session. I would like to turn the conference back over to Wendy Sun for closing remarks. Thank you, operator.
Speaker Change #100: This concludes our question and answer session.
Speaker Change #101: I would like to turn the conference back over to Wendy Simpson for closing remarks.
Wendy Sun: Thank you, operator. On behalf of the Baozun Management Team, we would like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today. This concludes the call.
Wendy Simpson: Thank you operator on behalf of the powers in management team, we'd like to thank you again for your participation in today's call. If you require any further information feel free to reach out to us. Thank you for joining US today. This concludes the call.
Wendy Simpson: Thank you.
Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #103: The conference has now concluded thank.
Speaker Change #104: Thank you for attending today's presentation you may now disconnect.
Speaker Change #104: [music].
Operator: BF-WATCH TV 2021
Speaker Change #104: Yeah.
Speaker Change #104: [music].
Speaker Change #104: Okay.
Speaker Change #104: [music].