Q2 2025 Vipshop Holdings Ltd Earnings Call

Operator: Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited's second quarter 2025 earnings conference call. At this time, I would like to turn the call over to Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.

Speaker #2: Ladies and gentlemen, good day, everyone, and welcome to VIP Shop Holdings Limited's second quarter 2025 earnings conference call. At this time, I would like to turn the call over to Ms. Jessie Zheng, VIP Shop's Head of Investor Relations.

Speaker #2: Please proceed.

Jessie Zheng: Thank you, operator. Hello, everyone, and thank you for joining Vipshop's second quarter 2025 earnings conference call. With us today are Eric Shen, our Co-founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our safe harbor statements in our earnings release and public filings to the Securities and Exchange Commission, which also apply to this call to the extent any forward-looking statements may be made.

Speaker #3: Thank you, operator. Hello, everyone, and thank you for joining Vipshop's second quarter 2025 earnings conference call. With us today are Eric Shen, our co-founder, chairman, and CEO, and Mark Wang, our CFO.

Speaker #3: Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Speaker #3: Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our Safe Harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also apply to this call to the extent any forward-looking statements may be made.

Jessie Zheng: Please note that certain financial matters used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop shareholders, and non-GAAP net income per ADI, are not presented in accordance with the U.S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP matters to GAAP matters. With that, I would now like to turn the call over to Mr. Eric Shen.

Speaker #3: Please note that certain financial matters discussed on this call, such as non-GAAP operating income, non-GAAP net income attributable to VIPShop's shareholders, and non-GAAP net income per ADI, are not presented in accordance with U.S. GAAP.

Speaker #3: Please refer to our earnings release for details relating to the reconciliations of our non-GAAP matters to GAAP matters. With that, I would now like to turn the call over to Mr. Eric Shen.

Eric Shen: Good morning and good evening, everyone. Welcome and thank you for joining our Q2 2025 earnings conference call. In the second quarter, our team acted swiftly to revive customer activity and sales momentum, driving stabilization in our business. These efforts delivered measurable progress against our key priorities for renewed growth. Total GMV returned to growth, driven by clear strengths in the apparel-related category, reflecting our refined adjustments in the merchandising portfolio. Total active customers also showed clear signs of recovery. Super VIP membership sustained its double-digit growth. In the second quarter, active SVIP customers increased by 15% year over year, contributing 52% of our online spending. This high-value customer segment continued to outperform in terms of sales and revenue growth. With the fast-moving industry dynamic, we remain anchored to the vision of the discount retail for brands.

Speaker #4: Good morning and good evening, everyone. Welcome and thank you for joining our second quarter 2025 earnings conference call. In the second quarter, our team acted swiftly to revive customer activities and sales momentum.

Speaker #4: Driving stabilization in our business, these efforts delivered measurable progress against our key priorities for renewed growth. Total GMV returned to close, driven by clear strengths in apparel-related categories.

Speaker #4: Reflecting our refined adjustments in the merchandising portfolio, total active customers also showed clear signs of recovery. Super VIP membership sustained its double-digit growth. In the second quarter, active SVIP customers increased by 15% year-over-year.

Speaker #4: Contributing 52% of our online spending, this high-value customer segment continued to outperform in terms of sales and revenue growth. With the fast-moving industry dynamics, we remain anchored to the vision of discount retail for brands.

Eric Shen: We believe at its heart, discount retail for brands is about offering customers beloved brands and high-quality products at exceptional value, while excluding many innovators. The fundamentals stay true: great brands, great quality, and great value. To achieve this, we are making changes to sharpen our merchandising strategy, which is key to deliver unique, compelling value to brand partners and customers. We are relying on our merchandising team to better capitalize on evolving customer trends and lifestyles, while enhancing cross-category synergies. Operationally, we are taking a more holistic approach to plan and manage our brand and customer interactions to maximize platform-wide value creations. We will also unify the marketing, customer growth, and engagement efforts to advance customer value through each lifecycle stage across customer segments.

Speaker #4: We believe at its heart discount retail for brands is about offering customers beloved brands and high-quality products at exceptional value. While the exclusion may innovate, the fundamentals stay true: great brands, great quality, and great value.

Speaker #4: To achieve this, we are making changes to our merchandising strategy, which is key to delivering unique, compelling value to brand partners and customers.

Speaker #4: We are relying on our merchandising team to better capitalize on evolving customer trends and lifestyles. While enhancing cross-category synergies operationally, we are taking a more holistic approach to plan and manage our brand and customer interactions to maximize platform-wide value creation.

Speaker #4: We will also unify the marketing, customer growth, and engagement efforts to advance customer value through each lifecycle stage across customer segments. We hope these initiatives will inject great agility and efficiency into our business model.

Eric Shen: We hope these initiatives will inject great agility and efficiency into our business model, creating a self-reinforcing flywheel that advances our growth priority from merchandising operations to customer engagement. To start with merchandising, we are pursuing a path that is a unique Vipshop. We focus on the three pillars of our merchandising strategy: relevancy, differentiation, and specialization. In a competitive environment, we are standing out by consistently offering customers high-value brands that they love, exclusive made-for-Vipshop customized products, and carefully curated portfolio of highly sought-after items. In the meantime, we keep up with new trends, new styles, and innovative fabrics and materials in each category. This ensures a steady and sustainable inflow of inventory that aligns with shifting customer demands. In the first half, we added close to 500 brands to our platform, which are gaining traction among customers.

Speaker #4: Creating a self-reinforcing flywheel that advances our growth priority from merchandising operations to customer engagement. So, starting with merchandising, we are pursuing a path that is unique to Vipshop.

Speaker #4: We focus on the three pillars of our merchandising strategy: relevancy, differentiation, and specialization. In the competitive environment, we're standing out by consistently offering customers high-value brands that they love.

Speaker #4: Exclusive made for VIPshop, we customize the products and maintain a carefully curated portfolio of highly sought-after items. In the meantime, we keep up with new trends, new styles, and innovative fabrics and materials in each category.

Speaker #4: This ensures a steady and sustainable inflow of inventory that aligns with shifting customer demands. In the first half, we added close to 500 brands to our platform.

Speaker #4: Which are gaining traction among customers. The made-for-VIP Shop line is a key part of our differentiation. It's delivering a more compelling brand of the quality and value that results in high-value customers.

Eric Shen: The made-for-Vipshop product line is a key part of our differentiation. It is delivering a more compelling brand of the quality and value that results in high-value customers, repeat purchase, and better conversions. In the second quarter, it maintained strong sales momentum, contributing to a meaningful portfolio of our apparel sales for many brands. These customized products account for more than 20% of their sales on our platform. In the second quarter, we added more high-fashion selections, achieving improved sales flow. We saw growing customer recognition of our platform as the go-to place for flash sales and cherry hunting, leveraging our global sales capabilities. We will have a steady stream of differentiated items that flow into our assortment so that shoppers always have something to discover as they come back.

Speaker #4: Repeat purchases and bet conversions in the second quarter maintained strong sales momentum, contributing a meaningful portion to our apparel sales. For many brands, these customized products accounted for more than 20% of their sales.

Speaker #4: On our platform, in the second quarter, we added more high-fashion selections. Achieving improved sales, we saw growing customer recognition of our platform as the go-to place for fresh sales and trial hunting.

Speaker #4: Revolutionize our global sales capabilities. We will have a steady stream of differentiated items that flow into our assortment so that shoppers always have something to discover as they come back.

Eric Shen: For our customers, we continue to create a unique experience that not only reinforces the affordability and the reliability they love, but also inspires them to discover the value and the freshness we offer. This is coming from optimized traffic allocation, along with the customer journey enhanced through improved search and the recommendations for both existing and new offerings. A good example of our customer-centric approach is the Super VIP (SVIP) membership program. In the second quarter, we upgraded our private sales for SVIP members, offering high-value branded products to create a great sense of exclusiveness and delight. We expect the loyalty program to deliver a more differentiated and personalized experience for our top-tier customers. Lastly, we continue to develop and leverage AI capabilities as part of our overall technology advancement to drive growth and efficiency.

Speaker #4: For our customers, we continue to create a unique experience that not only reinforces the affordability and reliability they love, but also inspires them to discover the valor and freshness we offer.

Speaker #4: This is coming from optimized traffic allocation, along with the customer journey, enhanced through improved search, and the recommendations for both existing and new offerings.

Speaker #4: A good example of our customer-centric approach is the SVIP loyalty program. In the second quarter, we upgraded our private sales for SVIP members, offering high-level brand products.

Speaker #4: To create a great sense of exclusivity and delight, we expect the loyalty program to deliver a more differentiated and personalized experience for our top-tier customers.

Speaker #4: Lastly, we continue to develop and leverage AI capabilities as part of our overall technology advancement to drive growth and efficiency. We are deepening collaboration with business teams to expand AI application cases and deliver measurable results.

Eric Shen: We are deepening collaboration with the business team to expand AI application cases and deliver measurable results. We see promising early traction across our AI initiatives. AI-generated reviews and Q&As are contributing to enhancing the customer journey. AI-driven sales support is showing initiative benefits to conversions and issue resolution. Besides, AI-powered marketing content demonstrates effective reach to potential customers. Despite near-term challenges, we are investing in multiple ways to grow shares across our merchandising portfolio and customer segments. Our roadmap for sustainable profitable growth in the long term relies on the consistent and collaborative execution every day. It stays true to who we have always been, while adapting to evolving trends, enhancing our capabilities, and always thinking about our unique role in retail for today's customers. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Speaker #4: We see promising early traction across our AI initiatives. AI-generated reviews and Q&As are contributing to enhancing the customer journey. AI-driven sales support is showing initiative benefits to conversions and issue resolution.

Speaker #4: Besides, AI-powered marketing contents have demonstrated effective reach to potential customers. Despite near-term challenges, we are investing in multiple ways to grow share across our merchandising portfolio and customer segments.

Speaker #4: Our roadmap for a sustainable portfolio of profitable growth in the long term relies on the consistent and collaborative exclusion every day. It stays true to who we are, always being.

Speaker #4: While adapting to evolving trends, enhancing our capabilities, and always thinking about our unique role in retail for today's customers, at this point, let me hand over our call to our CFO, Mark Wang, to go over our financial results.

Mark Wang: Thanks, Eric, and hello, everyone. We have delivered another quarter of healthy profitability with margins held up, whereas we moved at pace to stabilize the business. This underscores our team's consistent financial discipline in a dynamic operating environment. During the quarter, we prioritized investments in growth initiatives related to customer engagement and the merchandising categories where we saw good momentum. We were more agile to dynamically reallocate resources in response to more productive activities that really helped the business grow at a profit. As Eric indicated, through a series of organizational changes, we have further enhanced strategic clarity and execution speed across companies. Though we are early on our journey, these actions are building tangible traction, enabling us to position the business for return to sustainable profitable growth in the quarters ahead.

Speaker #5: Thanks, Eric. And hello, everyone. We have delivered another quarter of healthy profitability, with margins holding up well as we moved at a pace to stabilize the business.

Speaker #5: This underscores our team's consistent financial discipline; yet, dynamic operating environment. During the quarter, we prioritized investments in growth initiatives related to customer engagement in the merchandising categories where we saw good momentum.

Speaker #5: We were more agile in dynamically reallocating resources in response to more productive activities. That really helped the business grow profitably. As Eric indicated, through a series of organized organizational changes, we have further enhanced strategic clarity and execution speed across companies.

Speaker #5: Though we are early in our journey, these actions are building tangible traction, enabling us to position the business for a return to sustainable, profitable growth in the quarters ahead.

Mark Wang: Furthermore, we are firmly on track to deliver on our shareholder return commitment for 2025, which is no less than 75% of the RMB 9 billion through year 2024 non-GAAP net income. In the first half, we distributed a total of over $640 million through a combination of dividend payments and share buyback, reflecting both our robust cash flow generations and the conviction in the company's fundamental value and the growth prospect. Now, moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below are in Renminbi, and all percentage changes are year-over-year changes unless otherwise noted. Total net revenues for the second quarter of 2025 were RMB 25.8 billion, compared with RMB 26.9 billion in the prior year period. Gross profit was RMB 6.1 billion, compared with RMB 6.3 billion in the prior year period.

Speaker #5: Furthermore, we are firmly on track to deliver on our shareholder return commitment for 2025, which is based on 75% of the R&B $9 billion full year 2024 non-GAAP net income.

Speaker #5: In the first half, we distributed a total of over $640 million through a combination of dividend payments and share buybacks, reflecting both our robust cash flow generation and our conviction in the company's fundamental value.

Speaker #5: And the growth prospect. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below are in Yemin B.

Speaker #5: And all presented teams are year-over-year teams, unless otherwise noted. Total net revenues for the second quarter of 2025 for R&B were $25.8 billion, compared with $26.9 billion.

Speaker #5: In the prior year period, gross profit was R&B 6.1 billion, compared with R&B 6.3 billion in the prior year period. Gross margin was 23.5%.

Mark Wang: Gross margin was 23.5%, compared with 23.6% in the prior year period. Total operating expenses increased by 6.3% year over year to RMB 4.6 billion from RMB 4.3 billion in the prior year period. As a percentage of total net revenues, total operating expenses were 17.7%, compared with 16.0% in the prior year period. Procurement expenses decreased by 2.6% year over year to RMB 2.1 billion from RMB 2.2 billion in the prior year period. As a percentage of total net revenues, procurement expenses were 8.2%, compared with 8.1% in the prior year period. Marketing expenses decreased by 3.3% year over year to RMB 715.9 million from RMB 714.7 million in the prior year period. As a percentage of total net revenues, marketing expenses were 2.8%, which remained stable as compared with that in the prior year period.

Speaker #5: Compared with 23.6% in the prior year period, total operating expenses increased by 6.3% year-over-year to RMB 4.6 billion, up from RMB 4.3 billion in the prior year period.

Speaker #5: As a percentage of total net revenues, total operating expenses were 17.7%, compared with 16.0% in the prior year period. Human expenses decreased by 2.6% year-over-year.

Speaker #5: To $2.1 billion from $2.2 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 8.2%, compared with 8.1% in the prior year period.

Speaker #5: Marketing expenses decreased by 3.3% year-over-year, totaling R&B 715.9 million, compared to R&B 740.7 million in the prior year period. As a percentage of total net revenues, marketing expenses were 2.8%.

Speaker #5: Which remains stable compared with that in the prior year period. Technology and content decreased by 9.3% year-over-year, to R&B 442.0 million, down from R&B 447.2 million.

Mark Wang: Technology and content expenses decreased by 9.3% year over year to RMB 442.0 million from RMB 487.2 million in the prior year period. As a percentage of total net revenues, technology and content expenses were 1.7%, compared with 1.8% in the prior year period. General and administrative expenses were RMB 1.3 billion, compared with RMB 900.7 million in the prior year period, primarily reflecting an increase in the share-based compensation expenses for Shenzhen Outlets. As a percentage of total net revenues, general and administrative expenses were 5.0%, compared with 3.4% in the prior year period. Income from operations was RMB 1.7 billion, compared with RMB 2.2 billion in the prior year period. Operating margin was 6.6%, compared with 8.3% in the prior year period. Non-GAAP income from operations was RMB 2.4 billion, compared with RMB 2.6 billion in the prior year period.

Speaker #5: In the prior year period, as a percentage of total net revenues, technology and content expenses were 1.7%, compared with 1.8% in the prior year period.

Speaker #5: General and administrative expenses were R&B 1.3 billion, compared with R&B 917 million in the prior year period, primarily reflecting an increase in share-based compensation expenses for the Shenzhen office.

Speaker #5: As a percentage of total net revenues, general and administrative expenses were 5.0%, compared with 3.4% in the prior year period. Income from operations was R&B 1.7 billion.

Speaker #5: Compared with R&B $2.2 billion in the prior year period, operating margin was 6.6%, compared with 8.3% in the prior year period. Non-GAAP income from operations was R&B $2.4 billion.

Speaker #5: Compared with RMB 2.6 billion in the prior year period, non-GAAP operating margin was 9.3%, compared with 9.5% in the prior year period. Net income attributable to Vipshop shareholders was RMB 1.5 billion.

Mark Wang: Non-GAAP operating margin was 9.3%, compared with 9.5% in the prior year period. Net income attributable to Vipshop shareholders was RMB 1.5 billion, compared with RMB 1.9 billion in the prior year period. Net margin attributable to Vipshop shareholders was 5.8%, compared with 7.2% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS was RMB 2.91, compared with RMB 3.49 in the prior year period. Non-GAAP net income attributable to Vipshop shareholders was RMB 2.1 billion, compared with RMB 2.2 billion in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders was 8.0%, compared with 8.1% in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS was RMB 4.06, compared with RMB 3.91 in the prior year period.

Speaker #5: Compared with R&B, $1.9 billion in the prior year period, the net margin attributable to Vipshop shareholders was 5.8%, compared with 7.2% in the prior year period.

Speaker #5: Net income attributable to VIP Shop shareholders per diluted ADS was RMB 2.91, compared with RMB 3.49 in the prior year period. Non-GAAP net income attributable to VIP Shop shareholders was RMB 2.1 billion.

Speaker #5: Compared with R&B, $2.2 billion. In the prior year period, non-GAAP net margin attributable to Vipshop shareholders was 8.0%, compared with 8.1% in the prior year period.

Speaker #5: Non-GAAP net income attributable to Vipshop shareholders per diluted ADS was RMB 4.06, compared with RMB 3.91 in the prior year period. As of June 30, 2025, the company has cash and cash equivalents, along with restricted cash, totaling RMB 24.7 billion.

Mark Wang: As of June 30, 2025, the company had cash and cash equivalents in the restricted cash of RMB 24.7 billion and short-term investments of RMB 3.0 million. Looking forward to the third quarter of 2025, we expect our total net revenues to be between RMB 20.7 billion and RMB 21.7 billion, representing a year-over-year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Speaker #5: The short-term investments are R&B 3.0 billion. Looking forward to the third quarter of 2025, we expect our total net revenues to be between R&B 20.7 billion.

Speaker #5: And R&B is $21.7 billion. We're presenting a year-over-year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions.

Speaker #5: Which is subject to change. With that, I would now like to open the call to Q&A.

Operator: Thank you. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. We do ask you to translate your question into Chinese if you are bilingual. Please give us one moment to compile the Q&A roster. The first question comes from Alicia Yap with Citigroup. Your line is now open.

Speaker #2: Thank you. To answer your question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again.

Speaker #2: We do ask you to translate your question into Chinese if you are bilingual. Please give us one moment to compile the Q&A roster. And the first question comes from Alicia Yap with Citigroup.

Speaker #2: Your line is now open.

Jessie Zheng: Thanks, management, for taking my question. My first question is about the latest e-commerce competition. I understand that there is very limited overlap, but curious to get management's view whether the recent stand-up initiatives of quick commerce by other e-commerce platforms have any impact on Vipshop. Have you seen any change of purchasing frequency declining or budget spend coming down by your customers? My second question is about the weather. Given the recent uncertainty of weather conditions with heavy rain and flood in many areas of China, has that affected the apparel items purchasing demand for the summer clothing? Thank you. 谢谢管理层接受我的提问。我有两个小问题。第一个是能不能请管理层分享一下您的观点。最近电商平台对于即时零售上有非常多的投入, 这对于我们唯品会的需求有没有看到任何的影响? 我们在消费者行为上, 比如说购物的频次或者是预算的花费, 对我们唯品会的呃用户有没有什么影响? 我的第二个问题是关于天气的。最近我们看到天气有非常不确定性, 在一些城市都有非常大的暴雨或者是洪水。想请问管理层, 您有没有观察到任何对于比如说衣服上的消费或者是消费者的需求, 对于夏天会不会有什么影响? 谢谢。

Speaker #3: Thanks, management, for taking my question. My first question is about the late-paced e-commerce competition. I understand that there is very limited overlap, but I am curious to get management's view on whether the recent startup initiatives of quick commerce by other e-commerce platforms have any impact on Vipshop.

Speaker #3: Have you seen any change in purchasing frequency declining or budget spend coming down by your customers? My second question is about the weather. Given the recent uncertainty of weather conditions with heavy rain and flooding in many areas of China, has that affected the apparel items purchasing demand for summer clothing?

Speaker #3: Thank you. 谢谢管理层接受我的提问。我有两个小问题。第一个是能不能请管理层分享一下您的观点, 最近电商平台对于即时零售商有非常多的投入。这对于我们微品会的需求有没有看到任何的影响? 我们在消费者行为上, 比如说购物的频次或者是预算的花费, 对我们微品会的用户有没有什么影响? 我的第二个问题是关于天气的。最近我们看到天气有非常不确定性, 在一些城市都有非常大的暴雨或者是洪水。想请问管理层, 您有没有观察到任何对于, 比如说衣服上的消费或者是消费者的需求, 对于夏天会不会有什么影响? 谢谢。

Eric Shen: rains, or their willingness to go out. We also have not seen any long-term situations like this in some areas, nor have we seen any particularly abnormal data.

Speaker #4: 好, 嗯, 我回答第一个问题, 就是关于即时零售啊。对, 因为我们的平台是卖服饰为主, 那么我们的标品占比不大。那么所以说我们其实看到的, 那么目前对我们的影响, 那个我们没看到特别大的影响。但是呢, 我们在想就是客户那个即时零售, 那么如果今天他很方便啊, 确实有些标品的话很方便, 半个小时就送到。他们有可能有时候也不会去等说快那个等到那个我们电商的快递, 有可能要一天半、两天半, 大概是这样。但是呢, 最终还是取决于看货品, 比如说到底他的货价格有没有优势, 还是不错。如果价格如果没有什么优势, 我估计消费者的选择可能会有一些在标品方面会有一些变化啊。那么第二个我回答一下关于天气的问题。那么最近有暴雨, 但是我们没看到那个我们的消费者在各个城市, 比如说因为天气原因啊, 暴雨啊, 或者什么那个对他的那个出行或者说对他的衣服的购买, 没有什么看到特别的变化。因为我们也没看到一些, 比如说一些地方很长期的这种情况, 也没有看到一些特别异常的数据。

Jessie Zheng: Thank you, Alicia. Thank you for your question. On the potential impact from the instant or quick e-commerce, we do not see any material impact on our business. We are very much focused on apparel sales, and just a small portion of our business is standardized items, which are more suitable for quicker delivery, especially when customers see they can get most of their daily essentials within half an hour delivery. They may choose to shop through quick e-commerce. Overall, we do not see any meaningful impact on our business so far. On customer behavior, there could be some change, but at the end of the day, it depends on the quality and pricing of the offerings, especially in standardized items. On weather conditions, also we do not see very meaningful impact, despite volatile weather conditions across many regions in China.

Speaker #3: Thank you, Alicia, for your question. So, on the potential impact from the instant or quick e-commerce, we don't see any material impact on our business.

Speaker #3: Or, you know, we are very much focused on apparel sales. And just a small portion of our business is standardized items, which are more suitable for quicker delivery, especially when customers see they can get most of their daily essentials within a half-hour delivery.

Speaker #3: They may choose to shop on quick e-commerce through quick e-commerce. But overall, we don't see any meaningful impact on our business so far. And on customer behavior, there could be some change.

Speaker #3: But, at the end of the day, it depends on the quality and pricing of the offerings, especially in standardized items. As for weather conditions, we don't see a very meaningful impact despite volatile weather across many regions in China.

Jessie Zheng: Whether it is rain or flood, we do not see very much impact on people's outing, travel plans, or apparel purchases. We look at the data across different tiers of cities, and we do not see any abnormalities with regard to their travel or apparel shopping activities.

Speaker #3: Whether it's rain or flood, we don't see, very much impact on people's, outing travel plans or, apparel purchases. and, we look at, the data across different tiers of cities and don't, we don't see any, abnormalities, with regard to, their, their, their travel or, or, or apparel, shopping activities.

Operator: Thank you.

Speaker #3: Thank you.

Operator: The next question comes from Andre Chang with JPMorgan. Your line is open.

Speaker #2: And the next question comes from Andrei Chang with JPMorgan. Your line is open.

Andre Chang: 是不是这代表说我们重新回到了一个正增长的轨道? 可能这个三季度的增长的势头可能可以延续到后面的季度。这是第一个问题。第二个问题就想请教一下, 就是我们 Q2 这边回购到了 $350 million 左右, 这是大概可能两年来最高的这个金额。我想了解说这个公司在 Q2 这个回购的力度加大这么多, 是有没有什么特殊的考量? 接下来我们今年剩下的时间, 随着我们预计的 quota 还有相当的数额, 我们是不是还会维持这样子一个回购的力度? 让我接下来翻译一下我的这些提问。 Thank you, management, for taking my question. My first question is about the Q3 revenue guidance returning to positive year-over-year. I want to understand whether there's any comparison effect that helping the year-over-year growth, or we are back to a no growth trajectory again, suggesting that the company will maintain a positive growth in the coming quarters. My second question is about the share repurchase. The company bought back nearly $315 million in Q2, which is the highest in two years. I wonder if there's any reason for such a strong jump of buyback, and should we expect such a momentum to continue into the second half this year given the management's commitment in terms of shareholder return for 2025? Thank you.

Speaker #4: 谢谢管理层接受我的提问。我这边有两个问题请教。第一个问题是关于我们三季度的这个营收指引回到了一个这个正增长的一个区间。那我想跟沈总这边确认一下, 就是这个部分的话, 有任何去年基期特殊的因素吗? 我这边是没有任何印象, 但想就想确认一下, 是不是这代表说我们重新回到了一个正增长的轨道, 那可能这个三季度的这个增长的势头可能可以延续到后面的季度。这是第一个问题。第二个问题就想请教一下, 就是我们二季度这边回购到了三亿五千万美元左右。这是大概可能两年来最高的这个金额啊。那, 呃, 我想了解说这个公司在二季度这个回购的力度加大这么多, 是有没有什么特殊的考量? 那接下来我们今年剩下的时间, 呃, 随着这个我们预计的这个 quota 还有相当的这个数额, 我们是不是还会维持这样子一个回购的力度? 那, 而且让我接下来翻译一下我的这些提问。 Thank you, management, for taking my question.

Speaker #4: My first question is about the third quarter revenue guidance. Returning to positive year-on-year growth, I want to understand whether there's any comparison effect that is helping the year-on-year growth or if we are back to a no growth trajectory again.

Speaker #4: Suggesting that the company will maintain positive growth in the coming quarters. My second question is about the share repurchase. The company bought back nearly $350 million in the second quarter, which is the highest in two years.

Speaker #4: I wonder if there's any reason for such a strong jump in buybacks. Should we expect such momentum to continue into the second half of this year, given the management's commitment to shareholder returns for 2025?

Speaker #4: Thank you. 我回答第一个问题啊, 就是关于 Q3。我们看到, 那么包括我们对未来的预估销售的预估, 我们说看到有正向啊, 比如说我们这次的预估是0到正5, 那么我们其实是觉得因为我们前段时间也在努力调整, 包括过去几个季度, 其实一直不算好。那么包括我们把这个用户负增长的用户, 我们把它搬回来了。那么现在有正增长, 包括我们的用户里面原来新客跌的也比较多。那么我们也看到新客也找到一些方法能正增长。所以说我们自己认为那个就扭转了一些趋势吧。因为是客户增长了, 那么我们就看到那个销售也会增长。那么包括我们说的那个另外呢, 我们其实努力也在货品上面继续努力。那么更多差异化的好商品或者说我们要更强调有价格优势, 因为是我们是特卖。等等等等啊, 所以说我们其实也看到一些变化。那么我们也希望就是我们以后能延续这种正增长的趋势。那么但是呢, 就是我们说的, 比如说我们说的Q4, 就是这次Q3就没有什么关于去年Q3的些特别变化, 因为我们是看到自己的那个水平在提升吧。那么Q4的话呢, 我们努力也争取。那么要做到正增长。那么但是呢, 就去年的Q4因为我们其实是做得不错, 而且天气还有给力。那么比如说12月份那时候又比较冷, 所以说我们反正尽我们努力吧。那么争取在以后尽量都把它做到, 我们讲正增长。而且呢, 有可能叫正增长, 越来增长, 随着那个我们讲的找到这种趋势。那么可能增长的越来越好吧。那么第二个问题呢, 那个我们CFO来回答。

Eric Shen: 我回答第一个问题，就是关于 Q3，我们看到包括我们对未来的预估销售的预估。我们说看到有正向，比如说我们这次的预估是 0 到正 5。我们其实是觉得因为我们前段时间也在努力调整，包括过去几个季度其实一直不算好。包括我们把这个用户负增长的用户我们把它搬回来了，现在有正增长。包括我们的用户里面原来新客跌的也比较多，我们也看到新客也找到一些方法能正增长。所以说我们自己认为就扭转了一些趋势吧，因为是客户增长了，那么我们就看到销售也会增长。包括我们说的另外呢，我们其实努力也在货品上面继续努力，更多差异化的好商品，或者说我们要更强调有价格优势，因为是我们是特卖等等。所以说我们其实也看到一些变化，我们也希望我们以后能延续这种正增长的趋势。但是呢，就是我们说的，比如说我们说的 Q4，就是这次 Q3 就没有什么关于去年 Q3 的一些特别变化，因为我们是看到自己的水平在提升吧。Q4 的话呢，我们努力也争取要做到正增长。但是呢，就去年的 Q4，因为我们其实是做得不错，而且还天气给力，比如说 12 月份那时候又比较冷。所以说我们反正尽我们努力吧，争取在以后尽量都把它做到我们讲的正增长，而且呢，有可能叫正增长越来越增长，随着我们讲的找到这种趋势，可能增长的越来越好吧。第二个问题呢，我们 CFO 来回答。

Jessie Zheng: So, Andrew, on your first question on Q3 guidance, we guide for top line growth at 0% to 5%. We attribute these positive momentum to the efforts we have made in the last few quarters. We have made a lot of organization changes and adjustments in terms of merchandising and operations, so that we actually have started to see clear recovery in terms of customer growth. Total active customers actually have returned to growth so far year over year, especially we have seen new customers, which have struggled for a few quarters, have returned to growth as well. If customers start to regrow, naturally, we are more confident about sales and revenue growth. We actually, and also on the merchandising side, we have been talking a lot about providing more consumer-relevant and differentiated offerings, especially to provide them with more items at a competitive pricing.

Speaker #3: So, Andrew, on your first question on Q3 guidance, you know, we guided for top line growth at 0% to 5%. We attribute this positive momentum to the efforts we have made in the last few quarters.

Speaker #3: We've made a lot of organizational changes and adjustments in terms of merchandising and operations, so we are actually starting to see a clear recovery in terms of customer growth.

Speaker #3: Total active customers have actually returned to growth year over year. Especially, we have seen new customers, who have been struggling for a few quarters.

Speaker #3: We have returned to growth as well. If customers start to regrow, naturally we are more confident about sales and revenue growth. So we actually, on the merchandising side, have been talking a lot about providing more consumer-relevant and differentiated offerings, especially to provide them with more items at a competitive pricing.

Jessie Zheng: So we have done a lot of optimization on the merchandising front as well. That is why we guide a positive top line growth for Q3. We do not think there is any material base effect for Q3. For Q4, we also want to see a positive growth in terms of top line. Q3, admittedly, we actually had a high base in 2024. We actually benefited to some extent from the long streak of cold weather conditions. But overall, we are confident that we can maintain growth for the quarters ahead. We are looking to accelerate the growth in the foreseeable future, after we see our recent changes and adjustments materialize into real growth engines.

Speaker #3: So we've done a lot of, you know, optimization on the merchandising front as well. So that's why we guide a positive top-line growth for Q3.

Speaker #3: And we don't think there is any material basic effect for Q3. And for Q4, we also want to see a positive growth. In terms of top line.

Speaker #3: But Q3, admittedly, we actually had a high base in 2024. We actually benefited to some extent from the long streak of weather conditions. But overall, we are confident that we can maintain growth for the quarters ahead.

Speaker #3: And we are looking to accelerate growth in the foreseeable future, after we see our recent changes and adjustments materialize into real growth engines.

Mark Wang: Okay. Regarding your second question, thanks for your question regarding the share buyback program. Actually, there is no special reason for increasing the amount of the share buyback in Q2. We just committed to return value to our shareholders continuously. As you may be aware that we have mentioned before, we are going to return no less than 75% of our full-year 2024 non-GAAP net income to shareholders in discretionary share repurchase and/or dividend distributions. Actually, that is amounting almost around $900 million. So we just committed to return value to our shareholders, and we will continue to invest in our business growth and improving profit and generating cash to support our dividend payout and buyback. Thank you.

Speaker #4: Okay, regarding your second question, thank you for your question about the revenue program. Actually, there is no special reason for increasing the amount of the share buyback in the second quarter.

Speaker #4: We just committed to return value to our shareholders continuously. As you may be aware, we have mentioned before that we are going to return no less than 75% of our full year 2024 non-GAAP net income to shareholders.

Speaker #4: In discretionary share repurchasing or dividend distribution, that amount is almost around $900 million. So, we have just committed to return value to our shareholders.

Speaker #4: And we will continue to invest in our business as well, improving profit and generating cash to support our dividend payouts and buyback. Thank you.

Operator: As a reminder, to ask a question, please press star one one on your telephone. The next question comes from Wei Xiong with UBS. Your line is open.

Speaker #2: As a reminder to ask a question, please press star 11 on your telephone. The next question comes from Wei Sheng with UBS. Your line is open.

Jessie Zheng: 好的, 谢谢管理层接受我的提问。我也有两个问题想请教。首先是关于咱们 GMV跟收入之间这个 gap, 观察到这个季度其实相对的比例也是比较稳定的。那想请教一下咱们最近观察到退货率这方面的趋势, 那未来是不是有继续改善的空间, 还是说考虑到 SVIP这边持续健康的增长, 那么下半年可能这个 gap还是有稍微扩大一些的可能性。第二个问题呢, 是 other revenue这边这个季度的增速还是在环比加速, 所以想请管理层分享一下咱们 Shenzhen Outlets这边最近一些收入跟利润率的趋势, 包括明年一些发展计划的展望。我也自己翻译一下。Thank you, management, for taking my question. First, we noticed a relatively stable gap between GMV and the revenue this quarter. Just wondering, could management share any latest trend regarding the return rate on our platform? Do we see any further room to improvement, to narrow this gap going forward, or that gap might widen a little bit considering the very healthy growth of SVIP users in the second half of the year? Secondly, on the other revenue side, could management share the latest progress, and revenue and profit trends for Shenzhen Outlets business, as well as some strategic planning and outlook for next year? Thank you.

Speaker #3: 好的, 谢谢管理层接受我的提问。那我也有两个问题想请教。首先是关于咱们 GMV 跟收入之间这个 GAAP 的观察到这个季度其实相对的比例也是比较稳定的。那想请教一下咱们最近观察到退货率这方面的趋势。那未来是不是有继续改善的空间, 还是说考虑到 SVIP 这边持续健康的增长, 那么下半年可能这个 GAAP 还是有稍微扩大一些的可能性? 那第二个问题呢, 是 other revenue 这边这个季度的增速还是在环比加速哈。所以想请管理层分享一下咱们杉山奥莱这边最近一些收入跟利润率的趋势, 包括明年一些发展计划的展望。那我也自己翻译一下。 Thank you, management, for taking my question.

Speaker #3: First, we noticed the relatively stable GAAP between GMV and the revenue this quarter. Just wondering, could management share any latest trend regarding the return rate on our platform?

Speaker #3: Do we see any further room for improvement to narrow this GAAP going forward? Or might that GAAP widen a little bit, considering the very healthy growth of SVIP users in the second half of the year?

Speaker #3: And secondly, on the other revenue side, could management share the latest progress and revenue and profit trends for Shenzhen outlet business? As well as some strategic planning and outlook for next year.

Speaker #3: Thank you.

Eric Shen: be developed. We will continue to build Shenzhen Outlets into a long-term, stable business model and strive to make it bigger and stronger.

Speaker #4: 那么我回答那个第一个问题是关于退货率的。那么退货率呢, 我们目前整体看比较正常。而且呢, 就是我们那个这么多年, 就最近这么多年, 我们看每年的趋势也基本上比较稳定。那么我们自己预估, 那么因为我们, 比如说我们的 SVIP 其实持续在增加嘛。那么我们自己预估未来可能每年那个退去率可能会提升两到三个点。但是在每个季度呢, 基本上持平的。就是说每个季度的那个退去率基本是这么样。所以说对这块呢, 我们不会有太大的担心。那么第二点就是关于杉山奥莱。杉山奥莱我们现在运营有二十个, 二十个奥莱。那么总体我看他们的业务其实发展都还不错。那么包括我们看到同店, 那么比如说都有双位数的增长。所以说我们自己认为其实奥特莱斯这个生意在中国还是非常不错的。那么我们其实后续也会看, 如果有合适的那个城市或者地方, 我们其实可以继续再拓展。那么总体我们认为在中国可以做奥莱的城市其实还有不少啊。那么我们也会持续把这个杉山奥莱作为一个很长远很稳健的, 一个我们说的一个商业模式。那么继续把它做大做强。

Jessie Zheng: Thank you, Sheng Wei. On your first question, in terms of return rate, we actually see no surprise as regard to return rate. For years, we have seen some relatively stable return from customer behavior. It is just that our Super VIP (SVIP) customers are growing very nicely at double digits. So we potentially are looking at a 2 to 3 percentage point increase every year in terms of return rate due to this structural factor. But it will be smoothed out on a quarterly basis, which we do believe that at some point, we will see a flattish return rate quarter by quarter. On the second question, on Shenzhen Outlets, we have seen very good momentum in terms of Shenzhen Outlets. We have a total of 20 stores for now. The comparable same store growth maintained at double digits for several quarters.

Speaker #3: Thank you, 沈伟。 On your first question, in terms of return rate, we actually see no surprise. As regards to return rate, you know, for years we have seen some relatively stable return from customer behavior.

Speaker #3: It's just that our SVIP customers are growing very nicely at double digits. So we potentially will look at a two to three percentage point increase every year in terms of return rate.

Speaker #3: Due to this structural factor, it will be smoothed out on a quarterly basis. We believe that at some point, we will see a flattish return rate quarter by quarter.

Speaker #3: On the second question, on Shenzhen outlets, you know, we have seen a very good momentum in terms of Shenzhen outlets. We have a total of 20 stores for now.

Speaker #3: And the comparable same store growth maintained at double digits for several quarters. And we continue to look for the right cities or locations to expand our outlet business.

Jessie Zheng: We continue to look for the right cities or locations to expand our outlet business, given the fact that the outlet industry is actually prospering in China, and are actually riding on the tailwind of value for money consumption. We do believe that there are still a decent amount of cities or locations that are suitable for outlet expansion. We intend to build the outlet business as part of our strategic and long-term asset.

Speaker #3: Given the fact that the outlet industry is actually prospering in China, and are actually riding on the tailwind of value for money consumption, and we do believe that there are still a decent amount amount of cities or locations that are suitable for outlet expansion.

Speaker #3: And we intend to build the outlet business as part of our strategic and long-term asset.

Operator: I show no further questions at this time. I will turn the conference back to Jessie for any closing remarks.

Speaker #2: I show no further questions at this time. I will turn the conference back to Jesse for any closing remarks.

Jessie Zheng: Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

Speaker #3: Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.