The first quarter financial report of 2024 released by Chinese online brand discount retailer Vipshop (stock code: VIPS) shows that Vipshop achieved a net revenue of 27.6 billion yuan in the first quarter, an increase of 0.4% compared to the same period last year. Non GAAP's net profit was 2.6 billion yuan, a year-on-year increase of 25%. Amidst the escalating subsidy war among e-commerce giants such as Taobao and Pinduoduo, this vertical e-commerce platform, which focuses on brand specials, continues to achieve dual growth in revenue and net profit.
However, looking ahead to the second quarter of this year, Vipshop's performance guidance is net revenue of 26.5-27.9 billion yuan, a year-on-year decrease of 5-0%, lower than the market estimate of 29.28 billion yuan. The company's second quarter revenue guidance is too conservative and has attracted attention from the outside world.
At the earnings conference call on the evening of May 22nd, Vipshop management provided detailed answers to investor concerns and pointed out that the lower revenue forecast for the second quarter was mainly due to factors such as a higher sales base in the same period last year, a shorter sales window for spring clothing this year, the passing of sales in the second quarter, fierce competition, cautious market placement, and continuous increase in return rates, which affected the company's revenue expectations.
Revenue and net profit growth: GMV of wearable products maintains double-digit growth
The above financial report shows that in the first quarter of 2024, Vipshop achieved a net revenue of 27.6 billion yuan, a year-on-year increase of 0.4%. Non GAAP's net profit was 2.6 billion yuan, a year-on-year increase of 25%. This is also why Vipshop has been profitable for 46 consecutive quarters.
In addition, the company's gross profit for the first quarter of 2024 increased by 10.9% year-on-year to 6.5 billion yuan, compared to 5.9 billion yuan in the same period last year.
Vipshop CFO Wang Yuhua commented on this, "We have achieved strong profit growth for another quarter and maintained a very healthy profit margin, thanks to our high profit margin product categories and strict operations."
Specifically, benefiting from the model of focusing on clothing and apparel categories and attracting SVIP (super member users, super VIP) through low-priced brands, Vipshop's total merchandise transaction volume (GMV and SVIP users) maintained a good growth in the first quarter of 2024, GMV increased from 48.5 billion yuan in the same period last year to 52.4 billion yuan in the same period this year, a year-on-year increase of 8.0%. The number of active SVIP users also increased by 11% year-on-year, and these SVIP users contributed over 45% of Vipshop's online consumption.
However, the number of active customers and total orders of Vipshop has declined year-on-year. In the first quarter of this year, the number of active customers on the platform was 43.1 million, compared to 43.7 million in the same period last year; The total orders for the first quarter of 2024 were 178.5 million, compared to 184.4 million in the same period last year.
"Due to lower than expected seasonal demand, the business started strong in the first quarter, but then the momentum slowed down." Vipshop Chairman and CEO Shen Ya admitted that the company's total orders in the first quarter were affected.
When it comes to the overall decline in user data in the first quarter, Shen Ya explained during the financial report conference call that the main reason was that Vipshop had a stricter restriction on LTV (Lifetime Value of Users) in terms of advertising in the first quarter, coupled with competition, which resulted in some price sensitive and volatile users not being able to obtain or leave.
"However, sales in the clothing category continue to stand out, with active super VIP member users achieving double-digit growth." Shen Ya said that Vipshop's core super VIP member users are still very stable, and some strategies will be adjusted in the second quarter to relax some LTV customer acquisition standards and strive for more high-quality users. Although Vipshop's user base is not as large as other platforms, we believe that these long-term loyal users can also create great value for Vipshop.
Vipshop told China Business Daily that "the company's wearable product GMV has maintained double-digit growth." It can be seen that wearable products are still driving Vipshop's overall GMV growth.
The 2024 White Paper on the Spring and Summer Trends of Vipshop Clothing Industry shows that in the past three years, the scale of platform wearable consumer users has been continuously expanding, and the growth rate of the "high-quality", "outdoor sports", and "trendy fashion" demographic has been significant. Driven by consumer demand, Vipshop's wearable products achieved double-digit year-on-year growth in GMV in the first quarter of this year, with sales of trendy products such as horse skirts, workwear skirts, and Haken shoes all showing high multiples year-on-year growth.
The performance guidance for the second quarter is estimated to be lower: less investment and fierce competition
From the second quarter performance expectations, Vipshop expects a net revenue of 26.5 billion to 27.9 billion yuan in the second quarter, lower than the market estimate of 29.28 billion yuan. The estimated situation is not as good as Vipshop's net revenue of 27.9 billion yuan achieved in the second quarter of 2023.
Shen Ya stated that the revenue forecast for the second quarter is relatively low, mainly considering the following factors: a high performance base in the same period last year, a shortened spring clothing sales window in March due to climate reasons, and fewer sales opportunities for seasonal changes in the second quarter. The company has adopted a more cautious strategy in market placement in the second quarter, as well as the overall increase in return rates, especially the high and growing return rates of SVIP users.
"The market competition in the second quarter was still quite fierce, and we did not subsidize or expand our users on a large scale, resulting in some wobbly user losses." Shen Ya admitted, "From April this year to now, the overall sales situation of the company has not actually met expectations, and we think we need to readjust our strategy. In addition, we are also concerned about the upcoming major promotional festivals. In fact, 'June 18th' (major promotion) started on May 20th and lasted for a month. This kind of promotional season is different from last year, so we still hold a cautious attitude." However, Shen Ya believes that a slight increase or decrease in performance is normal, but expectations are relatively conservative.
In fact, "From the situation in the first quarter, Vipshop's revenue growth rate is also somewhat sluggish." E-commerce analyst Li Chengdong analyzed to reporters that Vipshop is still facing fierce market competition this year. The reason may be that some users have returned to Tmall for consumption, while others have gone to Pinduoduo to buy cheaper white cards due to further downgrades in consumption. It can be seen that Pinduoduo and Alibaba both had good revenue growth rates in the first quarter.
In the view of Zhuang Shuai, an expert in the retail e-commerce industry and founder of Bailian Consulting, the low price strategy and subsidy strategy of the entire e-commerce industry have become increasingly fierce this year, which has also led to intensified and irreversible competition among discount e-commerce platforms. Zhuang Shuai told reporters, "While the low price strategy in the entire e-commerce industry continues, Vipshop's brand discount products have advantages in how to achieve low prices in the future. However, various home appliance platforms are increasing their brand discount efforts."
During the financial report conference call, institutional investors asked, "Will the company adopt a strategy of appropriately subsidizing users in the future, or will it adhere to its current positioning and use SVIP to enhance repeat purchases?"?
"Vipshop has never provided much or no subsidies," Shen Ya responded. While other e-commerce platforms have been subsidizing enthusiastically, Vipshop still insists on not providing subsidies. However, in terms of customer acquisition, Vipshop will be more aggressive in the future.
Against the backdrop of increasingly fierce competition on e-commerce platforms, Shen Ya stated that Vipshop will continue to adhere to its positioning as a brand special sale, providing more high-quality and price competitive products through deep cooperation with more brands.
"Although we are cautious about the short-term outlook, we are confident in achieving long-term growth with our unique value proposition and solid business foundation." Vipshop stated that in response to the dynamic environment, the company still focuses on enhancing long-term strength, continuing to increase attractiveness to consumers by satisfying their preferences and strengthening differentiation, in order to continue providing excellent value.
At the beginning of 2024, Vipshop announced the distribution of an annual dividend of $250 million. Wang Yuhua stated that since April 2024, the company has cumulatively returned over 2.2 billion US dollars to shareholders through stock repurchases and dividends. The company has made it clear that it will repurchase $500 million worth of stocks by the end of 2024, which means it will basically complete the existing $1 billion repurchase plan.
Vipshop has revealed that in the second quarter, it launched its self-developed "Chaoche" model, which uses high-quality graphic and textual content generated by AI to help improve brand operations and enhance user shopping experience. At the same time, the "Chaoche" model is piloting the launch of a conversational shopping guide function, which will further optimize the intelligent customer service experience and provide users with higher quality and efficient services.