Earnings Review: Vipshop Holdings Limited (NYSE: VIPS)

On Thursday, Shares of Vipshop Holdings Limited (NYSE: VIPS) declined -0.59% to $11.72. The stock recorded $11.66 as its minimum price and hit the max level of $11.97, during its most recent trading session. It traded total volume of 1,818,481 shares lower than the average volume of 9.69M shares.

Vipshop Holdings Limited (VIPS), a leading online discount retailer for brands in China, recently declared its unaudited financial results for the first quarter ended March 31, 2018.

First Quarter 2018 Financial Results:

REVENUE:

Total net revenue for the first quarter of 2018 increased 24.6% year over year to RMB19.90B (US$3.20B) from RMB16.00B in the prior year period, mainly driven by the improvement in average revenue per customer.

GROSS PROFIT:

Gross profit for the first quarter of 2018 increased 8.5% to RMB4.00B (US$639.20M) from RMB3.70B in the prior year period. Gross margin for the first quarter of 2018 was 20.2% as contrast with 23.2% in the prior year period. In the first quarter of 2018, the Company reclassified costs related to third-party logistics from fulfillment expenses into cost of revenues, which had a 0.9% impact on the gross margin for the quarter. The Company continues to balance investment in promotional activities with its broader marketing efforts to drive growth.

OPERATING INCOME AND EXPENSES:

Total operating expenses for the first quarter of 2018 were RMB3.50B (US$551.40M), as contrast with RMB3.10B in the prior year period. As a percentage of total net revenue, total operating expenses for the first quarter of 2018 reduced to 17.4% from 19.6% in the prior year period.

• Fulfillment expenses for the first quarter of 2018 were RMB1.70B (US$276.40M), as contrast with RMB1.40B in the prior year period, mainly reflecting a boost in sales volume and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses for the first quarter of 2018 reduced to 8.7% from 9.0% in the prior year period.
• Marketing expenses for the first quarter of 2018 were RMB645.30M (US$102.90M), as contrast with RMB729.50M in the prior year period. As a percentage of total net revenue, marketing expenses for the first quarter of 2018 reduced to 3.2% from 4.6% in the prior year period.
• Technology and content expenses for the first quarter of 2018 were RMB466.40M (US$74.30M), as contrast with RMB419.50M in the prior year period. As a percentage of total net revenue, technology and content expenses for the first quarter of 2018 reduced to 2.3% from 2.6% in the prior year period.
• General and administrative expenses for the first quarter of 2018 were RMB613.60M (US$97.80M), as contrast with RMB542.20M in the prior year period. As a percentage of total net revenue, general and administrative expenses for the first quarter of 2018 reduced to 3.1% from 3.4% in the prior year period.

Income from operations for the first quarter of 2018 was RMB662.70M (US$105.60M), as contrast with RMB736.60M in the prior year period. Operating margin for the first quarter of 2018 was 3.3% as contrast with 4.6% in the prior year period.

NET INCOME:

Net income attributable to Vipshop’s shareholders for the first quarter of 2018 was RMB529.70M (US$84.50M), as contrast with RMB551.90M in the prior year period. Net margin attributable to Vipshop’s shareholders for the first quarter of 2018 was 2.7% as contrast with 3.5% in the prior year period, mainly attributable to the Company’s investment in promotional activities to drive growth. Net income attributable to Vipshop’s shareholders per diluted ADS was RMB0.77 (US$0.12) as contrast with RMB0.92 in the prior year period.

Non-GAAP net income attributable to Vipshop’s shareholders, which excludes share-based compensation expenses, impairment loss of investments, and amortization of intangible assets resulting from business acquisitions and equity method investments, was RMB727.70M (US$116.00M) as contrast with RMB799.40M in the prior year period. Non-GAAP net margin attributable to Vipshop’s shareholders for the first quarter of 2018 was 3.7% as contrast with 5.0% in the prior year period. Non-GAAP net income attributable to Vipshop’s shareholders per diluted ADS was RMB1.05 (US$0.17) as contrast with RMB1.31 in the prior year period.

For the quarter ended March 31, 2018, the Company’s weighted average number of ADSs used in computing diluted income per ADS was 702,451,555.

BALANCE SHEET AND CASH FLOW:

As of March 31, 2018, the Company had cash and cash equivalents and restricted cash of RMB7.40B (US$1.20B) and short term investments of RMB1.80B (US$288.10M).

For the quarter ended March 31, 2018, net cash from operating activities was RMB171.20M (US$27.30M).

Business Outlook:

For the second quarter of 2018, the Company anticipates its total net revenue to be between RMB20.50B and RMB21.30B, representing a year-over-year growth rate of about 17% to 22%. These forecasts reflect the Company’s current and preliminary view on the market and operational conditions, which is subject to change.

VIPS has the market capitalization of $7.84B and its EPS growth ratio for the past five years was 171.50%. The return on assets ratio of the Company was 6.20% while its return on investment ratio stands at 7.00%. Price to sales ratio was 0.65 while 61.80% of the stock was owned by institutional investors.