|View printer-friendly version|
Vipshop Responds to Recent Allegations
Accusations regarding Accounting:
i) Revenue Recognition:
The allegations question the Company's method of revenue recognition and allege that the Company relied upon an incorrect application of gross revenue basis reporting. As disclosed and elaborated in the Company's annual report on Form 20-F for the fiscal year of 2014 (the "2014 Form 20-F"), the Company appropriately records its revenue on a gross basis where the ownerships, risks and rewards of these inventories have been fully transferred to the Company after it takes ownership upon deliveries to its warehouses, any loss related to damages to these inventories after the Company receives them from vendors are absorbed by the Company, and it reports these inventories on the Company's balance sheets as its assets.
ii) Inventory Accounting
The allegations state that the Company improperly commingled inventory-held-on-consignment with purchased inventory, thereby increasing its reported ending inventory and decreasing its cost-of-sales. The conclusion is based on the short seller's own erroneous assumptions. The Company's inventory is reported at the lower of cost or market, and the Company's cost of inventory is determined using the "weighted-average cost" method. The Company believes this approach is appropriate given the nature of its business and its arrangements with its vendors. During the periods reported, the Company has full ownership on inventories that are recorded on the balance sheet.
iii) Other Receivables
The allegations contend that the Company recorded significantly increased levels of "Other Receivables" which potentially reflect abusive related-party transactions ("RPTs"). This allegation is also unsupported. The breakdown of "Other Receivables" has been clearly disclosed in note 5 to the Company's consolidated financial statements for the year ended
iv) Capital Expenditures
The allegations assert that the Company exaggerated and accelerated its capital expenditures ("
v) Cash Flow
The allegations assert that the Company's cash flow from operations is driven not by earnings, but by significant growth in both accounts payables and accrued expenses. This conclusion is also incorrect. As disclosed in its 2014 Form 20-F, the Company's net cash from operating activities amounted to
Additionally, the allegations question the Company's Held-to-Maturity ("HTM") investments, including the rates of interest earned thereon, and suggest that they could constitute low-interest loans offered to the Company's founders. These allegations are false. The Company invests in debt securities which are made with third party banks and entered into at market rates. The Company classifies these investments as HTM. None of these HTM investments were extended to the Company's founders or other related parties.
i) Lefeng and Ovation
The allegations assert that the Company grossly overpaid for stakes in Lefeng and its parent company, Ovation, and that these transactions may not have been conducted at arms-length. The Company believes the valuations of the Lefeng and Ovation investments were reasonable based on prevailing market conditions and both investments were negotiated at arms-length. The acquisitions of Lefeng and Ovation were strategic moves that were intended to strengthen the Company's market share in the large and fast growing cosmetics sector and help expand its reach to female customers.
ii) Logistics Companies
In addition, there were false allegations regarding the Company's investments into regional logistics companies. This allegation is subjective and is based on inaccurate financial figures. In 2014, the Company made minority investments in several regional logistic companies. Strategically, these investments reflect the Company's effort to expand its nationwide delivery capabilities.
Accusations regarding Corporate Governance:
The allegations also challenge the independence of the Company's board and its audit firm. This allegation is unfounded. As required by U.S. securities laws and the
As disclosed in the 2014 Form 20-F, the Company has a majority independent board of directors as required by U.S. securities laws and the
Safe Harbor Statement
This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/vipshop-responds-to-recent-allegations-300082581.html
Vipshop Holdings Limited, Millicent Tu, +86 (20) 2233-0732, IR@vipshop.com; ICR, Inc. Jeremy Peruski, +1 (646) 405-4866, IR@vipshop.com