GUANGZHOU, China, Aug. 10, 2015 /PRNewswire/ -- Vipshop Holdings Limited (NYSE: VIPS), a leading online discount retailer for brands in China ("Vipshop" or the "Company"), today announced its unaudited financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Highlights

• Total net revenue increased by 77.6% to RMB9.0 billion (US$1.5 billion) from RMB5.1 billion in the prior year period.
• Gross profit increased by 78.6% to RMB2.3 billion (US$363.0 million) from RMB1.3 billion in the prior year period. Gross margin increased to 25.0% from 24.8% in the prior year period.
• Income from operations increased by 192.5% to RMB437.8 million (US$70.6 million) from RMB149.6 million in the prior year period. Operating margin increased to 4.9% from 2.9% in the prior year period.
• Non-GAAP income from operations[1] increased by 113.0% to RMB568.6 million (US$91.7 million) from RMB267.0 million in the prior year period. Non-GAAP operating margin[2] increased to 6.3% from 5.3% in the prior year period.
• Net income attributable to Vipshop's shareholders increased by 147.2% to RMB399.3 million (US$64.4 million) from RMB161.5 million in the prior year period. Net income margin attributable to Vipshop's shareholders increased to 4.4% from 3.2% in the prior year period.
• Non-GAAP net income attributable to Vipshop's shareholders[3] increased by 96.6% to RMB517.6 million (US$83.5 million) from RMB263.2 million in the prior year period. Non-GAAP net income margin attributable to Vipshop's shareholders[4] increased to 5.7% from 5.2% in the prior year period.

Mr. Eric Shen, chairman and chief executive officer of Vipshop, stated, "We delivered strong second quarter financial and operating results, which were mainly driven by mobile expansion, enhanced operating leverage and the continued growth in the numbers of customers and orders in our core flash sales business. Our smooth and swift execution on the mobile front – with 76% of our gross merchandise value now coming from mobile devices – has helped set us apart in the market, and further clarifies the unique value of our flash sale model for on-the-go shoppers. Our cross-border expansion, supplier financing initiatives and logistical enhancements have further improved our ecosystem for brands and customers. Going forward, we will focus on expanding our market share and scaling our operations through enhancing the customer shopping experience, attracting new customers and elevating our brand value in China and globally."

Mr. Donghao Yang, chief financial officer of Vipshop, commented, "Vipshop continued to deliver strong overall results in the second quarter, with mobile adoption accelerating and margins strengthening across the board. What was particularly encouraging was the scale effect we successfully achieved as fulfillment and G&A expenses came down as a percentage of revenues, leading operating margin to expand sharply to 4.9% from 2.9% a year ago. In order to further improve fulfillment efficiency, we continue to enhance and expand our logistical capabilities. With approximately 1.4 million square meters of warehouse capacity as of June 30, 2015 and construction of a new warehouse in Sichuan Province underway, we are on track to meet our 1.5 million-square-meter target by year end. We also continue to expand our local delivery and services network, which we are currently utilizing to deliver over 70% of our total orders across almost all provinces in mainland China."

Second Quarter 2015 Financial Results

REVENUE

Total net revenue for the second quarter of 2015 increased by 77.6% to RMB9.0 billion (US$1.5 billion) from RMB5.1 billion in the prior year period, primarily driven by the growth in the numbers of total active customers, repeat customers, total orders, as well as the increasing revenue contribution from the mobile platform.

The number of active customers[5] for the second quarter of 2015 increased by 47.2% to 14.2 million from 9.7 million in the prior year period. The number of total orders[6] for the second quarter of 2015 increased by 55.2% to 44.9 million from 28.9 million in the prior year period[7].

In an effort to increase focus on its core flash sales business, and attract and maintain high-quality long-term customers, the Company began to substantially scale down its lower-margin group-buy business in the third quarter of 2014. As a result, revenue contribution from the group-buy business decreased to 0.2% of Vipshop's total net revenues in the second quarter of 2015 from 5.5% the prior year period. Furthermore, the active customers and orders for the group-buy business as a percent of Vipshop's total active customers and total orders decreased to 0.8% and 0.7%, respectively, in the second quarter of 2015 from 22.2% and 13.2%, respectively, in the prior year period. Excluding the impact of the group-buy business and Lefeng, the number of total customers and total orders for Vipshop's core flash sales business increased by 84.4% and 86.1% year over year, respectively. On the mobile platform, the number of total active customers and total orders for Vipshop's core flash sales business increased by 185.7% and 194.1% year over year, respectively.

GROSS PROFIT

Gross profit for the second quarter of 2015 increased by 78.6% to RMB2.3 billion (US$363.0 million) from RMB1.3 billion in the prior year period, primarily attributable to the increased bargaining power with its suppliers due to the expanding scale of the business, as well as the growth of its marketplace platforms. Gross margin increased to 25.0% in the second quarter of 2015 from 24.8% in the prior year period. 

OPERATING INCOME AND EXPENSES

Total operating expenses for the second quarter of 2015 were RMB1.9 billion (US$299.1 million), as compared with the RMB1.1 billion in the prior year period. As a percentage of total net revenue, total operating expenses decreased to 20.6% from 22.5% in the prior year period.

• Fulfillment expenses for the second quarter of 2015 were RMB819.6 million (US$132.2 million), as compared with RMB513.4 million in the prior year period, primarily reflecting the increase in sales volume, and number of orders fulfilled. As a percentage of total net revenue, fulfillment expenses decreased to 9.1% from 10.1% in the prior year period, primarily reflecting the scale effect associated with the rapid growth in total net revenue and the increase in average ticket size.
• Marketing expenses for the second quarter of 2015 were RMB502.6 million (US$81.1 million), as compared with RMB274.2 million in the prior year period. As a percentage of total net revenue, marketing expenses were 5.6%, as compared with 5.4% in the prior year period, reflecting the Company's strategy to drive long-term growth through increasing investments in strengthening its brand awareness, attracting new users particularly for its mobile application, and expanding market share especially within product categories such as cosmetics, home goods, and baby and child care products.
• Technology and content expenses for the second quarter of 2015 were RMB245.7 million (US$39.6 million), as compared with RMB131.0 million in the prior year period. As a percentage of total net revenue, technology and content expenses were 2.7%, as compared with 2.6% in the prior year period, primarily reflecting the Company's continued effort to expand headcount to better support future growth, as well as its investments in data analytics, which can help improve the ability to predict consumer behavior and further enhance user experience.
• General and administrative expenses for the second quarter of 2015 were RMB286.7 million (US$46.2 million), as compared with RMB225.9 million in the prior year period. As a percentage of total net revenue, general and administrative expenses decreased to 3.2% from 4.4% in the prior year period, primarily reflecting the scale effect associated with the rapid growth in total net revenue.

Income from operations for the second quarter of 2015 increased by 192.5% to RMB437.8 million (US$70.6 million) from RMB149.6 million in the prior year period due to the growing scale of the Company's operations and decrease in fulfillment, and general and administrative expenses as a percentage of total net revenue. Operating income margin increased to 4.9% from 2.9% in the prior year period.

Non-GAAP income from operations, which excludes share-based compensation expenses and amortization of intangible assets resulting from a business acquisition, increased by 113.0% to RMB568.6 million (US$91.7 million) from RMB267.0 million in the prior year period.Non-GAAP operating income margin increased to 6.3% from 5.3% in the prior year period.

NET INCOME

Net income attributable to Vipshop's shareholders increased by 147.2% to RMB399.3 million (US$64.4 million) from RMB161.5 million in the prior year period. Net income margin attributable to Vipshop's shareholders increased to 4.4% from 3.2% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS[8] increased to RMB0.66(US$0.11) from RMB0.27 in the prior year period.

Non-GAAP net income attributable to Vipshop's shareholders, which excludes share-based compensation expenses and amortization of intangible assets resulting from a business acquisition and equity method investments, increased by 96.6% to RMB517.6 million (US$83.5 million) from RMB263.2 million in the prior year period. Non-GAAP net income margin attributable to Vipshop's shareholders increased to 5.7% from 5.2% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS increased to RMB0.86(US$0.14) from RMB0.44 in the prior year period.

For the quarter ended June 30, 2015, the Company's weighted average number of ADSs used in computing diluted income per ADS was 601,002,280.

As of June 30, 2015, the Company had cash and cash equivalents, and restricted cash of RMB4.4 billion (US$716.2 million) and held-to-maturity securities of RMB2.9 billion (US$462.3 million).

For the quarter ended June 30, 2015, net cash used in operating activities was RMB467.4 million (US$75.4 million), as compared with net cash from operations of RMB183.7 million in the prior year period. This was primarily due to the Company substantially expediting its payments to suppliers, in order to support their growth and create an ecosystem that will strengthen Vipshop's competitive advantages. As a result, accounts payable turnover days decreased to 71 days in the second quarter of 2015, from 80 days in the prior quarter.  

Business Outlook

For the third quarter of 2015, the Company expects its total net revenue to be between RMB9.1 billion and RMB9.3 billion, representing a year-over-year growth rate of approximately 71% to 74%. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which is subject to change.

Exchange Rate

This announcement contains currency conversions of certain Renminbi amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars are made at a rate of RMB6.2000 to US$1.00, the effective noon buying rate for June 30, 2015 as set forth in the H.10 statistical release of the Federal Reserve Board.

Conference Call Information

The Company will hold a conference call on Tuesday, August 11, 2015 at 8:00 am Eastern Time or 8:00 pm Beijing Time to discuss its financial results and operating performance for the second quarter 2015.

The replay will be accessible through August 19, 2015 by dialing the following numbers:

A live and archived webcast of the conference call will also be available at the Company's investor relations website at http://ir.vip.com.

About Vipshop Holdings Limited

Vipshop Holdings Limited is a leading online discount retailer for brands in China. Vipshop offers high quality and popular branded products to consumers throughout China at a significant discount to retail prices. Since it was founded in August 2008, the Company has rapidly built a sizeable and growing base of customers and brand partners. For more information, please visit www.vip.com.

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 Vipshop's strategic and operational plans, contain forward-looking statements. Vipshop may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the "SEC"), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Vipshop's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: Vipshop's goals and strategies; Vipshop's future business development, results of operations and financial condition; the expected growth of the online discount retail market in China; Vipshop's ability to attract customers and brand partners and further enhance its brand recognition; Vipshop's expectations regarding demand for and market acceptance of flash sales products and services; competition in the discount retail industry; fluctuations in general economic and business conditions in China and assumptions underlying or related to any of the foregoing. Further information regarding these and other risks is included in Vipshop's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and Vipshop does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Use of Non-GAAP Financial Measures

The unaudited condensed consolidated financial information is prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that the consolidated statement of shareholders' equity, consolidated statements of cash flows, and the detailed notes required by Accounting Standards Codification 270 Interim Reporting ("ASC270"), have not been presented. Vipshop uses non-GAAP net income attributable to Vipshop's shareholders, non-GAAP net income per diluted ADS, non-GAAP income from operations, non-GAAP net income margin, and non-GAAP operating income margin, each of which is a non-GAAP financial measure. Non-GAAP net income attributable to Vipshop's shareholders is net income attributable to Vipshop's shareholders excluding share-based compensation expenses and amortization of intangible assets resulting from a business acquisition and equity method investments. Non-GAAP net income per diluted ADS is non-GAAP net income divided by weighted average number of diluted ADS. Non-GAAP income from operations is income from operations excluding share-based compensation expenses and amortization of intangible assets resulting from a business acquisition. Non-GAAP operating income margin is non-GAAP income from operations as a percentage of total net revenue. Non-GAAP net income margin is non-GAAP net income as a percentage of total net revenue. The Company believes that separate analysis and exclusion of the non-cash impact of share-based compensation and amortization of intangible assets adds clarity to the constituent parts of its performance. The Company reviews these non-GAAP financial measures together with GAAP financial measures to obtain a better understanding of its operating performance. It uses these non-GAAP financial measures for planning, forecasting and measuring results against the forecast. The Company believes that non-GAAP financial measures are useful supplemental information for investors and analysts to assess its operating performance without the effect of non-cash share-based compensation expenses and amortization of intangible assets, which have been and will continue to be significant recurring expenses in its business. However, the use of non-GAAP financial measures has material limitations as an analytical tool. One of the limitations of using non-GAAP financial measures is that they do not include all items that impact the Company's net income for the period. In addition, because non-GAAP financial measures are not measured in the same manner by all companies, they may not be comparable to other similar titled measures used by other companies. In light of the foregoing limitations, you should not consider non-GAAP financial measure in isolation from or as an alternative to the financial measure prepared in accordance with U.S. GAAP.

The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, or as a substitute for, the financial information prepared and presented in accordance with U.S. GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Vipshop Holdings Limited Reconciliations of GAAP and Non-GAAP Results" at the end of this release.

 

 

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SOURCE Vipshop Holdings Limited

Investor Relations Contact, Millicent Tu, Vipshop Holdings Limited, +86-20-2233-0732, IR@vipshop.com; Jeremy Peruski, ICR, Inc., +1-646-405-4866, IR@vipshop.com