Vipshop: Maintain caution in the short term, focus on shareholder returns
Below is the summary of Vipshop's first quarter financial report for 2024. For a detailed interpretation of the financial report, please refer to " Vipshop: Guiding "Thunder"? Not afraid, there is repurchase to save the day 》
I. Review of Core Financial Information:
II. Detailed Content of the Financial Report Conference Call
2.1. Key Points from Executive Statements:
The company's business development momentum was slow this quarter, but the growth rate of profits far exceeded the growth rate of sales. Faced with insufficient revenue, the company focused on priority matters to enhance long-term strength. In the first quarter, the seasonal demand for spring clothing saw strong growth in March, leading to a slowdown in sales growth. Overall for the quarter, sales of clothing continued to maintain double-digit year-on-year growth. In the first quarter, the active super VIP members increased by 11% compared to the same period last year, accounting for 45% of online consumption. In the new year, the company adapts to changes in customer behavior, continuously improves methods to navigate the still dynamic environment. The company deeply understands customer preferences and uniqueness in order to provide more clothing products and greater value to customers beyond the existing customer base.
Product Expansion: In terms of product expansion, the company continues to see sufficient supply within the industry. Based on extensive and deep brand relationships, the company is establishing a wide range of product categories: selected domestic and global brands continue to introduce new products, providing customers with more options. With professional product promotion skills, the team has truly achieved better brand and product combinations at various discount levels, with the company still leading in the share of deeply discounted brand products.
Customized Products: Even as consumers need to make cautious purchasing choices, customers still welcome affordable products. Vipshop's tailored product line enables the platform to meet the needs of customers who are more cautious about style and price. Through partnerships with 180 well-known brands, the supply of customized products has more than doubled compared to last year. Made for VIPshop products are favored by high-quality customers who often place repeat orders.
In addition to promotions, customers purchase brand products because they benefit from the comprehensive advantages of price, quality, and service; customers value the authenticity of products and trust Vipshop's products; customers also prefer simplified promotions and seamless returns and exchanges. All of these make the shopping experience simple, leading to a large number of repeat purchases, which is one of the platform's strengths.
Loyalty Programs: In addition, the company is taking various measures to increase customer loyalty to its brand. In the first quarter, the company launched product sales and special offers for super VIP members, thereby establishing more online and offline connections with loyal customers, with initial significant resultsNew Technological Products: Within the company, efficiency is a top priority. The company is working hard internally to design better products and deploy the latest technology in its operations. For example, Vipshop is using AI-generated model photos and product videos to optimize the platform's marketing efforts, while helping brand partners interact more effectively with customers. Considering the potential for increased engagement and cohesion, the company hopes to further promote the adoption of this solution this year.
While the company remains cautious about the near-term outlook, it is confident in its ability to create long-term performance. Its unique value proposition enables the company to provide the best service to brand partners and develop high-quality customers from different age and income groups. The company's solid foundation allows it to seize opportunities and achieve business growth in the coming years.
2.1 Q&A Analyst Q&A
Q1: Was the weakness in the first quarter mainly due to March? Is the guidance based on the trend in April, or mainly on May and June? Will the intensity of stock buybacks increase in the remaining three quarters?
A: Regarding your first question, the sales momentum is weaker than expected, and we are making every effort to adjust our business and try to execute correctly. This year's promotional season started on May 20th and lasted for a month, which is different from the situation we faced last year. Therefore, we will remain cautious about the future sales momentum. In the volatile situation, we will try to be conservative about the prospects and continue to adhere to operational discipline.
Regarding shareholder returns: We are committed to a long-term shareholder return policy and will continue to use a combination of buybacks and dividends to provide shareholders with relatively stable and continuous annual returns. Since April 2021, we have returned over $2.2 billion to shareholders in the form of buybacks and dividends. In 2024, we adopted an annual dividend policy and announced a $250 million dividend. In addition, we are steadily buying back shares and have committed to repurchasing approximately $500 million by December 31, 2024. This means that we will have almost exhausted the remaining amount of the existing $1 billion two-year buyback plan by the end of the year. Looking ahead to 2025, for the benefit of shareholders, we plan to use no less than 75% of the 2024 Non-GAAP net income attributable to shareholders for discretionary share repurchases and/or dividends. All the historical records and future plans I mentioned demonstrate our determination and commitment to creating long-term, stable, and continuous value for shareholders.
Q2: From a relatively long-term perspective, will we also adopt a more aggressive subsidy strategy? In the first quarter, the number of users saw a year-on-year decline. What are your thoughts on user growth, this year, and long-term strategies? What are the reasons for the growth in AOV this quarter?
A: Regarding the first question about competition. Our strategy has always been and will continue to focus on brand discount retail. There are many e-commerce platforms now, but each platform has its unique value proposition, and our uniqueness lies in our ability to serve the best interests of brand partners and provide better value to customers. That's why we have so many loyal customers on our platform, who rarely leave usWe will continue to expand and deepen our relationships with more brand partners, continuously providing suitable products to create value for customers who value brand quality and product authenticity. When it comes to subsidies, we do not wish to blindly engage in large-scale subsidies like our competitors. Of course, we will actively acquire customers prudently, but we will remain focused on acquiring high-quality customers.
Regarding marketing expenses, in the first quarter, we saw a slight decrease in active customers. This is because we have very strict requirements for customer loyalty (LTV), and we will stop investing in marketing expenses as long as customer loyalty exceeds a certain level.
Faced with competition and price sensitivity, some customers, driven by subsidies or price sensitivity, have had to go to other platforms. However, the core customer group of SVIP has remained resilient. In terms of customer base, they are still growing at a double-digit rate. The growth rate of their ARPU is still higher than that of regular users. As we enter the second quarter, we will be more proactive with existing customers. After all, we aim to bring more new customers to our platform, but only those who are high-quality customers. Therefore, we will cautiously relax the restrictions on customer loyalty to ensure that we continue to acquire customers effectively and efficiently.
The upward trend in GMV per customer better represents the development momentum of customers, and SVIP members have continued to develop very well. The growth rate of their ARPU is higher than that of regular customers. This indicates that as long as we prioritize the maximum benefit of SVIP members, provide them with suitable products and top-notch services, they will continue to shop with us and buy more. Therefore, in the future, we will continue to expand the SVIP customer group. We believe that our core customer group is a solid foundation for maintaining high-quality growth and good profitability.
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