Vipshop (Minutes): Expected 4Q user growth to be better than 3Q

The following are the Dolphin Research compiled $Vipshops(VIPS.US) 3Q25 Earnings Call Minutes. For earnings report commentary, please see "Vipshop: After Finally Bottoming Out and Warming Up, Are There Any Highlights?"

I. Review of Core Financial Information

1. Net revenue for the third quarter of 2025 increased by 3.4% year-on-year to RMB 21.4 billion (compared to RMB 20.7 billion in the same period last year). Net revenue achieved growth and exceeded expectations, while profitability improved steadily, reflecting the company's balance between growth investment and value creation.

2. Gross profit for the quarter was RMB 4.9 billion (compared to RMB 5 billion in the same period last year), with a gross margin of 23.0%, slightly down from 24.0% last year. Operating expenses were RMB 3.9 billion, roughly flat compared to last year, accounting for 18.5% of net revenue.

3. Fulfillment expenses were RMB 1.9 billion (compared to RMB 1.7 billion last year), marketing expenses were RMB 667.2 million (compared to RMB 617.8 million last year), technology and content expenses were RMB 438.6 million (compared to RMB 454.2 million last year), and administrative expenses were RMB 984.6 million (compared to RMB 957.8 million last year).

4. Operating profit was RMB 1.26 billion (compared to RMB 1.33 billion last year), with an operating margin of 5.9% (compared to 6.4% last year). Non-GAAP operating profit was RMB 1.6 billion (compared to RMB 1.7 billion last year), with a margin of 7.5% (compared to 8.2% last year).

5. Net profit attributable to Vipshop shareholders increased by 16.8% year-on-year, rising from RMB 1 billion last year to RMB 1.2 billion, with a net profit margin increasing from 5.1% to 5.7%. Diluted earnings per ADS attributable to Vipshop shareholders increased from RMB 1.97 to RMB 2.42.

6. Non-GAAP net profit attributable to Vipshop shareholders increased by 14.6% year-on-year, rising from RMB 1.3 billion last year to RMB 1.5 billion, with a net profit margin increasing from 6.3% to 7.0%. Non-GAAP diluted earnings per ADS increased from RMB 2.47 to RMB 2.98.

7. As of September 30, 2025, the company held RMB 25.1 billion in cash, cash equivalents, and restricted cash, with short-term investments of RMB 5.9 billion, maintaining a stable cash flow.

8. Looking ahead to the fourth quarter, the company expects total net revenue to be between RMB 33.2 billion and RMB 34.9 billion, representing a year-on-year growth of approximately 0% to 5%, based on the current preliminary assessment of market and operational conditions.

II. Detailed Content of the Earnings Call

2.1 Key Information from Executive Statements

The company noted that the third-quarter performance demonstrated "substantial progress in returning to the growth track," primarily due to significant improvements in customer trends and overall positive performance in core categories. Active customers resumed year-on-year growth, Super VIP members grew by 11% year-on-year, contributing 51% of total online consumption. Continuous upgrades in benefits and more precise user interactions improved conversion rates.

2) The company stated it is strengthening its position as a "product display-driven enterprise" by offering affordable and differentiated product assortments to compete, continuously consolidating its leadership in the deep discount product sector, and deepening category specialization layout, carefully curating highly relevant and uniquely valuable product assortments.

3) The company continues to create differentiated product assortments on the product side, including "customized products for Vipshop," which achieved strong sales growth again this quarter. The team deepened cooperation with more high-value brand partners, encouraging brands to configure more competitive pricing and create more seasonal trendy products. Meanwhile, the company actively procures popular products from domestic and international brand partners, attracting a large number of young middle-class customers who are increasingly returning to the platform to enjoy the fun of new product launches and treasure hunting.

4) Vipshop is actively applying new marketing forms such as influencer content and short dramas, balancing cost-effectiveness and reinvestment, significantly improving customer acquisition and retention efficiency. Through upgrading models, algorithms, and operations, search and recommendation functions achieved significant results, directly driving commission income growth in the third quarter.

6) Vipshop continues to enhance the SVIP customer experience, launching invitation-only private events offering deep discounts on selected brands, further enhancing member loyalty.

7) The company is accelerating the application of AI across all business areas, including search recommendations, customer service, external marketing, and business analysis, and enhancing customer experience and acquisition efficiency through features like virtual try-on and AI creative advertising.

2.2 Q&A Session

Q: How is the competitive landscape of online shopping? What impact will fast e-commerce have? What is the GMV growth trend so far this quarter? What is the outlook for 2026?

A: The company will not engage in instant retail but will learn from its convenience advantages in categories such as fresh produce and food. For apparel products, sensitivity to fast delivery is low. The company has optimized the experience from "convenience," including launching next-day delivery in some cities, accelerating apparel delivery in core cities, and optimizing return logistics paths to improve supply chain efficiency. In terms of GMV, growth remained stable in October and November, with significant year-on-year improvement during Double Eleven. Management holds a "reasonably optimistic" view for the fourth quarter, maintaining a 0%-5% revenue growth guidance. Looking ahead to 2026, discount retail still holds opportunities, and consumer confidence is expected to recover. The company will adhere to balanced growth and profitability, driving long-term high-quality development.

Q: What specific content does the recent organizational adjustment of the product team include? Have these changes driven quarterly performance improvement? Additionally, how does AI assist in VIP business growth? Can it be used to recall lost users?

A: This is not a partial adjustment but a comprehensive organizational restructuring across product, customer operations, and technology departments, with the core goal of improving overall agility and decision-making efficiency, with deeper involvement from the two founders. The company has replaced and strengthened the management of the product team, reshaping the apparel and non-apparel category mix, driving cross-category consumption; meanwhile, integrating marketing and customer interaction teams to improve user acquisition, activation, and retention efficiency. On the technology side, organizational preparation is underway for the next phase of technology iteration. In terms of AI, the company has extensively introduced AI into business, including virtual fitting and other experience enhancement tools to improve conversion rates; AI-generated content is used for marketing creativity and placement to improve customer acquisition efficiency; AI agents are beginning to be used in user retention and recall experiments. Management believes AI will continue to enhance efficiency and become an important driver of long-term growth.

Q: When is the operating profit margin expected to resume year-on-year growth? Are recent reports about Hong Kong listing true?

A: The decline in operating profit margin in the third quarter was mainly due to incentive investments for SVIP and high-value customers, product structure adjustments, and slightly higher marketing expenses, aimed at driving GMV and revenue growth. In the long term, the company expects the gross margin to remain around 23%, and will improve operating leverage through product strength enhancement, AI application, and marketing efficiency to gradually improve operating profit margin. Regarding potential Hong Kong listing, the company stated it will continue to monitor the capital market environment and disclose any substantial progress to the market.

Q: Can user and revenue improvement continue in the fourth quarter? What is the current focus of user and customer investment? How do you view growth next year? Additionally, has a new shareholder return plan been formulated?

A: In the short term, customer growth in the fourth quarter is expected to be faster than in the third quarter; in the long term, the company remains committed to driving revenue and profitability through "customer quality improvement + ARPU growth." The company is continuously investing in acquiring new customers, activating dormant users, expanding the SVIP high-value customer base, and improving customer structure through various marketing and channel methods, thus maintaining confidence in next year's revenue performance under the dual engines of customer growth and ARPU. In terms of shareholder returns, the company continues to adhere to disciplined growth while maintaining stable profits and cash flow. Since 2021, it has returned over USD 3.4 billion to shareholders and commits to returning more than 75% of the full-year non-GAAP net profit to shareholders in 2024, having returned USD 730 million as of the third quarter. Next year, shareholder returns will continue through dividends and buybacks, with specific scale to be determined after evaluation.

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