Vipshop Reports Unaudited Third Quarter 2023 Financial Results
Conference Call to Be Held at 7:30 A.M. U.S. Eastern Time on November 14, 2023
GUANGZHOU, China, Nov. 14, 2023 /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 quarter ended September 30, 2023.
Third Quarter 2023 Highlights
Mr. Eric Shen, Chairman and Chief Executive Officer of Vipshop, stated, "We had a decent quarter, primarily driven by the sustained momentum in the apparel category. During the quarter, we advanced our strategic priority of growing mindshare for Vipshop to become the go-to online shopping platform for apparel. We are encouraged to see that our professional merchandising team is skilled at both developing a rich and diverse mix of branded merchandise and identifying opportunities with brand partners in customized products. While growing our merchandise selections, we are committed to providing our users with affordability and elevating their shopping experience enabled by a comprehensive suite of core capabilities. With these competencies, we are confident to achieve stable and sustainable growth, which we believe is well supported by our unique business model."
Mr. Mark Wang, Chief Financial Officer of Vipshop, further commented, "We are delighted to see that third-quarter results exceeded our expectations. With a continued focus on high-quality growth, we delivered strong margins due to efficiency improvements along with a favorable category mix. Moreover, we remain committed to executing our share repurchase program. As we see opportunity for our value-for-money offerings ahead, we are positive on the long-term growth outlook as well as shareholder value creation."
Third Quarter 2023 Financial Results
Total net revenues for the third quarter of 2023 increased by 5.3% year over year to RMB22.8 billion (US$3.1 billion) from RMB21.6 billion in the prior year period, primarily attributable to the growth in active customers and spending driven by the recovery in consumption of discretionary categories.
Gross profit for the third quarter of 2023 increased by 14.9% year over year to RMB5.4 billion (US$737.6 million) from RMB4.7 billion in the prior year period. Gross margin for the third quarter of 2023 increased to 23.6% from 21.7% in the prior year period.
Total operating expenses for the third quarter of 2023 increased by 9.6% year over year to RMB4.0 billion (US$549.3 million) from RMB3.7 billion in the prior year period. As a percentage of total net revenues, total operating expenses for the third quarter of 2023 was 17.6%, as compared with 16.9% in the prior year period.
INCOME FROM OPERATIONS
Income from operations for the third quarter of 2023 increased by 34.8% year over year to RMB1.5 billion (US$210.2 million) from RMB1.1 billion in the prior year period. Operating margin for the third quarter of 2023 increased to 6.7% from 5.3% in the prior year period.
Non-GAAP income from operations for the third quarter of 2023, which excluded share-based compensation expenses, increased by 33.0% year over year to RMB2.1 billion (US$284.2 million) from RMB1.6 billion in the prior year period. Non-GAAP operating margin for the third quarter of 2023 increased to 9.1% from 7.2% in the prior year period.
Net income attributable to Vipshop's shareholders for the third quarter of 2023 was RMB1.2 billion (US$165.6 million), as compared with RMB1.7 billion in the prior year period. Net margin attributable to Vipshop's shareholders for the third quarter of 2023 was 5.3%, as compared with 7.8% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS for the third quarter of 2023 was RMB2.19 (US$0.30), as compared with RMB2.70 in the prior year period.
Non-GAAP net income attributable to Vipshop's shareholders for the third quarter of 2023, which excluded (i) share-based compensation expenses, (ii) impairment loss of investments, (iii) investment (gain) loss and revaluation of investments excluding dividends, (iv) reconciling items on the share of equity method investments, and (v) tax effects on non-GAAP adjustments, increased by 15.5% year over year to RMB1.8 billion (US$252.3 million) from RMB1.6 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders for the third quarter of 2023 increased to 8.1% from 7.4% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS for the third quarter of 2023 increased to RMB3.33 (US$0.46) from RMB2.56 in the prior year period.
For the quarter ended September 30, 2023, the Company's weighted average number of ADSs used in computing diluted income per ADS was 552,080,770.
BALANCE SHEET AND CASH FLOW
As of September 30, 2023, the Company had cash and cash equivalents and restricted cash of RMB19.6 billion (US$2.7 billion) and short term investments of RMB451.9 million (US$61.9 million).
For the quarter ended September 30, 2023, net cash generated from operating activities was RMB1.2 billion (US$165.0 million), and free cash flow, a non-GAAP measurement of liquidity, was as follows:
Share Repurchase Program
During the quarter ended September 30, 2023, the Company repurchased US$13.4 million of its ADSs under its current US$1 billion share repurchase program, which is effective through March 2025. As of September 30, 2023, the Company had an unutilized amount of US$551.5 million under this program.
Environment, Social and Governance
On August 28, 2023, Vipshop released its 2022 Environment, Social, and Governance (ESG) Report. As outlined in the report, Vipshop defines its ESG strategy with the goal of "co-creation of a new sustainable life" to explore a path of sustainable development across five core areas: New Sustainable Choices, Happy Consumption, Proactive Inclusivity, Beautiful Society, and Dependable Compliance. Besides, the Company also pledges to achieve carbon neutrality in its own operations and a 50% reduction in Scope 3 carbon emission intensity no later than 2030.
As a result of the Company's efforts, Vipshop's MSCI ESG rating was elevated from "A" to "AA" in October 2023, making it a leader among over 300 companies in the consumer discretionary industry.
Full ESG Report of the Company can be accessed at https://ir.vip.com/sustainability.
For the fourth quarter of 2023, the Company expects its total net revenues to be between RMB31.8 billion and RMB33.3 billion, representing a year-over-year increase of approximately 0% to 5%. These forecasts reflect the Company's current and preliminary view on the market and operational conditions, which is subject to change.
The Company's business is primarily conducted in China and the significant majority of revenues generated are denominated in Renminbi. This announcement contains currency conversions of Renminbi amounts into U.S. dollars solely for the convenience of the reader. Unless otherwise noted, all translations from Renminbi to U.S. dollars are made at a rate of RMB7.2960 to US$1.00, the effective noon buying rate on September 29, 2023 as set forth in the H.10 statistical release of the Federal Reserve Board. No representation is made that the Renminbi amounts could have been, or could be, converted, realized or settled into U.S. dollars at that rate on September 29, 2023, or at any other rate.
Conference Call Information
The Company will hold a conference call on Tuesday, November 14, 2023 at 7:30 am U.S. Eastern Time, 8:30 pm Beijing Time to discuss the financial results.
All participants wishing to join the conference call must pre-register online using the link provided below.
Registration Link: https://register.vevent.com/register/BI76030433d32e4ded923a0d58ad810740
Once pre-registration has been completed, each participant will receive dial-in numbers and a unique access PIN via email. To join the conference, participants should use the dial-in details followed by the PIN code.
A live webcast of the earnings conference call can be accessed at https://edge.media-server.com/mmc/p/m9sw6aaf. An archived webcast will 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 https://ir.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 needs for and market acceptance of flash sales products and services; competition in the discount retail industry; the potential impact of the COVID-19 to Vipshop's business operations and the economy in China and elsewhere generally; 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 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 condensed consolidated financial information is derived from the Company's unaudited interim condensed consolidated financial statements prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"), except that comparative consolidated statements of income and cash flows for the period presented and detailed footnote disclosures required by Accounting Standards Codification 270, Interim Reporting ("ASC270"), have been omitted. Vipshop uses non-GAAP net income attributable to Vipshop's shareholders, non-GAAP net income attributable to Vipshop's shareholders per diluted ADS, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net margin attributable to Vipshop's shareholders, and free cash flow, each of which is a non-GAAP financial measure. For the periods presented in this press release, non-GAAP net income attributable to Vipshop's shareholders is net income attributable to Vipshop's shareholders excluding (i) share-based compensation expenses, (ii) impairment loss of investments, (iii) investment (gain) loss and revaluation of investments excluding dividends, (iv) reconciling items on the share of equity method investments, and (v) tax effects on non-GAAP adjustments. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS is computed using non-GAAP net income attributable to Vipshop's shareholders divided by weighted average number of diluted ADS outstanding for computing diluted earnings per ADS. Non-GAAP income from operations is income from operations excluding share-based compensation expenses. Non-GAAP operating margin is non-GAAP income from operations as a percentage of total net revenues. Non-GAAP net margin attributable to Vipshop's shareholders is non-GAAP net income attributable to Vipshop's shareholders as a percentage of total net revenues. Free cash flow is net cash from operating activities adding back the impact from internet financing activities and less capital expenditures, which include purchase and deposits of property and equipment and land use rights. Impact from internet financing activities added back or deducted from free cash flow contains changes in the balances of financial products, which are primarily consumer financing and supplier financing that the Company provides to customers and suppliers. The Company believes that separate analysis and exclusion of the non-cash impact of (i) share-based compensation expenses, (ii) impairment loss of investments, (iii) investment (gain) loss and revaluation of investments excluding dividends, (iv) reconciling items on the share of equity method investments, and (v) tax effects on non-GAAP adjustments add 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 (i) share-based compensation expenses, (ii) impairment loss of investments, (iii) investment (gain) loss and revaluation of investments excluding dividends, (iv) reconciling items on the share of equity method investments, and (v) tax effects on non-GAAP adjustments. Free cash flow enables the Company to assess liquidity and cash flow, taking into account the impact from internet financing activities and the financial resources needed for the expansion of fulfillment infrastructure, technology platform and Shan Shan Outlets. Share-based compensation expenses 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. One of the key limitations of free cash flow is that it does not represent the residual cash flow available for discretionary expenditures.
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.
Investor Relations Contact
Tel: +86 (20) 2233-0732
SOURCE Vipshop Holdings Limited
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