Vipshop Holdings (VIPS) navigated a challenging third quarter of 2024, reporting mixed results that surprised Wall Street. While the company’s sales fell short of the previous year’s performance, its earnings surpassed expectations, offering a glimmer of hope amidst a softening consumer spending environment.
The company announced third-quarter sales of $2.95 billion, a 9.2% year-on-year decrease. However, this figure still managed to exceed the Wall Street consensus estimate of $2.91 billion. Adjusted earnings per ADS reached 35 cents, beating the analyst consensus of 33 cents. This positive earnings surprise underscores Vipshop’s ability to manage costs and maintain profitability despite lower sales volume.
A closer look at the numbers reveals a decrease in total orders from 179.9 million in Q3 2023 to 163.9 million in Q3 2024. Similarly, the number of active customers dipped from 42.3 million to 39.6 million during the same period. This decline reflects the broader slowdown in consumer spending affecting the discretionary retail sector. Despite this contraction in customer base and order volume, Vipshop’s gross margin showed resilience, rising to 24.0% from 23.6% year-on-year. However, gross profit in Chinese Yuan fell 7.9% to 4.96 billion ($706.14 million), mirroring the overall sales decline.
While the company’s Gross Merchandise Value (GMV) also experienced a decrease, falling from 42.5 billion Chinese Yuan to 40.1 billion Chinese Yuan, Vipshop showcased its financial strength with $3.2 billion in cash and cash equivalents, restricted cash, and an additional $222.3 million in short-term investments as of September 30, 2024. Further demonstrating confidence in the company’s future, Vipshop repurchased $275 million of its ADSs under its ongoing $1 billion share repurchase program, a clear indication of management’s belief in the company’s long-term value.
Vipshop’s leadership addressed the results, acknowledging the challenging market conditions. Eric Shen, Chairman and CEO, emphasized the company’s proactive adjustments to its merchandising portfolio and operational efficiency. He highlighted a notable double-digit growth in active Super VIP customers as a positive sign, indicating that Vipshop’s loyalty programs and targeted marketing initiatives are proving successful. He affirmed a continued focus on long-term strategic initiatives and the execution of key retail fundamentals to achieve sustainable growth.
Mark Wang, CFO, echoed this sentiment, highlighting the alignment of the third-quarter results with internal expectations. He noted the company’s commitment to maintaining profitability through disciplined financial management while simultaneously investing in customer experience and growth. Mr. Wang also reaffirmed the company’s dedication to shareholder value, reiterating the substantial share repurchase program and plans for another $1 billion repurchase program following the completion of the current one.
Looking ahead, Vipshop forecasts total net revenues for the fourth quarter of 2024 to fall within the range of 31.2 billion to 32.9 billion Chinese Yuan, representing a year-over-year decrease of approximately 5% to 10%. This outlook suggests that the company anticipates continued challenges in the near term. The stock market reacted negatively to the results, with VIPS stock experiencing a significant year-to-date drop of over 20% and a further decline of 1.66% in premarket trading on Tuesday. Despite these short-term challenges, Vipshop’s ability to surpass earnings expectations and its strategic focus on long-term growth position it for future success in the competitive e-commerce landscape.
