Vipshop Holdings Limited

Ladies and gentlemen, good day, everyone, and welcome to VIP Shop Holdings Limited's first quarter 2026 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zhang, VIP Shop's Head of Investor Relations. Please proceed.

Thank you, operator. Hello, everyone, and thank you for joining VIP Shop's first quarter 2026 earnings conference call. With us today are Eric Shen, our co-founder, chairman, and CEO, and Mark Wong, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our Safe Harbor Statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to VIP shop shareholders, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earlier release for details relating to the reconciliation of our non-GAAP merits to GAAP merits. With that, I would now like to turn the call over to Mr. Eric Shenz.

Good morning and good evening, everyone. Welcome and thank you for joining our first quarter 2026 earnings conference call. Our first quarter performance reflected a significant calendar-driven shift caused by the later Chinese New Year. This lead to a successful holiday surge in active that effectively pulled forward demand resulting in a softer match. What is important to highlight is the sustained health of our customer base. Our holiday results were outstanding, driven by customers who actively sought out our seasonal collections and value promotions. This strength of that demand, especially in apparel, confirms that we remain a top priority for their spending and gives us real confidence in their long-term resilience. Our customer metrics, these cultures further prove that resilience. Total active customers show the positive momentum lead by our SVIP members who grew by 9% year over year. their paid members accounting for 55% of our online spending. We remain focused on the quality of our growth as we move further into the year. We are making steady progress in how we optimize merchandising portfolio, engage with customers, and integrate AI to reshape our off-price retail model. Since realigning our team last year, we are seeing the benefits of the faster, more fluid approach to merchandising. By staying focused on customer relevance and deepening category expertise, we will be able to move from market insight to product on shelf more quickly, ensure our deep discount brand inventory hits when demand peaks. We are also driven better cross-category engagement as we create our selection along the broad needs of our customers and develop more effective analytics and marketing tools for brand partners. We are helping shoppers easily discover products across apparel, childcare, and home category. Following our last update, we have transitioned our made-for-VIP line into the new face of globe by raising the bar for quality, style, and value. At the same time, we have tightened our planning with brand partners' seasonal calendars to stay in sync with real-time fashion trends. This approach ensures our line-up is always created and on-trend, looking ahead, We will continue to involve their exclusive offering into the primary driver of customer mindshare and brand loyalty. Building on our optimistic buying strategy, we will successfully speed up our buying cycle. Over the past few months, our teams have locked in a high value of exclusive low-priced inventory that is now flow through the platform. This has enhanced the treasure hunt experience for our customers. We are seeing strong daily habits from our high-value shoppers who are returning more frequently to discover our latest arrivals. This differentiates merchandising approach directly feeds in the stress of our SVIP program by offering exclusive access to private sales and unique inventory. We are driving both member acquisitions and loyalty. A great example is our recent event with global athletic brands, where curated selection deliver a surge in new SVIP signups, particularly among young male shoppers. And the sales value many times above the baseline. In line with the push of high-value engagement, we have shifted towards a more target acquisitions model using refined agreements that identify members with the highest long-term value. By replacing generalistic benefits with a tiered service system, we are directly rewarding higher spending with exclusive product access, deepened discount, one-stop customer support, and value-added benefits. This will further optimize conventions and individual spend. These integrated efforts ensure the SVIP program remains our primary engine for sustainable revenues and earnings growth. As the pace of the change in retail accelerate, We were excited to embrace the broad opportunities AI offers. Our initial journey focused on putting the customer first, enhancing experiences through virtual try-ons, smart search and recommendations, and automated customer support. we also leverage AIGC to reach potential customers more effectively with automated content. Having proven this use case, we are now shifting our focus towards scaling that capabilities for greater operational impact. For example, we are using generative AI to scale personalized marketing. by combining our operational expertise with real-time customer feedback, our AI marketing agent effectively generates tailored creative across video, photo, and text forms. This has already driven a clear lift in our customer acquisition efficiency. Beyond the marketing, AI is increasingly Empowering our brand partners with advanced business analysts, deeper customer cohort insights, and optimized merchandising strategy. By anchoring our strategy in the off-price model and leveraging best-in-class technology, we have identified more effective ways to serve our customers. From dynamic merchandising to the smart supply chain, This allows us to continue earnings custom loyalties through every interaction. We remain committed to investing in our people and our platform. We are confident that by continuously optimizing our operational strategies, we will driven steadily profitable growth for the long term. At this point, let me hand over the call to our CFO, to go over our financial results.

Thanks, Eric, and hello, everyone. Our latest results landed within our guided range, reflecting a dynamic quarter that was heavily influenced by late Chinese New Year. The holiday period triggered a concentrated surge in demand for winter and early spring apparel categories, where our merchandise trends resonate well with a broader base of consumers. By successfully capturing these peak season opportunities, we proved that the effectiveness of our coordinate efforts across merchandising, customer engagement, and operations. This operation synergy directly fed into our bottom line. Margins remain healthy and stable, and are pinned by a highly favorable category mix in our continued operational discipline. As Eric outlined, we maintain a focused strategic investment in our key growth drivers, expanding differentiated merchandise offerings, deepening SVIP's engagement, and scaling AI integration across our operations. At the same time, we continue to manage our broader resource pool with strict prudence. dynamically shifting spend to our most productive activities. This balanced approach ensures we sustain solid baseline profitability by prioritizing high quality, profitable revenue today. Simultaneously, it allows us to systematically strengthen our foundations for the long term. Even as we navigate an uncertain microeconomic backdrop. Turning to shareholder returns, we remain firmly on track to deliver on our 2026 commitment of returning no less than 75% of full-year 2025 non-GAAP net income to shareholders. In April, we complete our annual dividend distributing approximately $300 million. For the quarters ahead, we look forward to executing the remaining balance of our shareholder return program. Our free cash flow outlook is robust, and we have the full financial capacity to meet our full-year allocation targets. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below are in RMB, and all the percentage change are year-over-year change, unless otherwise noted. Total net revenues for the first quarter of 2026 increased by 1.2% year-over-year to RMB 26.6 billion from RMB 26.3 billion in the prior year period. Gross profit increased by 6.8% year over year to RMB 6.5 billion from RMB 6.1 billion in the prior year period. Gross margin increased to 24.4% from 23.2% in the prior year period. Total operating expenses were RMB 4.2 billion compared with RMB 4.0 billion in the prior year period. As a percentage of total net revenues, total operating expenses was 15.7% compared with 15.3% in the prior year period.

For human expenses,

were RMB 2.0 billion compared with RMB 1.9 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.7% compared with 7.2% in the prior year period. Marketing expenses decreased by 1.8% year-over-year to RMB 719.3 million for RMB 732.1 million in the prior year period. As a percentage of filter net revenues, market expenses decreased to 2.7% from 2.8% in the prior year period. Technology and content expenses decreased by 0.2% year-over-year to RMB 448.2 million, or RMB 449.1 million in the prior year period. As a percentage of total net revenues, technology and content expenses was 1.7%, which stays slight as compared with that in the prior year period. General and administrative expenses were RMB 950.5 million compared with RMB 950.8 million in the prior year period. As a percentage of total net revenues, general and administrative expenses was 3.6% with state flight as compared with that in the prior year period. Income from operations increased by 9.7% year-over-year to RMB 2.5 billion from RMB 2.3 billion in the prior year period. Operating margin increased to 9.4% from 8.7% in the prior period. Non-GAAP income from operations increased by 3.5% year-over-year to RMB 2.7 billion from RMB 2.6 billion in the prior period. Non-GAAP operating margin increased to 10.2% 10.0% in the prior year period. Net income attributable to VIP shop shareholders increased by 13.6% year-over-year to RMB 2.2 billion from RMB 1.9 billion in the prior year period. Net margin attributable to VIP shareholders increased to 8.3% from 7.4% in the prior year period. Net income attributable to VIP shop shareholders per diluted ADS increased to RMB 4.48 from RMB 3.72 in the prior year period. Non-GAAP net income attributable to VIP shop shareholders was RMB 2.31 billion compared with RMB 2.31 billion in the prior year period. Non-GAAP net margin attributable to VIP shops shareholders was 8.7% compared with 8.8% in the prior year period. Non-GAAP net income attributable to VIP shops shareholders Her diluted ADS increased to RMB 4.68 from RMB 4.43 in the prior period. As of March 31, 2026, we had cash and cash equivalents and restricted cash of RMB 28.3 billion and short-term investment of RMB 2.7 billion. Looking forward to the second quarter of 2026, we expect our total net revenues to be between RMB 24.5 billion and RMB 25.8 billion, representing a year-over-year decrease of approximately 5% to 0%. Please note that this forecast reflects our current in a preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Thank you. If you would like to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. And to withdraw your question, please press star 1 and 1 again. Please kindly translate your question into Chinese if you are bilingual. Please stand by while we compile the Q&A roster. Thank you. We'll now take the first question today. This is from Thomas Chong from Jefferies. Please go ahead.

Good evening. Thank you for accepting my question. 我的問題是 第一個是關於我們現在看到 4月份還有5月份 現在我們看到GMV的趨勢 可以分享一下嘛 因為我們也看到在物流行業那邊 也看到行業的單量其實都在放緩 所以想看一下我們GMV未來一段的趨勢 第二的話是關於618的 Let me translate into English. Thanks management for taking my question. My first question is about the monthly GMV trend. Given that we have seen some software's in industry parcel volume in the past few weeks or even last month. So how is our monthly GMV so far? And my second question is relating to June 18th. How should we think about the events this year versus last year? And on top of that, how is the consumer sentiment these days that we should think about the outlook for the second half? Thank you.

I would like to answer that we actually did a good job in the whole Q1, especially in January and February. In China, because of the holiday, the Spring Festival is in the wrong place, so we usually put January and February together to look at each other. So January and February are actually very good, so there is actually something like us last year because of the warm winter, which led to a lot of users who didn't buy anything, so they bought it in January and February. Then in January and February, it was very good. But in March, we saw that in fact, there was a drop in March. Then we think we also asked all the industries. Then in fact, everyone is very bad in March. Then in addition, since April, but our Q1 is not bad, because January and February are very good. Even if it drops a little in March, in fact, the overall performance is OK. But in April, we saw that in fact, the business in April is not good. In April, in fact, the drop ratio is China China China Guidance is still reporting a zero to five. So for the future of 618, we don't think it's going to be too good in general. It's not going to be too bad either, because it's basically the same anyway, because there's a possibility that 618 is taking a long time now. It actually started in May, so we think 618 is relatively stable. So we made a conservative estimate of Q2. Then the other thing is that we can actually Q1 for the whole year. Q2 fell a little bit. Then we want to fight for it in Q3 and Q4. We want to make sure that it is relatively stable. So we generally look forward to the second half of the year. We think we hope that it is especially the consumption, including the consumption of clothes. We hope that everyone will have some good, good situations in the second half of the year.

Okay, so we actually started the year on a very strong note. We have seen a holiday surge during the January to February period when consumers actually concentrated their buying activities And that effectively pulled forward demand. So following the holiday period, we saw a very apparent moderation of sales in March. And as we enter the second quarter, the April data does not turn out very well. slightly it's not improving from March and into May to date still very challenging but actually we saw a slight pickup in consumer activity but as though we have been through half of the quarter it seems that we have relatively low visibility on consumer sentiment and activity how the rest of the quarter Our turnout still depends on the month-long industry promotion, which we also don't have very big expectations. So we think it's more prudent for us to give conservative guidance and reset our second quarter expectations. Turning to our outlook for the full year, we think we still have opportunities in the second half, and we believe as consumer sentiment may be improving marginally, we should be able to capture opportunities in discretionary spending, especially apparel, and we look forward to making the best effort to maintain steady operational performance for the second half. So for the full year, I will continue to believe that we will maintain steady outlook.

Thank you. Thank you. We will now take the next question.

This is from Vicky Wu from CICC. Please go ahead.

I will translate by myself. Thanks, Benjamin, for taking my question. I would like to ask for some updates regarding Shanshan outlets. First, would you walk us through Shanshan's first quarter performance? And second, we've noticed that the webshop commercial rate is about to be launched. And how should we assess its subsequent impact on the financial statements? Thank you.

Well, thanks for your question. And actually, Shenzhen outlet's business is quite strong in the first quarter. And the GMV grows around 30% year over year. And thanks for your question regarding the raise. And I think some of the investors may be aware that VIP shop commercial rate obtained official approval from the CSRC and the Shanghai Stock Exchange in late April and complete the pricing process on May 19th. And there are two underlying assets, Shan Shan Outlets in Zhengzhou and Harbin. Both are material outlets that operate for around 10 years. And both outlets hold leading position in their regional markets. Zhengzhou Outlets is the highest grossing outlet in Henan Province, while the Harbin Outlets ranks first in Heilongjiang Province. And the commercial REITs usually feature more flexible policy regarding the fund usage and expansion mechanism. And actually, in addition to these three outlets already used as underlying assets for the REITs, we also hold another 18 outlets projects demonstrating strong potential for future expansion. We will conduct further evaluation based on our strategy and market conditions. And for the accounting treatment, for this Zhengzhou and Harbin, we subscribe for 49% of the total shares in the commercial rate. In simple terms, we will lose control and we will deconsolidate the investment from our financials and recognize the related investment again accordingly. And more specifically, our gap basis we will book a one-time investment gain of around 5.3 billion RMB in the second quarter, an increase of 1.7 billion income tax expenses. And cash flow-wise, we will see a significant increase in net cash inflow of RMB 1.7 billion in the second quarter.

Thanks. Thank you.

We will now take the next question. This is from Alicia Yap from Citigroup. Please go ahead. Hi.

管理層,晚上好。 謝謝接受我的提問。 我有兩個問題。 第一個問題是, 剛剛我們管理層說到那個四月份, 其實我們看到的是一個負增長。 然後5月份到此為止 可能也應該是一個負增長 然後上週的這個攝林 看到4月份攝林的這個總額 在服飾其實是增長3.6 然後想管理層就是大概說一下 這個是不是有大部分的這個 銷售轉到了線下 然後另外就是說如果 如果 If not, are other online platforms stealing some of our market share? This is the first question. 然後第二個問題其實也是跟第一個問題有關的 就是這個山山澳來 我們剛剛說到這個quarter是漲了三十幾 然後你懷疑成是不是看到從消費者的行為 是比較往線下去購物呢 還是說是因為山山提供了一些品位 I wanted to follow up, I think management earlier mentioned that Seems like you guys saw April is a negative growth for your platform. And then maybe May, that's also so far month to date, it also seems to be negative. But then I think last week we have the China retail sales data. It's a total apparel sales is actually grew 3.6% in April. So just wanted to see where is the misconnect. Is it a lot of these spending been shifting to offline or is it there are some of the You know, the market share, you know, our market shares are losing to other online platforms. And then related to that is also on the Sunshine outlet. Also, I think management mentioned the platform grew like 30 plus percent. I also wanted to know if this is because of the consumer behavior that you observed started to shift more to the offline shopping, or is it because Sunshine actually has certain merchandise that VIP online doesn't have? Thank you.

Let me answer that question. We also saw that the statistics were 3.6% and the sales were 0%. them up for slayer number one kind of chin in China is and then they'll that's not a little bit I can't handle what is she and she actually did the the nigga just so top and down but this is him some quick data as he and he had made a just a piece he and he's on the chisholm so he's all woman taking it back on to the one team number her uh uh . . . .

Okay, so the NBS data, the apparel sales, the growth of 3.6% you have mentioned actually refers to both online and offline. Based on our observation, actually online we have seen a very notable decline and we are actually quite in line with the industry trend and offline we do see very strong growth. We believe it could be a the difference of consumer activity with online and offline shopping. When they do online shopping, they tend to return a lot. So that would make the sales and revenue data more compressed. And with offline, consumers do shift part of their spending increasingly to outlet channels. And it's actually the same with merchants, with brand partners. They have been shifting a little bit more resources to offline outlets, channels as well. But we think it's still partially holiday driven. And going forward, we have to see whether the momentum can be sustained. In addition, offline outlet, the outperformance is actually benefiting from a higher concentration of certain categories, especially sportswear and outdoor products. That makes their sales performance exceptionally strong because consumers tend to shop into these categories. It's just being fitting in with their lifestyle. And it's actually the same thing with the online category performance. Even in April and May, when we do see a broader weakness in apparel categories, sportswear and outdoor products products continue to outperform. I think the real weakness is actually going into discretionary, more discretionary apparel categories like women's wear and men's wear, which are pretty much fashion-driven. So I think we still need some time to see whether the discretionary spending we are better than expected going forward.

Thank you. Thank you. We will now take the next question. This is from Ronald Kung from Goldman Sachs. Please go ahead.

Thank you, Mr. Mark and Jessie. I would like to ask two questions. The first one is that we see that the gap between GMB and revenue is relatively large. I would like to know if it is due to the ratio of Shanshan Online and Offline or the increase in the return rate. The second one is that since March, April, and May are relatively weak, Is it because of technology? Will it become a trend in the second half of the year? Because I saw that the third quarter of last year was relatively healthy, so the base is not low. So I want to hear if there will be any changes in our judgment in the second half of the year. Thank you, management, for taking my question. First, I want to ask about the GMV gap with revenue. Is that due to Shan Shan or maybe the return rates have changed? Second is, given that the March, April, May trends have been quite soft, should we take this or read this into the second half, given the base in the third quarter last year is not a low one, which therefore the base is normal? So how should we think of the recent trends and translating to our expectations into the second half. Thank you.

Well, thanks for your question. And let me answer the first question. Actually, the year-over-year growth gap between revenue and GMV in the first quarter increased due to the following two reasons. The first one is the return exchange rate slightly increased year-over-year due to higher contribution from a pair of categories and SVIP members. Secondly, as you mentioned, the increased GMV contribution from Shanshan Outlet. Given that Shanshan operates on a commission-based model, so from accounting-wise, we recognize its revenue based on that method, which resulting revenue to GMV gap become wider.

Let me answer the second question. Is it very dangerous? We don't think so, because we actually fall That number is the number that fell the most in April, which is between 0 to 5, but it is actually the number that we originally predicted because we originally predicted it to rise, so it is actually a little bit of a gap So we think we can take some more time to look at the overall trend so 345 is not good with what we said This weather is also related to the change of seasons, it is not obvious, so we think In terms of our four-year outlook, even when we face near-term pressure from March to May today,

We think it's still within our control. It's just from negative 5% to 0%. That's the range we are confident to maintain. And also the recent softness is related to a number of factors, weather conditions, seasonal transition to spring and the summer apparel. Of course, there is a bit of uncertainty on consumer sentiment and behavior, etc. So we may need more time to see whether the trend will be improving going forward. But for the full year, we think our full year target is still achievable. And by continuously optimizing our operational strategies, we should be able to maintain at least a steady business performance.

Thank you.

Thank you. Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

And this concludes today's conference call. Thank you for participating and you may now disconnect.