Earnings Call Transcript - BZUN Q4 2025

Operator, Operator

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Fourth Quarter 2025 Earnings Conference Call. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy.

Wendy Sun, Senior Director of Corporate Development and Investor Relations

Thank you, operator. Hello, everyone, and thank you for joining us today. Our fourth quarter 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website, where they are available for your download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, Chief Financial Officer; Mr. Junhua Hao, Director and Chief Strategy Officer of Baozun Group; and Ms. Ken Huang, Chief Executive Officer of Baozun Brand Management. Ms. Qiu will first share our business strategy and company highlights. Ms. Zhu then will discuss our financial outlook, followed by Mr. Wu and Mr. Huang, who will share more about our e-commerce and brand management segment, respectively. They will all be available to answer your questions during the Q&A session that follows. Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve unknown risks, uncertainties, and other factors, many of which are difficult to predict and beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the U.S. Exchange Commission and its announcement, notice, or other documents published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based upon assumptions that the company believes to be reasonable as of this date, and the company does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may elect to use adjusted in place of non-generally accepted accounting principles on non-GAAP in order to reduce overall confusion that may arise from our discussion of our financials related to the GAAP brand. You may now turn to Slide 2 for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

Wenbin Qiu, Chairman and Chief Executive Officer

Thank you, Wendy. Hello, everyone, and thank you for joining us. I'm pleased that Baozun delivered a strong fourth quarter closing 2025 on a high note and successfully completing our 3-year strategic transformation. Over the past 3 years, we have rebuilt our company with focus and intention, driving consistent sequential momentum throughout 2025. In the fourth quarter, our revenue increased 6% to RMB 3.2 billion while non-GAAP operating profit grew 91% to RMB 198 million. This was not just about short-term recovery; it was about fundamentally improving the quality and potential of our business. BEC has become a sustainable cash engine. Through sharper execution and continued cost rigor, BECs are more agile and consistently profitable. We have moved from pursuing scale to focusing on value, prioritizing margin expansion and reliable cash generation, and most importantly, build alignment with BBM. BBM, meanwhile, has reached a defining inflection point. After 3 years of repositioning and localization, our brand management platform achieved its first quarterly breakeven in fourth quarter '25. This milestone validates the sustainability of our model. Importantly, scale is beginning to translate into tangible operating leverage, marking the transition from a turnaround to profitable growth. Our financial profile has strengthened alongside operational progress. Margins have expanded, profitability has improved meaningfully, and our balance sheet remains solid. In addition, our operating cash flow more than tripled to RMB 420 million in 2025. These results validate that our business is not only growing. It is growing with better structure and healthier economics. In summary, 2025 marks the successful completion of the initial phase of our transformation. As we enter into 2026, our focus shifts decisively from rebuilding to scaling. Our priority now is to amplify the progress to accelerate in the next 3 years. We will do this by expanding BEC's margin, building scale and operating leverage in BBM, and deepening the strategic synergies between BEC and BBM. Our ambition is clear: to drive the group's non-GAAP operating profit growth to RMB 550 million by 2028. With a stronger organization, a proven strategy, and a highly focused execution culture, we are entering this next phase with confidence and momentum. Now I will hand over the call to our team for a deeper dive into our financials and business performance.

Catherine Yanjie Zhu, Chief Financial Officer

Thanks, Vincent, and hello, everyone. Now let me provide a more detailed overview of financial results for the fourth quarter and full year of 2025. While group total net revenues for the fourth quarter of 2025 increased by 6% year-over-year to RMB 3.2 billion. Of this total, e-commerce revenue grew by 2.5% to RMB 2.6 billion, while Brand Management revenue rose by 24% to RMB 664 million. Breaking down e-commerce revenue by business model, services revenue increased 3.1% year-over-year to RMB 2 billion. This increase was driven by revenue growth in digital marketing and IT solutions as well as strong performance in the luxury category within our online store operation services. BEC product sales revenue increased modestly by 0.5% year-over-year to RMB 574.5 million, mainly driven by growth in the Health and Nutrition category, which was partially offset by lower sales in the appliance category as we continue to optimize category mix to prioritize profitability. BBM product sales totaled RMB 663.7 million, representing a 24% year-over-year growth. This growth was mainly driven by the strong performance of the GAAP. From a profitability perspective, our blended gross margin for product sales at the group level was 36.5%, an expansion of 640 basis points year-over-year. Gross profit increased by 35.9% year-over-year to RMB 451.5 million for the quarter. Breaking this down by our key business lines, gross margin for e-commerce product sales expanded to 18.4%, reflecting a 760 basis point improvement compared to 10.8% a year ago. This margin expansion was primarily driven by product mix optimization. Gross margin for BBM improved to 52.1% from 50.4% a year ago, reflecting the adaptiveness of its merchandising and marketing initiatives. Now turning to OpEx, sales and marketing expenses increased by RMB 181 million to RMB 1.2 billion. This included an increase of RMB 136.9 million for BEC which was mainly due to higher spending on creative content and market initiatives in line with the growth in digital marketing revenue. BBM sales and marketing expenses increased by RMB 49.6 million, which was mainly driven by the expansion of offline stores and marketing activities during the quarter. Fulfillment costs for the quarter were reduced by 11.1% to RMB 683.4 million, reflecting ongoing efforts in cost optimization. Technology and content expenses decreased by 20.2% to RMB 116.9 million as we continue to enhance tech monetization efficiency. G&A expenses decreased slightly by 2% to RMB 187.9 million due to the company's continued efforts to implement cost control and efficiency improvement initiatives. Turning to bottom line items, during the quarter, our non-GAAP income from operations was RMB 197.7 million, an increase of 91.4% from RMB 103.3 million in the same period of last year. BEC's adjusted non-GAAP income from operations was RMB 195.9 million, representing a 43% year-over-year increase compared with a year ago. BBM reported a non-GAAP operating income of RMB 1.8 million, a solid milestone as we achieved a very first breakeven quarter for the segment. Let us turn to a quick full year summary. The group's total revenue was RMB 9.9 billion, an increase of 6% year-over-year, of which e-commerce net revenues were RMB 8.3 billion, an increase of 2% year-over-year. BBM net revenues were RMB 1.8 billion, an increase of 25% year-over-year. Our adjusted operating income totaled RMB 126 million, a significant improvement compared with RMB 11 million in fiscal year 2024. As of December 31, 2025, our cash, cash equivalents, restricted cash, and short-term investments totaled RMB 2.8 billion. We continue to improve working capital efficiency through back-end process optimization across inventory management, billing, and cash collection. As a result, our adding operating cash flow reached RMB 420 million, representing a 315% year-over-year increase. Let me also briefly address our GAAP item recorded during the quarter. We recognized an investment impairment loss of RMB 230 million primarily related to pre-investments in the e-commerce sector as well as impairment provisions for certain equity investments. While these investments have at the time, today's macroeconomic environment, combined with our sharpened focus on developing our brand management business, makes it prudent to recognize this impairment. These adjustments reflect our commitment to maintaining a focused and resilient business portfolio. Importantly, our remaining investments will be healthy, and we are confident in their long-term potential. Let me now pass the call over to Junhua to update you on BEC, our e-commerce business.

Junhua Wu, Chief Strategy Officer

Thank you, Catherine, and hello, everyone. I'm pleased to share we've closed 2025 with significant momentum. In the fourth quarter, we delivered 2% revenue growth and a 43% increase in non-GAAP operating profit, capping a year of progression from stabilization to accelerated performance. Throughout the year, we focused on driving sustainable, profitable growth while making strategic investments in high opportunity areas. Now let me quickly walk through some of our operational highlights in the e-commerce segment for the first quarter of 2025. Highlighting the continued quality improvement of our distribution model. During the quarter, BEC product sales gross profit increased 70.9% despite a largely flat top line. Notably, BEC's gross margin rose to 18.4%, setting a new record since our inception. This improvement was mainly driven by ongoing optimization of our category mix with strong growth from health and nutrition and beauty and cosmetics categories. In addition, our efforts to expand into non-standard categories are beginning to show results. Apparel delivered a strong contribution across sales, gross margin, and profitability during the quarter. Turning to our services revenue which grew 3% year-over-year in the fourth quarter, led primarily by strong performance of BBM and IT solutions, which includes 19%. We gained market share in key categories such as luxury, sports, and outdoor. Our omnichannel capability remains one of Baozun's core advantages and a focus of development going forward. During the quarter, we received 41 awards in the Tmall ecosystem, including the Prestigious 2025 Tmall Ecosystem in Service Award. Douyin we were once again certified as a Douyin e-commerce diamond service partner, the platform's highest tier of accreditation. Together, these recognitions affirm our sustained leadership and execution strength across major platforms. We also continue to focus on strengthening our bottom line. Across the organization, we are implementing a series of lean initiatives designed to streamline processes, reduce costs, and enhance efficiency. Furthermore, we are expanding the use of artificial intelligence tools across a wide range of employees and business scenarios to enhance productivity. These efforts have significantly improved our profitability, with BEC's non-GAAP operating income increased 43% year-over-year to RMB 196 million in the fourth quarter of 2025. Overall, we are pleased with our performance in the final quarter of the strategic transformation, a period that certified our shift towards sustainable and profitable operations. Moving forward, we will continue to deepen client engagement and stickiness, innovate our service models, and enhance operational efficiency. For 2026, our priorities are clear: deliver the numbers, deliver the strategy, and deliver the talent. Delivering the numbers means maintaining our focus on profitable growth and ensuring that our operational progress continues to translate into strong financial performance. On strategy, we are advancing 3 key initiatives. First, we will expand our apparel distribution business leveraging the synergy between BEC and BBM to unlock new growth opportunities and strengthen our brand ecosystem. Second, we will further enhance our digital marketing and traffic acquisition capabilities, helping brand partners capture demand more efficiently across an increasingly complex omnichannel landscape. Third, we will deepen technology empowerment, accelerating the deployment of AI and digital tools to improve operational efficiency and elevate our service capabilities. Finally, delivering the talent remains essential. We will continue strengthening our leadership bench and reinforcing a strong execution culture with the right people and the capabilities in place. We are well-positioned to scale the business and deliver sustainable growth in the years ahead. Now I'll pass to Ken for an update on BBM.

Ken Huang, Chief Executive Officer of Baozun Brand Management

Thank you, team, and hello, everyone. Please turn to Slide #9 for BBM's performance in the fourth quarter of 2025. The fourth quarter marks a defining milestone for BBM as we delivered our first breakeven quarter. This result reflects our structural improvements across merchandising, marketing, store productivity, and networking expansion. In Q4, BBM revenue grew by 24% year-over-year to RMB 664 million, supported by double-digit same-store sales growth and the continued contributions from new store openings. Gross margin improved by 170 basis points from a year ago to 52.1%, leading to a 28% increase in gross profit. Moreover, inventory turnover efficiency improved, reducing our inventory turnover days by 16% to 114 days. Merchandising was the core growth driver for the quarter. We entered the winter season with a balanced assortment architecture, reinforcing Gap's iconic categories, sweatshirts, denim, and denim wear while sharpening segmentation across channels and consumer groups. Our partnership with the Forbidden City has maintained a strong sell-through in Q4. More recently, we launched a new IP collaboration with packaging Oprah, showcasing our ability to blend Chinese cultural storytelling with Gap's global DNA in a commercially effective manner. Since we introduced our brand ambassador on September 15, we have collaborated closely to create authentic, engaging content that connects with our audience. We also launched seasonal products and limited styling collections aligned with key moments in the retail calendar. This ambassador-driven initiative has boosted social buzz leading to higher consumer engagement, increased brand visibility, and a strong brand voice. Offline expansion continues to be a strategic priority for us. In the fourth quarter, we opened 7 new stores for a total of 29 new Gap stores in 2025, bringing our total store count to 164 by the year-end. Our new stores continue to outperform older locations, driven by better site selection and enhanced visual merchandising. For instance, our new image stores at Dongguan Min International Trade City and Shanghai Century Link Mall have delivered strong results. The improvement in-store experience and the outfit-based presentation have driven a double-digit gain in sales productivity. This early performance indicators are highly encouraging and reinforce our confidence in our store expansion strategy. As a result, we are accelerating our store opening efforts to build on this momentum, and currently plan to open 50 stores in 2026 through a hybrid model that combines direct and partnership stores in line with our asset-light approach. With these initiatives in place, we are confident in sustaining double-digit year-over-year revenue growth and achieving operating breakeven for GAAP on an annual basis in 2026.

Junhua Wu, Chief Strategy Officer

Chris, Analyst

I have three questions. The first one is about AI. With the rapid evolution of AI technology, could management provide an update on the current status of our workflow transformation using AI agents? Have we seen any measurable gains in efficiency? The second question concerns the mid- to long-term impact of AI. What is our perspective on the opportunities that AI agents present for our e-commerce and brand management businesses? My third question is about our business outlook for the mid- to long term. I noticed in our report that we project reaching RMB 550 million in operating profit by 2028. Can management share what key factors are driving this business outlook?

Junhua Wu, Chief Strategy Officer

Okay. This is Junhua. Let me address your first two questions regarding the implementation of AI in Baozun. The first question is about the AI agent. We have been utilizing AI agent technology since the beginning of last year, primarily focused on enhancing our bottom line. In terms of digital assets, we are creating and uploading products onto various platforms, which significantly reduces the need for personnel to handle repetitive tasks. We have already adopted many AI agents, and this technology aims to improve our internal efficiency and strengthen our bottom line. However, we do not have a clear definition yet on how AI technology will help us increase our top line. Concerning the AI agent, the underlying technology is quite new in this industry, and we recognize that it currently concentrates more on general search engine optimization. Your daily active users among the shopper app are approximately 850 million, with around 300 million of those engaging with AI and large-scale AI agent applications. This is changing consumer behavior and redistributing traffic. We are closely monitoring trends across major platforms and the shifts in traffic allocation, and we will provide more insights in future quarters. The third question pertains to our business outlook.

Wenbin Qiu, Chairman and Chief Executive Officer

Yes. We just discussed the goal for operating profit in 2028, which is set at RMB 550 million. The main factor driving this target is our strategy. We are transitioning our e-commerce business to a model that combines BEC, BBM, and synergy. BBM is enhancing its profitability, particularly in GAAP metrics, and is expected to become increasingly profitable over the coming years. Additionally, we are leveraging our experience from the apparel industry with BBM to incorporate more brands into BEC using a franchise model, which significantly boosts our margins. The growth of BBM, along with the margin expansion in BEC, will enable us to achieve this target by 2028, but this will not mark the end of our acceleration. In the following years, even beyond 2028, we anticipate seeing clearer indicators of improved profitability.

Alicia Yap, Analyst

My first question is about the latest macro sentiment. Can management share some insights on the recent Chinese New Year demand and the promotional performance in March? What are your expectations for 2026? My second question relates to AI. How do you perceive generative AI and other advanced AI technologies changing consumer behavior and the e-commerce landscape? Could you elaborate on Baozun's strategy for integrating AI into your operations and service offerings? Are you developing your own AI tools or partnering with leading AI firms? Lastly, what is the growth expectation for Gap China this year? What is your long-term vision for the Gap business in China, and what key growth drivers do you see for the brand over the next 3 to 5 years?

Junhua Wu, Chief Strategy Officer

Okay. This is Junhua. Let me address the first 2 questions. The first one, I will elaborate from the BEC perspective and Ken can just feedback some new sentiment kind of the forecast, aligned with the third question from the BBM perspective. Yes, we did have a very strong finish on the Chinese New Year campaign and the Queens day campaign on March 3. This is definitely very strong. We had a late Chinese New Year this year. From the online digital e-commerce growing, that was very promising. We see the momentum of each category growing a lot, and the platforms are still compensating a lot of coupons to the end consumers to increase the overall GMV growth. The efficiency of the traffic quality is increasing. So yes, we believe that we had a very good, strong start. The future quarters will be very promising from the BEC perspective. The second one is also related to the AI in terms of how does AI really change consumer behaviors. Just like I mentioned, AI is changing the behavior, shifting our daily lives toward new interactions. Consumers are starting to ask questions about their daily lives, and AI can smoothly push a lot of information along with some kind of brand-oriented right information such as shopping links or providing a very emotional linkage from the brand's perspective with the content, videos, or other comprehensive information. We can foresee that the change in consumer behavior is slightly moving from instant shopping to other categories. The AI agent is becoming very promising. You can easily order a bubble tea from, for example, from the AI geolocation navigation systems. But from different categories, it's still not in the business scenario. We are closely tracking all those technological operations and making sure that we can share more in future quarters. Regarding the bottom line, we definitely input a lot of efforts in AI agents to increase our efficiency, especially those repeatable kinds of systems. Regarding those proprietary AI tools, we are not partnering with any other leading AI firms for now. We still use some public services with our in-house engineering team to do a lot of Baozun customization for our leading brand partners.

Ken Huang, CEO of Baozun Brand Management

This is Ken. For the first question about the consumer segment. For GAAP, we also see a high increase in February and January in both months. The increased rate year-to-year is over 30% for Gap. We can confirm that we continued our 20 to 30 increased rate in the last quarter and this quarter. For the third question, the gross expectation for Gap, we will still continue to keep the growth rates. In 2025 our growth rate is more than 20%. We will keep this around 20% increase in 2026 by both same-store increases and new openings. We plan to open more than 50 stores, and we will also expand our e-commerce sales scale. For the long-term vision of the Gap business, in 2027 and 2028, we plan to accelerate our growth rate from 20% to 30% so we'll be 25% to 30% in the next 2 years in the top line. We are also trying to improve our operating profit from breakeven to 150 basis points increase per year. The main growth driver for Gap over the next 3 years is coming from 3 areas: First, same-store sales increase driven by product improvements, our vision merchandising, and our new image stores, which will improve our in-store traffic and commercial rates. Second, scale expansion, both offline and online. For example, offline also plan to re-enter some markets such as Hong Kong and Macau. The third one is supply chain efficiency. With the scale increase, we expect to gain our efficiency in our cost management and also in the expenses.

Wenbin Qiu, Chairman and Chief Executive Officer

Here is Vincent. We have more to say about the AI because AI application right now is one of the core strategies of Baozun. Our goal is quite clear; we want to make the AI utilization and application the best practice for both e-commerce and also the apparel industry. We aim to be the best practice in utilizing AI in these two areas. Not only for the sales side, but also for the supply side for BBM, and of course, for efficiency improvement. It's quite important for us, and we are confident we will be in a leading position in utilizing AI capabilities.

Jiawei Yin, Analyst

I have 2 questions. The first is that we have seen many industry changes such as the compliance of e-commerce tax, the levy of traffic tax, and the restriction of competition in the industry, which are generally beneficial to the sales of branded goods and are also accommodating by a narrowing growth gap between platforms. How does Baozun impact such evolution on operational preference and strategies? What’s the brand’s response to this change? And my second question is, has there been any change to Baozun's development strategy for the BBM business in 2026? How do you view Baozun balance scale and profit, and what are your expectations for the growth pace and the long-term vision of each brand?

Junhua Wu, Chief Strategy Officer

Okay. This is Junhua. Let me address the first question. Those policies really don't affect our detailed operations and day-to-day because the government has signed up the direction about setting up a different sliding scale in terms of different policies, and none of the terms have really changed the allocation of the marketing fee of our existing brand partners because after the pandemic, all our brand partners have been very careful and very cautious about spending money, especially in the marketing allocation and others. We want to help our brand partners leverage all those expenses wisely and to drive a higher ROI as before. In terms of that, we are really within the range of those policies. Regarding cutthroat competition in the industry, Baozun is taking the lead in providing logistics and courier services. We have already leveraged a lot of pricing efficiency and cost efficiency for so many years, so that doesn't affect our day-to-day operations. In terms of the brand repositioning between different platforms, indeed, the brands are either diversifying their strategies for different brands because for some leading live-stream brands, they focus on GMV growth or treat those platforms as content creation platforms and let the traffic exceed traditional transaction platforms. We are helping all those different brands in different categories to diversify their strategies across different platforms. There is no unified strategy in general in terms of that question.

Wenbin Qiu, Chairman and Chief Executive Officer

Here's Vincent. I will talk about the BBM strategy. I think the strategy is quite consistent with the past years. The only change is about the level of our confidence. We think we are much more confident right now than before that the transformation is already there and we can see the results. We built a 3-year model and we believe in the coming 3 years, BBM will grow and we'll enter into an acceleration phase. We are quite excited about that, especially for Gap, the biggest brand. We will see a very good trend and improvements. The capabilities are also promising. For premium brands like Hunter and others, the most important thing for us is to build capability in merchandising and marketing. They will also grow quite fast, but building capability is more important. Regarding the BD of new brands, I think we are in a very good situation because we are having quite a big base of our brands from BEC, so when opportunities emerge in the market, we will be the first one to seize them. Recently, we see a lot of brands showing interest, and they trust us. We have such a solid track record for BBM in the past 2 years that people want to work with us. However, we also know what we need to selectively add. In the coming 3 years, we will have new brands, carefully selected, that are better profitable to add to our portfolio.

Wang, Analyst

I have 2 questions. The first one is on the growth outlook for 2026. What are the key upside and downside risks you see based on your expectations? And the second question is how should we think about the capital allocation plan given the AI investment and other investment priorities this year? Can management share our thoughts on shareholder return going forward?

Junhua Wu, Chief Strategy Officer

Sorry, the first one is about the outlook of the business growth in the future 3 years for 2026?

Wenbin Qiu, Chairman and Chief Executive Officer

Yes. Maybe I try to say something; maybe Catherine, you can say more about that because it's expectation. Yes, it is quite exciting goal to achieve because that means we will have more to contribute to our shareholders and investors. To achieve that, of course, we need to improve all aspects of our operations. Our margin expansion needs to be improved as well. So in this case, we're not only treating our customers and employees better, but also giving more return to our investors. In terms of numbers, can we share anything or....

Catherine Yanjie Zhu, Chief Financial Officer

Yes. Okay. Thank you for your question. I think the management is quite confident for the coming 2026. We think it is promising. Of course, we are doing a lot of initiatives, including like the easy part and the brand management segment. So regarding the revenue, we expect a certain number of increases and like BEC segment. If we split into 2 segments, BEC, we expect single-digit increase. For BBM part, we expect a very good number to come. Regarding the non-GAAP operating profit, we are also expecting to double the number compared with the year 2025. We are doing all kinds of initiatives like I mentioned in the call, so I think management is quite confident about that.

Wenbin Qiu, Chairman and Chief Executive Officer

And also Vincent here again. Talking about AI right now, although it is still in an initial phase for the industry to adopt the results, the development of the AI is very fast. We need to keep us very active and agile to keep our pace up with this development. Along with the investment into IT and internal process improvement every year, we put resources there. This year, starting from this year, we have more initiatives from the corporate level. We have several important initiatives but don’t require a lot of investments. Talent will be more important than investments. That’s why we are so confident that we will be the best practice for not only e-commerce but also the apparel industry in China.

Unknown Analyst, Analyst

My question is regarding your development strategy for overseas business. Can management share with us the update regarding your overseas strategies? Can you share your development plan regarding international business?

Wenbin Qiu, Chairman and Chief Executive Officer

Yes. Let me first address some about the international business. Right now, for the priority, of course, BBM and BEC are contributing the major share of our business and growth. So these two are very important. That’s why we talk more about these two sections. For BBM, I think we have made very solid progress, but still, it’s a minor contribution to the whole company and the growth. We are consolidated outside the business outside of China. Hunter is already in Southeast Asia making progress. We have several major e-commerce projects improving and becoming profitable in the region as well. We have opportunities in Korea and also several big projects ongoing in Hong Kong and Taiwan. We see this improving, which is a promising future, and we are confident the growth of international business will be solid, but we are not expecting a big contribution from international business yet in the coming 2 years.

Junhua Wu, Chief Strategy Officer

BBM new brands.

Wenbin Qiu, Chairman and Chief Executive Officer

Yes. I think you just talked about the new brands of BBM as well. Right now, I think we are in a very good situation because we are having a small base of our brands from BEC. When there’s an opportunity emerging in the market, we will be the first one to have the opportunity to work with them. Recently, we see many brands showing interest in working with us. This is a good sign. Right now, not only BBM can work with the brands in a very deep relationship, but also BEC has the capability to do more franchise business with brands, so we see that the coming 3 years will be an acceleration phase.

Operator, Operator

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Wendy Sun for closing comments. Over to you.

Wendy Sun, Senior Director of Corporate Development and Investor Relations

Thank you, operator. On behalf of the Baozun management team, I would like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us again. This concludes the call. Thank you.

Operator, Operator

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.