Good morning, ladies and gentlemen, and thank you for standing by for Belgium's first quarter 2026 earnings conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded. Now let's turn the call over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Belgium. Please proceed, Wendy.
Thank you operator. Hello everyone and thank you for joining us today. Our first quarter 2026 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. They have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your On the call today from Baozun, we have Mr. Vincent Chu, Chairman and Chief Executive Officer, Ms. Catherine Zhu, Chief Financial Officer, Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group, and Mr. Ken Huang, Chief Financial Officer of Baozun Brand Management. Ms. Chu will share a first stage about our business strategy and company highlights. Ms. Zhu will then discuss our financials, followed by Mr. Wu and Mr. Huang, who will share more regarding 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. Security Act of 1933 as a mandate. the U.S. Security Exchange Act of 1934 as a mandate, and the U.S. Private Security Letigation Reform Act of 1995. These forward-looking statements are based upon management current expectations and current market and operating conditions and relates to events that involve no or unknown risk, uncertainties, and other factors. All fees are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statement. Further information regarding these and other risks and certainties of factors is included in the company's filings with the U.S. Security and 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 at the date here 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 forelooking statements except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. You may now turn to slide 2 for the executive highlights for the quarter. It is now a pleasure to introduce my chairman and chief executive officer, Mr. Winston Chiu. Vincent, please go ahead.
Thank you, Wendy. Hello, everyone, and thank you for joining us. Q1 2026 was solid throughout. We achieved growth across every key metric, revenue, profitability, and working capital turnover efficiency. For the quarter, group revenue grew 15% year-over-year to $2.4 billion. Non-GAAP operating income turned profitable at $8 million, a significant improvement compared to a loss of $67 million a year ago. Both business lines delivered solid growth in top line and bottom line. Importantly, these are not just financial improvements. They reflect notable progress in sales quality, profitability, and cash generation across both engines. BEC resumed sustainable top-line growth this quarter with a 10% year-over-year revenue increase. Compared with scale, what is even more critical is actually the quality of this growth. We will continue to prioritize our revenue streams towards enhancing business quality, refining service satisfaction, and ultimately improving overall profitability. With growing synergies with BBM and the integration of this brand management mindset, we aim to engage more deeply with our clients, understand their businesses at a gradual level, and collaborate closely to drive sustainable growth. BBM delivered acceleration this quarter, with revenue up 39% year-over-year and continuing improvement in profitability. GAAP reached the operating break-even for the second consecutive quarter. This is especially impressive given the relatively smaller seasonal cycle in the first quarter. We believe this performance is a testament to our methodologies in MMC, merchandising, marketing, and channel. We will continue to leverage this proven approach to nurture smaller, niche brands within our portfolio to expand our addressable market. The strong Q1 results bolster our confidence in the full-year outlook, and more importantly, in our ability to excel during the acceleration phase of our business transformation over the next three years. Our two engines are each playing distinct yet reinforcing roles. BEC is not simply resuming growth. It is becoming a higher quality and a value-driven business. Meanwhile, BBM is accelerating with GAAP on a clear path toward 2026 annual operating break-even. Both engines are performing in sync, and operating synergy is beginning to emerge, opening up broader development opportunities and unlocking new growth potential for a company. Now I'll hand over the call to the team for a deeper dive in your financials and business performance.
Thanks, Vincent, and hello, everyone. now let me provide a more detailed overview of financial results for the first quarter of 2026 please turn to slide number three Fauzun groups total net revenues for the first quarter of 2026 increased by 15 percent year-over-year to 2.4 billion of this total e-commerce revenue grew by 10% to $1.9 billion, while brand management revenue grew by 39% to $538 million. Breaking down e-commerce revenue by business model, services revenue increased 7% year-over-year to $1.4 billion, while BEC product sales revenue increased by 21% year-over-year to $510 million. Please turn to slide number four. From a profitability perspective, gross profits for product sales increased by 33.6% year-over-year to $350 million for the quarter. Our group level blended gross margin for product sales was 33.5%, representing an expansion of 110 basis points year-over-year. Within this, gross margin for e-commerce product sales expanded to 15.9%, reflecting a 98 basis point improvement from 15% a year ago. Gross margin for BVM was 50% for the quarter, compared with 51.6% in the same period of last year. Now, please turn to slide number five for a walkthrough of our OPEC. Sales and marketing expenses increased by $93 million to $893 million. This included an increase of $43 million for BEC, which was mainly due to higher spending on creative content and marketing initiatives on Douyin and Randnot, consistent with growth in digital marketing revenue. BVM sales and marketing expenses increased by $56 million, mainly driven by the expansion of offline stores and marketing activities in the quarter. Fulfillment costs for the quarter decreased slightly by 1% to $519 million, reflecting our ongoing efforts in cost optimization. Technology and content expenses increased by 7% to $125 million, primarily due to more revenue contribution from technology monetization. G&A expenses decreased by 4% to $164 million, reflecting our continued focus on cost control and operational efficiency. Turning to bottom line items, please refer to slide number 6. During the quarter, our non-GAAP income from operations was $8 million, compared to a non-GAAP loss of operations of $67 million in the same period of last year. BC's adjusted non-GAAP income from operations was $13 million, significantly improved from loss of $46 million a year ago. BBVM reported a non-GAAP operating loss of $4.9 million compared with a loss of $21.1 million a year ago. Lastly, with the growing significance of our distribution business across both operating segments, we would like to share key metrics related to capital turnover efficiency and inventory turnover days, first enhancing our transparency and accountability. For the first quarter of 2026, our working capital turnover improved to 109 days compared with 193 days a year ago. Within this, inventory turnover shortened to 113 days from 185 days a year ago. This improvement was driven by both BEC and BBM segments. As of March 31, 2026, our cash equivalents, restricted cash and short-term investments, totaled $2.9 billion. Let me now pass the call over to Junhua to update you on BEC, our e-commerce business.
Thanks, Catherine, and hello, everyone. BEC delivered a solid first quarter, with revenue growing 10% year-over-year and on GAAP operating income of $13 million. A meaningful turnaround from a non-GAAP operating loss of $46 million in the same period last year. This performance reflects both a return to sustainable growth and a meaningful progress on a broader priority of improving revenue quality and expanding margins. Please turn to slide number seven. Our product sales revenue grew 21% year-over-year, with broad-based growth across all key categories, benefiting from both deeper and relationships that improves execution on major platforms. It is encouraging to see apparel product sales deliver high double-digit growth as our efforts to expand into non-standard categories begin to scale. We continue to deepen our engagement with brand partners in refining go-to-market strategies through channel diversification and merchandising segmentation. We are pleased to have achieved not only healthy top-line growth and product sales, but also improvements in gross margin and inventory efficiency. Now, please turn to slide number eight. Services revenue from the quarter grew 7% year over year, led by digital marketing and IT solutions, as well as online store operations. We continue to gain market share in key categories like luxury, sports, and outdoor, reflecting the depth and trust of brand partnerships in these high-value segments. In the recently disclosed 2025 annual rating rewards, we were recognized across major marketplaces as top-tier service provider, achieving a grand slam of awards across all platforms. These recommendations including Timo Six Star Service Provider, JD Gene Excellence Partner, Douyin Diamond Service Provider, Tencent Chien Yu Certified Excellence Partner, and Retno E-Commerce Operation Partner, reflecting our expanding ability to activate brands across an increasingly complex multi-channel landscape. Returning to growth is only part of the story. We are equally focused on the quality of that growth. We have begun conducting comprehensive profitability and productivity analysis across service layers, business models, and a margin continuous by revenue stream. With the explicit goal of concentrating on higher-value work while reducing exposure to lower ROI services, gross margin improvement is an active priority across both our product sales and service business. Lastly, we continue to focus on strengthening our bottom line. To support this, we are rolling out the enterprise-wide lean initiatives to drive operational agility and cost optimization. While scaling the adoption of AI tools across functions to unlock higher productivity, the improvement in quality non-GAAP operating income from a loss of $46 million to a profit of $13 million It's an early and tangible signal of this progress. Multiple AI power tools have already been deployed across daily operations, and we are expected to drive meaningful and efficiency gains. We also have several initiatives aimed at restructing and re-engineering our end-to-end operational process, creating even greater opportunities to capitalize on fast-moving AI advancements. We are encouraged by BEC's first quarter results. Looking ahead, our focus remaining on deepening client relationships, driving service innovation, and continuously improving operational excellence and the margin quality within this business. Now I'll pass to Ken for another date on Baozhen brand management.
Thank you, Junhua, and hello, everyone. Please turn to slide number nine for BBM's performance in the first quarter of 2016. BPM carried its strong momentum into the first quarter, with revenue growing 39% year-over-year. We also achieved significant improvement in the bottom line, with GAAP delivering its second consecutive break-even quarter in non-GAAP operating profits. More encouragingly, the solid growth was driven by gains across key operating metrics, including traffic, conversion, and the average transaction value. Leveraging our omni-channel capabilities and the agile integration, GAAP achieved record same-store sales goals in the 20s in the first quarter. Goals margin remained healthy at 50%, with an optimized commercial strategy during the Spring Festival to maximize traffic and conversion during the peak window. Inventory management also improved significantly with BBM inventory turnover reduced to 114 days from 157 days a year ago. Now let me share our key initiatives around merchandising, marketing, and the channel for GAAP during the quarter. Merchandising, our ability to blend GAAP's American schedule aesthetic with locally appealing features is connecting strongly with our target consumers. Our online segmentation strategy also moved beyond price-driven initiatives toward more fashion-forward and telemedia assortment, an increasingly important driver of our online growth. Underpinning both is improved internal alignment. Our merchandising design and product development teams have operated in close coordination for several quarters, Translating to tighter supply chain executions, stronger vendor relationships, and more consistent cost management. Our Q1 campaign strategy reflected the display in the seasonal sequencing. During Chinese New Year, we activated our Packing of Car collaboration, a new edition of classical hardware, re-interpreting traditional aesthetics through modern design. This marked our second consecutive CNY, anchored by a major culture IP, following the Forbidden City collaboration in first quarter of 2025. In mid-March, we launched our spring Women's Campaign, Flow in the Gap, in collaboration with Downstart Association through expressive movement and storytelling. The campaign explores themes of self-expression and personal growth among modern women. In fact, the women's division was the standard performer during the quarter. Following the successful launch of new stores featuring enhanced visual merchandising and upgraded store image in the fourth quarter, we remodeled and upgraded two additional stores in Beijing, Flora Village, and the Shanghai Hills in Q1. We also combined the charm of traditional Chinese aesthetics with contemporary culture in our newly launched flagship store at Tai Wien Shono Street, creating a unique and engaging shopping experience. The Grand Opening not only drove strong food traffic, but also generated a significant social buzz. We remain on track to deliver our full-year target of 50 new GAP stores openings, including about 10 new stores planned in Q2. Looking beyond the quarter, our April brand ambassador campaign with Chang'e moving forward in GAP continues to outperform. This gives us strong confidence in the momentum and reaffirms the power of well-executed China for China storytelling. Our partnership with Gabin continues to strengthen, including the Victoria Beckham collaboration launched recently and additional IP collaborations planned for the second half of this year. With double-digit top-line goals on track, a second consecutive break-even quarter delivered, we are well positioned to achieve our full-year target. That concludes our prepared remarks. Operator, we are now ready to begin the Q&A session.
Yes. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. Anytime your question has been addressed and you would like to withdraw it, please press star then 2. At this time, we will pause momentarily to assemble the roster. And the first question comes from Frank Tao with CMBI.
Hi, management. Congrats on the solid set of results. Can you help us unpack the drivers behind the strong revenue growth of your BBM business, and how should we think about the growth trajectory in the coming quarters?
The major driver for BBM's growth in the first quarter is from GAAP, and also, I think, from the consumption environment in Q1 because of the effect of winter sale, of the spring festival, and also the climate change, it helps drive more traffic as we expected. So the overall increase objective for us in 2026 is over 20 percent. So in the first quarter, we achieved 39%. And in the coming quarters, we are confident to deliver the 20th increase continuously.
Thank you.
Thank you. And the next question comes from Vicky Wei with Citi.
Thanks, management, for taking my question. So my question is mostly related to consumption sentiment and the June 18th. So, will management share your observation on the current consumption sentiment and the June 18th preparation of brands? What is your expectations for that? And lastly, would you please share some latest updates about debt performance and margin change?
Okay, this is Junhua. So, let me answer your first two questions. First one is regarding the consumer sentiment. So we had a strong Q1 that was due to we had a late CNY and we had a longer period of the Queen's Day. So for the Q1, so we had a very strong finish on the first quarter and we foreseen the consumer sentiment is growing faster. And for the 618 preparation, actually we're in the progress of the 618 right now. So tonight is the night for the second big wave of second campaign. So we're looking forward to also foreseeing a strong finish of 618 this time. Thank you.
And for GAAP's margin, for GAAP, our objective is still to keep a relatively stable gross margin during the year, but try to increase the scale effect through both online and offline channels as well as the BBM headquarters. So by this scale effect, the result is trying to keep improving the store level contribution margin and also in the end of the overall operating margin. Our current performance is on track and also our current expansion plan is also on track.
This is Vincent. Also some more words on this, on the margin trend. Actually, in general, the business is contributed by two parts, BEC and BBM. You can see that BBM with a higher margin, Rana is contributing more growth to the total business. So we can expect the whole business, the margin trend will be improved in the coming quarters. So that is what we are expected. And also, along with the synergy in between BIS and BBM, this gave us more opportunities working with our existing brands in BBB C portfolio, which can give us more, you know, potentials to generate more margin. So that is also a good thing for, you know, general margin trend.
Thank you. And the next question is from Xiaowei Wien of CITICS.
Good evening, Benjamin. Thank you for taking my questions. Congratulations on this quarter's strong performance. I have two questions. The first is regarding BEC, as growth rate across different e-commerce platforms converge, what new trends are emerging in brand marketing budget allocation across different channels? And what impact does this have on the company's service pricing and the bargaining power? And my second question is regarding BBM. In the chairman's letter to shareholders, the company mentioned that it will be very cautious about new brand acquisitions. Could you elaborate on the specific screening criteria, such as category positioning, business scale, profitability level, and or deal structure? Thank you.
Okay, so this is Jinghua. Let me answer your first question. So in terms of the platform allocation between different platforms in terms of the marketing budget, so both platforms and the brands maintain a relatively same CMRTR rate. So we don't see any significant kind of shift or movement about the budget allocation. But in terms of the spending, most of brands are switching a little bit from the traditional performance marketing to the content-driven platform, like Red Note, like Seeding Platform, like creating a lot of creative content facilitated by the AI and powered by Baozun. So, we realized that this kind of new allocation tends to moving from a traditional performance traffic driving to transaction to setting up an emotional linkage before making transactions based on the content driven. So, this is the overall kind of the trend we're seeing for leading brands in different categories. And for those kind of impacts, our company as a service provider, which has the bargaining power, is we can provide an end-to-end solution for all those brands in terms of content creating and the performance marketing. and if the brands are dedicated everything to Belzhen, so we are able to help them to allocate from the oversight to see how do you allocate the overall budget from performance marketing to content-driven to retinal to red cat and then back to the CPS, et cetera. So we can leverage from the omnichannel perspective to use their money wisely.
Hi, Vincent here. Let me talk about the brand acquisition, the soft processes. Yeah, the letter is written by me, not AI, so I can clearly remember this sentence, yeah. In the past three years, I think we have already forged a model, a new model of the development of Baozun. So right now, in the model, we are going to our next phase, which is the acceleration phase. So talking about the standards, when we talk about the new brands to work with, I think the scale is quite important because we want to accelerate. We want to harvest what we have built in the past. So, you know, talking about the scale, we want the bigger scale opportunities. A category-wise, of course, we focus on fashion apparel, which we can utilize the experiences we get from the gap operation process. So that is a category. And also, we want the new opportunities to bring us profit immediately, because we think we run a lot of opportunities, you know, emerges in the market. So we are in a very good position in talking with these kind of potential opportunities because Bozun's model today is very unique and very valuable. No one today or maybe just very, very few ones who can do MMC from our industry, Because in the past, talking about the e-commerce service sector, we only operate the online channel for brands. But right now, channel, we can do both online and offline, and channel is only one factor in the MMC methodology. Right now, we know how to do merchandising, how to do marketing, how to do the channel business together. So in this position, we will be very unique and valuable to all the potential, you know, brands within the BEC portfolio and outside brands. So our position is so good so we can have good opportunities. So our standard will be very high. Yeah. That is what we say, you know, we will be very cautious.
Thank you.
Thank you. And once again, please press star, then one, if you would like to ask a question. And the next question comes from Chris Cowell with Huttai Securities.
Hi, management. Thank you for taking my question. I have two questions. The first one is regarding the AI technology with the advancement of AI technology. Are there any ongoing changes to our service systems and mechanisms for merchants during major promotion events or in our daily operations? And in the long run, how do we view the impact of AI on the key competitive factors in the e-commerce industry? How will the company seize the opportunities and tackle the challenges presented by this shift. And the second question is about the trend in the recent sale. We see that the growth rate of overall online retail sales saw a month on month decline in April with the growth of social retail sales data for apparel also narrowing sequentially. How will our e-commerce business and the brand management business respectively leverage our strength to sustain our RFR growth momentum that outperforms the whole market. Thank you.
Okay. So let me ask you a first question and the first half of the second question. So in terms of the AI, so basically we're leveraging AI mostly focused on our bottom line efficiency. So we know that we have a lot of AI agent which can do automatically do a lot of job in terms of the saving human powers. So right now we have a dedicated team in Baozhen e-commerce services segment to really just leverage a lot of AI technology like large-scale mode and AI agent to increasingly our efficiency like digital assets management, like customer service, And like a lot of kind of the automation work, we used to use a lot of intense labor. And in terms of the top line, we haven't realized that the current public service of AI can really help us to do a creative job because they are learning business mode. So we're leveraging those large-scale mode on a top line more focused on to facilitate our operation team to make decisions. like collecting a lot of competitors' data, digital analytics, and forming a lot of data formats and giving us a lot of kind of the suggestions based on their learning and their data. So that's more focused on the facility that are top-line growing. So in the long run, we will closely work with the large platform like Tmall and the other platform, Alibaba and the other platform, to leveraging their public services, even if they can provide a closed-loop like a GEO kind of services within their ecosystem. And we also will keep maintenance about our in-house system, upgrading our backbone systems based on our AI. So hopefully we can share you more at the end of next year. Thank you. And the second half of the second question is, in terms of the fourth overall business, for online business, we haven't seen a big drop of our online business. So the April visits are still maintaining the same within our budget. So because this is also the beginning of a pre-warm stage before the 6-18 period, so we can realize that a lot of brands, they are saving their budgeting and they are saving their assortment allocation for the 6-18. And the 6-18 kind of campaign has a longer period than last year. So we can realize that within that kind of saving until right now, I mean the beginning of the May so we really just see a big growth compared to the last year in this in the beginning of a 618 campaign. So today is also the first wave of the 618 campaign so we're forward to see that the strong finish will be happening this year for 618.
So that's from the online perspective. And for BPM I think we have proved in Q1 And our alpha growth momentum with a very high growth rate. And even in April, we still continue to keep the growing trend, not only from online, but also from offline through our well-planned marketing activities and merchandise plan. So, for BBM, because first we have a gap, mass market with attractive price range, and we also have hunters, which target different market segments. So I think the BBM, our strength is not to use up any brand value, but try to increase the brand value in the same time of increasing the scale so we have after three years we have already deep understanding of online offline channels our faster reaction to the market changes we also build up strong supply chain of new wear woven and denim we also have approved ability in MMC model So all of this will help us try to meet the consumer's needs. And I think in the end, it's better understand brands, better understand the consumers, and then you gain your alpha growth momentum.
Thank you. And the next question comes from Thomas A. Hong with Jefferies. Your line is live.
Can you hear me? Thanks, management, for taking my question. So, I have two questions. The first one is, can management share some color about the recent amount of self-performance? And my second question is, for different categories, can management share some outlook for different categories like luxury, apparel, FMCG, consumer electronics, and appliance?
So, let me give you the outlook of the category segmentation. So the sports and outdoors still maintain the leadership in terms of the growth of online categories. And the premium and luxury is follow-up with sports outdoor. FMCG still have a very strong, they maintain the similar kind of the growth rate compared to last year. And consider about the, we just after the Queen's Day. So FMCG, especially the cosmetic category, they already just digested too much of the campaign. So they need to just wait a little bit for several months, maybe one or two quarters, until the double 11 coming this year. And the consumer electronics, yes, especially for home appliance and electronical devices. So we have a strong growth rate for the first part of this 618 campaign. So we're looking forward to see a strong finish for consumer electronics category also. So overall, the apparel, fashion apparel category is still taking the lead. Follow up with FMCGI Consumer Electronics. And for recently, the month's sales performance. Catherine, do you want to share some kind of?
Okay, thank you for your question. I think as you see that we have done quite good for the first quarter of 2026. And we are now quite optimistic in several recent months of sales performance regarding our top line and also bottom line. So the management still hold very high confidence for our whole group's performance, including both e-commerce part and also our BVM part. So that's all for the question.
Thank you. And as there are no questions at the present time, I would like to return the floor to Management for any closing comments.
Thank you, Operator. On behalf of the Bowson Management team, we'd 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 today. This concludes the call.
Thank you. As mentioned, that concludes today's presentation. Thank you for attending today's event, and you may now disconnect your lines.