Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited's First Quarter 2025 Earnings Conference Call. At this time, I would like to turn the call to Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.

Thank you, operator. Hello, everyone, and thank you for joining Vipshop's first quarter 2025 earnings conference call. With us today are Eric Shen, our Co-Founder, Chairman and CEO; and Mark Wang, 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 US 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 Vipshop's shareholders, and non-GAAP net income per ADS are not presented in accordance with the US GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone. Welcome and thank you for joining our first quarter 2025 earnings conference call. Our first quarter results came in largely as expected. We continue to make progress on our path to return to growth. Our team stayed ahead of trend to offer more unique and quality off-price seasonal items that were more relevant to customer preference. We see the apparel category achieved positive growth in the first quarter. The Super VIP membership extended its double-digit growth. In the first quarter, active SVIP customers increased by 18% from a year ago and accounted for 51% of our online spending. This hardcore cohort of customers shows clear strength in terms of sales and revenue growth. We are keeping a close eye on the broader customer trend. We still see customers have more willingness to spend on family and seasonal essentials, and they are gradually catching up on spending in most discretionary categories. We remain anchored to the value proposition of discount retail for brands, certainly upon our long-standing merchandising strategy. We are also making changes throughout the organization in how we align with growth priorities, operate in greater synergy, and deliver unique and compelling customer value. Our teams are restructured in a way that is more aligned and efficient so that they can act with speed to turn potential into growth. We will highlight the strategic priorities to grow the share of branded supply at exceptional value to invest in customer-engaging initiatives that drive traffic, frequency, and multi-category purchases, and to speed up technology advancement that drives value-creation for business. Starting with merchandising, we are focused on the brand and the products where we have made the biggest differences for customers. It's key factors in driving traffic and customer growth. That's why we believe in the power of merchandising capabilities, which we are leveraging to quickly adapt to trends across fashion apparel, leisure, and family lifestyle categories, continuously giving customers more reasons to stay here. One of the best examples in our Made for Vipshop business, which continued to outperform in the first quarter, a total of more than 200 brands joined this program by the end of March. We work closely with our brand partners in transforming a customized offering based on customer insights and changing trends. We are moving fast to deliver a more compelling brand of quality and value. We also have the prominent channel for Made for Vipshop. We expect it to become the go-to place for customers to discover affordable, on-trend products that they cannot find anywhere else. In the first quarter, we have also found view more on expected high fashion selection to keep customers coming back to see what's new. Customers were overjoyed with some of the best views they got, such as Burberry, Coach, and more through the invite-only private sales. We are trying to gain traction with customers as a place for fresh sales and treasure hunting. Turning to customers, we aspire to bring together the best of what they want in a unique shopping experience. On top of the compelling product offering, customers know that we stand behind what we sell. That's why our SVIP customers are clearly growing more attracted to our platform because of the affordable and reliable nature of our business. We have planned to make the loyalty program bigger and better. We are focused on how we could further differentiate it. For example, our customers are often family shoppers who love travel. So new second quarter SVIP members received more relevant and rewarding life privileges, such as gold card upgrades for Chimelong theme park and hotel accommodations and so on. We also increased the power of AI throughout the customer experience in many ways. We will improve our AI-powered algorithm to enhance the logic behind search and recommendations. We are leveraging general AI to create high-impact content, including smart mix-and-match content that makes product pages more compelling and an automatic customer review summary that highlights key insights to help shoppers. We will also apply AI to customer service, handling product inquiries, generating personally related recommendations, and potentially acting as smart shopping assistance. Also, by leveraging general AI, we generate targeted marketing creatives for diverse platforms and audiences, helping enhance customer acquisition efficiencies. So we will continue to invest in opportunities for long-term success. We look to set ourselves apart, provide more than what customers expect, and build a unique experience. Against a backdrop of ongoing uncertainty, I'm confident in our teams, who have navigated through several years of volatility to keep pace with customer trends, doubled down on the execution of our strategy, and regained growth track. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Thanks, Eric, and hello, everyone. In the first quarter, we sustained solid profitability despite sales pressure due to muted sentiment on discretionary spending. As we prudently increased investments in building customer and brand momentum to face growth opportunities, margins softened modestly compared with a year ago, but still held up healthily within our expectations. This underscored our capacity to drive operational efficiency, build on years of efforts, and refining internal management. As Eric mentioned, we are driving important teams within the organization for our long-term success. It will be an enhanced mindset across the business to fund growth, synergy, and efficiency opportunities we can take to the bottom line. We will remain focused on executing these strategic priorities with greater agility while maintaining discipline. Turning to our shareholder return program. Our full year 2025 commitment remains unchanged, returning no less than 75% of the RMB9 billion full year 2024 non-GAAP net income to shareholders. Year-to-date, we have returned over $400 million to shareholders, which includes approximately $250 million in annual dividend distribution and over $150 million in share repurchase. 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 changes are year-over-year changes unless otherwise noted. Total net revenues for the first quarter of 2025 were RMB26.3 billion compared with RMB27.6 billion in the prior year period. Gross profit was RMB6.1 billion compared with RMB6.5 billion in the prior year period. Gross margin was 23.2% compared with 23.7% in the prior year period. Total operating expenses decreased by 1.6% year-over-year to RMB4.0 billion from RMB4.1 billion in the prior year period. As a percentage of total net revenues, total operating expenses were 15.3% compared with 14.8% in the prior year period. Fulfillment expenses decreased by 4.8% year-over-year to RMB1.9 billion from RMB2.0 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.2%, which remained stable compared to the prior year period. Marketing expenses increased by 6.0% year-over-year to RMB732.1 million from RMB690.9 million in the prior year period. As a percentage of total net revenues, marketing expenses were 2.8% compared with 2.5% in the prior year period. Technology and content expenses decreased by 6.8% year-over-year to RMB449.1 million from RMB481.9 million in the prior year period. As a percentage of total net revenues, technology and content expenses were 1.7%, which remained stable compared to the prior year period. General and administrative expenses increased by 2.3% year-over-year to RMB950.8 million from RMB929.1 million in the prior year period. As a percentage of total net revenues, general and administrative expenses were 3.6% compared with 3.4% in the prior year period. Income from operations was RMB2.3 billion compared with RMB2.8 billion in the prior year period. Operating margin was 8.7% compared with 10.0% in the prior year period. Non-GAAP income from operations was RMB2.6 billion compared with RMB3.1 billion in the prior year period. Non-GAAP operating margin was 10.0% compared with 11.1% in the prior year period. Net income attributable to Vipshop's shareholders was RMB1.9 billion compared with RMB2.3 billion in the prior year period. Net margin attributable to Vipshop's shareholders was 7.4% compared with 8.4% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS was RMB3.72 compared with RMB4.18 in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders was RMB2.3 billion compared with RMB2.6 billion in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders was 8.8% compared with 9.3% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS was RMB4.43 compared with RMB4.66 in the prior year period. As of March 31st, 2025, the company had cash and cash equivalents and restricted cash of RMB28.9 billion, and short-term investments of RMB192.3 million. Looking forward to the second quarter of 2025, we expect our total net revenues to be between RMB25.5 billion and RMB26.9 billion, representing a year-over-year decrease of approximately 5% to 0%. Please note that this forecast reflects our current and 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. We'll now take our first question. The first question is from Thomas Chong from Jefferies. Please go ahead.

Thank you, management, for taking my question. I would like to ask about recent consumer sentiment. Could you provide insights on the monthly GMV trend we are observing in Q2, considering various events like tariffs and macroeconomic challenges? How should we view the revenue and earnings outlook for the full year 2025? Additionally, I have a question about the upcoming June 18th campaign. Can you share the latest sentiment surrounding it and how this event compares to last year from an industry standpoint? Thank you.

Can management provide insights on the monthly GMV trend observed in Q2, considering the current consumer sentiment and various events such as tariffs and macroeconomic challenges? How should we approach the revenue and earnings outlook for the full year 2025? Additionally, could management share their views on the upcoming June 18th campaign and how the sentiment around it compares to last year's event from an industry standpoint? Thank you.

Okay. Regarding your first question on consumption. I think in the past few months, we do see signs of improvement in overall consumption sentiment. After a muted start in January and February, we have begun to see some margin improvement in March in terms of sales. Into the second quarter, April plus May to date, we see even better sales momentum. For the 2025 full-year outlook, we maintain our view that we are going to regain growth track in the third quarter or the fourth quarter after a negative 5% to 0% growth trends in the first half. On margins, we have a good demand for our overall profitability because of our disciplined investment and also management. So we maintain our view on margins as we believe that, on a full-year basis, our net margins will be largely comparable to what we had achieved in 2024. In terms of the June 18th promotion, you may have noticed that the industry promotion has been quite lengthy. It has lasted for a month, and consumers are growing accustomed to these promotions and subsidies. Everything is readily available; they actually don’t have to stockpile anything. But they do look for value—they focus on deals. So they are still responding to our promotions. If these are— they do have shopping needs in terms of family and seasonal essentials, but the overall trend becomes quite normalized for everybody. So for Vipshop, we just focus on providing unique quality and off-price value-for-money deals for consumers.

Thank you.

Thank you. We'll now take our next question. This is from Alicia Yap from Citigroup. Please go ahead.

Hi, thank you. I appreciate management for taking my questions. I have one regarding the tariff situation. I understand our business doesn't have direct involvement with cross-border sales and tariffs, but I’m curious if any excess apparel supplies meant for export were temporarily redirected to the domestic market in April or the past few months. Could that have caused some user demand to shift to competitor sites? My second question is whether management or the company has any thoughts on a potential secondary listing in Hong Kong. Thank you.

I am curious if some of the excess apparel supplies intended for export were temporarily redirected to the domestic market in April or the past few months, potentially impacting user demand towards competitor sites. Additionally, I would like to know if management has any thoughts on a possible secondary listing in Hong Kong. Thank you.

Let me translate first. In terms of the tariff question, we have very limited exposure to exports, and we do have a very limited amount of direct purchase from the US market for monthly healthcare products or non-US origin products. But overall, the exposure is very small. In terms of export companies trying to divert their export goods to domestic markets, we do see that because in April we have already started to work with these export companies trying to see the possibilities to help them gain access to our customers on Vipshop. But it takes time because there are a lot of different standards for export versus domestically manufactured products in terms of brand, trademark, and quality certification, etc. We believe over time export companies, especially those with quality supply chain capabilities, will choose the domestic market as one of the options for them to gain a wider base of consumers within China. We are trying to grab any opportunities arising from that in terms of getting access to quality brand supply, etc. But it takes time.

Okay, Alicia, thanks for your question regarding Hong Kong listing. We have been closely following changes in capital market developments and evaluating the option of a Hong Kong listing internally. So we will keep the market posted if there is any progress. Thank you.

Thank you. We'll now take our next question. This is from Wei Xiong from UBS. Please go ahead.

Thank you, management, for taking my questions. I have two questions. The first one is about our SVIP program. We've noticed that the growth of SVIP members has been consistent over the last few quarters. Can we get an update on our strategy to further enhance SVIP growth moving forward? Do we have any targets for the second half of this year and next year? Secondly, could management provide an update on the changes in the competitive landscape that you have observed in recent weeks, especially considering the macro uncertainties in e-commerce competition? Thank you.

I have two questions. The first one is regarding our SVIP program. We have witnessed steady growth in SVIP members over the past few quarters. Can we get an update on our strategy to further drive SVIP growth going forward? Are there any goals set for the second half of the year and next year? Secondly, could management provide an update on changes in the competitive landscape we have observed in recent weeks amid the macro uncertainty in e-commerce competition? Thank you.

First, SVIP customers, we do see very solid momentum in the growth of SVIP customers, and it has extended double-digit growth for several quarters. It continues to be so in Q1 and in Q2 to date. We have very strong confidence that we can continue to achieve double-digit growth for SVIP customers for the full year of 2025. Of course, we are also working on a lot of initiatives to drive the SVIP customer growth, especially in terms of merchandising. We are trying to provide more unique, exclusive off-price product offerings all through invite-only private sales to attract more SVIP customers. By doing so, we believe we will increase the retention of SVIP customers as well. We do believe that over time SVIP contributions in terms of online spending will grow from the current 51% to even higher levels in the foreseeable future. And second, in terms of industry dynamics, apparently, it's a very hyper-competitive environment. We believe that the only way for Vipshop to survive, compete, and win in this e-commerce sector is to remain anchored to the value proposition of discount retail for brands. There are a lot of business models in terms of how to sell the products, including live-streaming platforms or shelf-based e-commerce. But the long-term factors that drive consumers' choices of where to shop have always been great merchandise, great prices, and great services. We will continue to deepen our initiatives to enhance the flywheel from merchandise to value to customer engagement. We believe that by remaining highly focused on discount retail for brands, we will gradually become the online outlet and this is the gateway for consumers to access our deep discount product offerings. We believe we have the capabilities and capacity to compete and win in this market.

Thank you. We will now take our next question. This is from Jialong Shi from Nomura. Please go ahead.

Good evening, management. I have three questions. First, what are the latest trends in shopping frequency and ARPU for Super VIP members? Second, what is the current trend regarding your return rate? Lastly, given the challenges in the e-commerce sector, does management still plan to stick to the previously provided capital return guidance for this year? Thank you.

Good evening management. I have three questions. The first question is, what is the latest trend? What is the latest shopping frequency and ARPU trend for Super VIP members? The second question is, what is the latest trend for your return rate? And the third and last question is, despite all these challenges for the e-commerce industry, I wonder if management still maintains the previous capital return guidance for this year. Thank you.

Okay. First let me translate your first two questions. In terms of SVIP operating metrics, it has been quite stable. Otherwise, we do see a small decline because of the dilutive impact from new SVIP customers who need time to ramp up their spending. But if you look at the two-year cohort of SVIP customers, actually, the ARPU decline is much smaller. We are trying to leverage more unique and exclusive merchandising to increase the loyalty, frequency, and across-category purchase opportunities for SVIP customers. We do see a lot of potential there because many of our SVIP customers are family shoppers who look to shop across categories for the whole family. It's just a matter of time for us to optimize our personalized store recommendations and to increase these to translate this across-category purchase potential into growth. In terms of return rates, overall, the return rates have been stabilized. In the past quarter, it has increased by a little bit over two percentage points. We have a very stable return policy for customers. In the past six to seven years, we have been adhering to that policy. That's why our return rate has moderated over time to a low-single-digit increase every year rather than dramatic increases like some of the other platforms.

Okay, Jialong, regarding your third question, let me give you a full picture for this point. Although we are facing short-term pressure and the dynamic industry change, we have a solid business model and disciplined operations with solid execution. So we are confident that we can achieve relatively stable and healthy profit and cash inflow. We have returned over $3 billion to shareholders since April 2021 in the form of buybacks and dividends. Year-to-date, we have returned over $400 million to shareholders, which includes approximately $250 million in annual dividend distribution and over $150 million through our buyback program. I would like to emphasize that for 2025, as we mentioned before, we are going to return no less than 75% of our full-year 2024 non-GAAP net income to shareholders in discretionary share repurchase and dividend distribution. Thank you.

Thank you. We'll now take our next question. This is from Eddy Wang from Morgan Stanley. Please go ahead.

Thank you management for addressing my questions. I have two inquiries. First, concerning the trading policy, I noticed there's a dedicated channel on the app for the trading program. I'm curious about the sales and incremental sales or GMV that are generated from this program. What benefits should we anticipate for the second quarter and the latter half of the year? My second question is regarding the rate issued for the Shan Shan Outlets. Has there been any change in the Shan Shan strategy following the recent funding? Thank you.

Thank you for your questions. The first question is about the trading policy and the performance of the trading program on our app in terms of sales and incremental sales or GMV. We anticipate that this will contribute positively in the second quarter and the latter half of the year. Your second question relates to the Shan Shan Outlets and any strategic changes following our recent funding. Thank you.

So first on the trading program. The trading program mostly covers home appliances, which is not a strong suit for Vipshop. Also, consumers don't have much of a mindset for buying home appliances on Vipshop. In total, we expect any contribution from the trading programs will be around 1% of our total GMV, so it's not going to have a meaningful impact on our financial performance.

Okay, Eddy, thanks for your second question regarding the Shan Shan Outlets lease program. The outlets business in China is huge and fast-growing. It is a long-proven and profitable offline business, which is also positioned as discount retail for brands. Vipshop is also a leading online discount retailer for brands. So definitely we have huge synergies with the outlets business, not only from the brand partner side but also from the user side. At the end of last quarter, we had 20 Shan Shan Outlets. We are one of the largest outlets groups in China, and the underlying Ningbo Shanjing outlet has been in operation for 14 years and is one of our best and most popular outlets in the Shan Shan Group. We submitted the lease application documents to the China Securities Regulatory Committee and the Shanghai Stock Exchange for their review and approval. The lease could be regarded as a financing platform, and we can respond by enrolling more outlet projects into the race, and the funds can be used to reinvest into new outlet projects and the merger and acquisition of existing projects, which will help us to expand our outlets business more efficiently. Thank you.

Thank you. We'll now take our next question. This is from Roger Duan from Barclays. Please go ahead.

Thank you, management, for taking my question. My question is about sales, marketing, and margins for this year. Management previously mentioned the goal of having GMV return to positive growth in the second half of the year while maintaining a stable margin profile for the rest of the year. So, how should we think about your marketing campaign schedule and the balance between marketing spending and maintaining the margin profile for the year? Thank you.

Thank you, management, for taking my question. My question is about sales, marketing, and margins for this year. Management previously indicated a desire for GMV to return to positive growth in the second half of the year, while also aiming to keep a stable margin profile for the remainder of the year. I’m interested in understanding your marketing campaign schedule and how you plan to balance marketing expenditures with maintaining the margin profile for the year. Thank you.

In terms of marketing spend, actually, marketing spend has been very measured, and we are going to maintain that for the rest of the year. If you look at our numbers in 2024, marketing expenses as a percentage of our total revenue was 2.7% and in Q1 it was 2.8%. For the full year, we believe it's going to be within 3%. We continue to evaluate the effectiveness of our marketing initiatives from various perspectives, especially on the LTV side. We don't believe that marketing spend is the only way to drive customer growth. We believe that a combination of merchandise value and services helps drive our customer growth. If you look at our Q1 and Q2 growth in new customers, actually, they are growing nicely, but we don't think we spent so much on marketing. Of course, we are trying to diversify our marketing channels, including branding through TV sponsorships and target marketing on many external channels, and we are also expanding our partnerships with major media outlets. We look for the most valuable channels for us to invest in that provide the best ROI and also have sustainable growth in high-quality customers. We have a very good command of our marketing spend, so we don't think it's going to be a drag on our margins.

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.

This concludes today's conference call. Thank you for participating. You may now disconnect.