Operator: 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.

Jessie Zheng: 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.

Eric Ya 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 in items that were more relevant to customer preference. We see apparel category achieved positive growth in the first quarter. Super VIP membership extended its double-digit growth. In the first quarter, active’s SVIP customer increased by 18% from a year ago and accounted for 51% of our online spending. This hardcore cohort our customers show clear strength in terms of sales and the revenue growth.

We are keeping a close eye on the broader customer trend. We still see customers still more willingness to spend on family and seasonal essentials and they are gradually catching up on spending in most discretion categories. We remain anchored to the value proposition of discount retail for brands, certainly upon our long-standing merchandising strategy. We are also making change throughout the organization in how we align with growth priorities, operate in greater synergy and deliver unique compelling customer value. Our teams are restructed in a way that 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 driven 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. Its key factors in driven traffic and customer growth. That’s why we believe in the power of merchandising capabilities, which we are leveraged to quickly adapt to trends across fashion apparel, as leisure and family lifestyle categories continuously giving customers more reasons to stay here. One of the best example 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 the brand partner in transforming a customized offering based on customer insights and changing trends. We were 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 to go place for customers to discover affordable on-trend products that they cannot find anywhere else. In the first quarter, we also found view more on expect 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 or through the invite-only provide sales, we are trying to gain traction with customers as a place for fresh sales and trade 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 [indiscernible] our product offering, customers know that we stand behind what we sell.

That’s why our SVIP customers are clearly growing more attract to our platform because of affordable and reliable nature in 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 member received more relevant and rewarding life privileges such as a 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 be improve our AI-powered algorithm to enhance the logic behind search and recommendations. We were leveraging general AI to create high-impact content, including smart mix-and-match content that make product page more compelling and automatic customer review summary that highlight 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 target marketing creatives for diverse platforms and audience, helping enhance customer acquisitions 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 building the unique experience. Against a backdrop of ongoing uncertainty, I’m confident in our teams, who have navigated through several years of our volatility to keep pace with customer trends, doubled down on execution of our strategy and regain growth track. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Mark Wang: Thanks, Eric, and hello, everyone. In the first quarter, we sustained solid profitability despite sales pressure due to muted sentiment on discretionary spend. 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 help 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 mindsight 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 present 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 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 as compared with that in 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 as compared with that in 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 a 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.

Operator: Thank you. [Operator Instructions] Thank you. We’ll now take our first question. First question is from Thomas Chong from Jefferies. Please go ahead.

Thomas Chong: [Foreign Language] Thanks management for taking my question. My question is about the recent consumer sentiment. Can management comment about the monthly GMV trend so far we are seeing in Q2, given a lot of events happening like a tariff, macro headwinds, et cetera, and how we should think about the revenue and the earnings outlook for the full year 2025? And my second question is about the upcoming June 18th campaign. Can management comment about the latest sentiment and how the event is different from last year or similar to last year from an industry perspective? Thank you.

Eric Ya Shen: [Foreign language]

Jessie Zheng: 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 muted start in January and February, actually, we do see some margin improvement in March in terms of sales, and into the second quarter, April plus May to date, we see actually even better sales momentum. And for the 2025 full year outlook, we maintain our view that we are going to regain growth track in the second half — in the third quarter or the fourth quarter after a negative 5% to 0% growth trends in the first half. And on margins, we have a good demand of our overall profitability because of our disciplined investment and also management. So we maintain our view on margins as we are.

We believe that on a full year basis, our net margins will be largely comparable as we had achieved in 2024. And in terms of the second question on the June 18th promotion, actually, you may have noticed that the industry promotion has been quite lengthy. It lasted for a month and consumers are growing accustomed to these promotions and the 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 a 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 a unique quality and off-price value-for-money deals for consumers.

Thomas Chong: Thank you.

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

Alicia Yap: Hi. Thank you. [Foreign Language] Thanks management for taking my questions. I have a question related to the tariff. I understand that our business does not have a direct collaborations with the cross-border sales and also the tariff, but just wonder if some of these excess supply from apparel that’s supposed to aim for the export market, that were temporarily diverted to the domestic market in April or the last couple of months, that actually attract away some of the user demand to the competitor sites. Second quick question is that just wondering if our management or company have any view about potential secondary listing in Hong Kong? Thank you.

Eric Ya Shen: [Foreign Language]

Jessie Zheng: 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 monthly healthcare products or non-US origin products. But overall the exposure is very small. And 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. And 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 et cetera.

We believe over time export companies, especially those with quality supply chain capabilities, will choose domestic market as one of the options for them to gain a wider base of consumers within China. And we are trying to grab any opportunities arising from that in terms of getting access to quality brand supply et cetera. But it takes time.

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

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

Wei Xiong: [Foreign Language] Thank you management for taking my questions. I have two questions. The first one is regarding our SVIP program. We can see the SVIP member growth has been very steady over the past few quarters. Can we please update our strategy here to further drive the SVIP growth going forward? And do we have any goal for the second half and next year? And second, just a quick one. Could management update the competitive landscape change you have seen over the past few weeks amid over the past few months amid the macro uncertainty for the e-commerce competition? Thank you.

Eric Ya Shen: [Foreign Language]

Jessie Zheng: 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 and it continues to be so in Q1 and in Q2 to date. And we think we have a very strong confidence that we can continue to achieve double-digit growth for SVIP customers for the full year of 2025. And 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. And by doing so, we believe that we will increase the retention of SVIP customers as well. And we do believe that over time SVIP contribution 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 and hyper-competitive environment. We believe that the only way for Vipshop to survive and to compete and to win in this e-commerce sector is to remain anchored to the value proposition of discount retail for brands and also 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 in terms of where they choose to shop has always been great merchandise, great prices, and great services. So we will continue to deepen our initiatives in terms to enhance the flywheel from merchandise to value to customer engagement. We believe that by remaining highly focused in discount retail for brands will gradually become the online outlet and this is the gateway for consumers to access our deep discount product offerings.

We will believe we have the capabilities and the capacity to compete and win in this market.

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

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

Eric Ya Shen: [Foreign Language]

Jessie Zheng: Okay. First let me translate your first two questions. In terms of SVIP operating metrics, it has been quite stable. And 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. And we are trying to leverage more unique and exclusive merchandising to increase the loyalty, frequency and across category purchase opportunities for SVIP customers. And we do see a lot of potential there because a lot of because many of our SVIP customers are family shoppers will look to shop across categories for the whole family. And it’s just a matter of time for us to optimize our personalized store recommendation 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. I think in the past quarter, it has increased by a little bit over two percentage points. We have a very stable return policy for customers. And in the past six to seven years, we have been adhering to that policy. So that’s why our return rate has moderated over time to a low-single-digit increase every year rather than dramatic increases on those other some of the other platforms.

Mark Wang: Okay. Jialong, regarding your third question, let me give you a full picture for this point. So although we are facing short-term pressure and the dynamic industry change, we have a solid business model and with disciplined operations and solid execution. So we are confident that we can achieve relatively stable and healthy profit and cash inflow. So we have returned over $3 billion to shareholders since April 2021 in the form of buyback and dividends. And year-to-date we have returned over $400 million to shareholders, which include approximately $250 million in annual dividend distribution and over $150 million through our buyback program. So I would like to emphasize 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.

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

Eddy Wang: [Foreign Language] Thank you management for taking my questions. I have two questions. First is about the trading policy. I noticed that we have a channel on the app, which is focused on the trading program. So just wondering what kind of the sales and incremental sales or GMV actually coming from the trading program. And how should we expect this benefit in the second quarter and the second half? And second question is, I just noticed that we have issued a rate for the Shan Shan Outlets. So is there any kind of the change of the Shan Shan strategy after we get the funding fund rates? Thank you.

Eric Ya Shen: [Foreign Language]

Jessie Zheng: So first on the trading program. The trading program mostly covers home appliances, which is not a strong suit for the Vipshop. And also consumer don’t feel a lot buying home appliances on Vipshop. They don’t have that kind of mind share. So, in total, we expect any contribution from the trading programs will be around 1% of our total GMV. So it’s not going to be to have a meaningful impact on our financial performance.

Mark Wang: Okay. Eddy, thanks for your second question regarding the Shan Shan Outlets lease program. And outlets business in China is huge and fast-growing. The outlets business is a long-proven and profitable offline business, which positioning also a discount retail for brand. Well, Vipshop is also a leading online discount retailer for brand. So definitely we have huge synergies with outlets business, not only from the brand partner side, but also from the user side. At the end of last quarter, we have 20 Shan Shan Outlets. We are one of the largest outlets group in China. And the underlying Ningbo Shanjing outlets has been in operation for 14 years and is one of our best and popular outlets in Shan Shan Group. So we have submitted the lease application documents to the China Securities Regulatory Committee and the Shanghai Stock Exchange for their review and approval.

And the lease could be regarded as a financing platform. We can respond by enrolling more outlet projects into race and the funds can be used to reinvest into new outlet projects and the merger and acquisition of existing projects so which will help us to expand our outlets business more efficiently. Thank you.

Eddy Wang: Thank you.

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

Roger Duan: [Foreign Language] Thank you management for taking my question. My question is on sales, marketing, and margins for this year. Management previously mentioned that we want to have GMV return to positive growth in the second half of the year, while also maintaining a quite stable margin profile for the remainder of the year. So my question is on how should we think about your marketing campaign cadence and the balance between spending on marketing and maintaining margin profile for the year? Thank you.

Eric Ya Shen: [Foreign Language]

Jessie Zheng: In terms of marketing spend actually marketing spend has been very measured and we are going to be that for the rest of the year. If you look at our numbers in 2024, marketing expense as a percentage of our total revenue was 2.7% and in Q1 it was 2.8% and for the full year we believe it’s going to be within 3%. And we continue to evaluate the effectiveness of our marketing initiatives from a lot of perspectives especially on the LTV side. So we don’t believe that marketing spend is the only way to drive customer growth. We believe a combination of merchandise value and services do help drive our customer growth. If you look at our Q1 and Q2 growth in new customers, actually, they are growing nicely, but we actually don’t spend so much on marketing.

And of course we are trying to diversify our marketing channels, including branding through TV sponsorships and target marketing on a lot of external channels and we are also expanding our partnerships with major media outlets. And we are trying to look for the most valuable channels for us to invest that we can have the best ROI and also have a sustainable growth in high quality customers. So basically we have a very good command of our marketing spend and so we don’t think it’s going to be a drag for our margins.

Operator: 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.

Jessie Zheng: Thank you for taking the time to join us today. If you have any questions, please don’t hesitate to contact our IR team. So we look forward to speaking with you next quarter.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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