Vipshop Reports 4th Quarter and Full Year 2012 Financial Results [Manufacturing Close - Up]

(Manufacturing Close - Up Via Acquire Media NewsEdge) Vipshop Holdings Limited, an online discount retailer for brands, announced its unaudited financial results for the quarter and full year ended December 31, 2012.

Fourth Quarter 2012 Highlights -Net revenues increased by 184.8 percent over the prior year period to US$299.6 million, primarily attributable to a 176.9 percent increase in the number of active customers from 934,000 to 2.6 million and a 191.2 percent increase in total orders from 3.0 million to 8.8 million.

-Gross margin increased to 22.9 percent from 20.0 percent in the prior year period and 22.3 percent in the third quarter of 2012.

-Non-GAAP income from operations was US$7.2 million, as compared to a non-GAAP loss from operations of US$11.1 million in the prior year period. Non-GAAP operating income margin[4] was 2.4 percent, compared to a non-GAAP operating loss margin of 10.6 percent in the prior year period and a non-GAAP operating loss margin of 0.7 percent in the third quarter of 2012.

-Net income attributable to ordinary shareholders was US$6.3 million, compared to a net loss attributable to ordinary shareholders of US$63.5 million in the prior year period. Net income margin was 2.1 percent, compared to a net loss margin of 60.4 percent in the prior year period and a net loss margin of 0.9 percent in the third quarter of 2012.

-Non-GAAP net income attributable to ordinary shareholders[5] was US$8.1 million compared to a non-GAAP net loss of US$11.2 million in the prior year period. Non-GAAP net income margin[6] was 2.7 percent compared with a non-GAAP net loss margin of 10.6 percent in the prior year period and a non-GAAP net income margin of 0.4 percent in the third quarter of 2012.

Full Year 2012 Highlights -Net revenues increased by 204.7 percent for the full year of 2012 to US$692.1 million, primarily attributable to a 175.7 percent increase in the number of active customers from 1.5 million to 4.1 million and a 201.5 percent increase in total orders from 7.3 million to 21.9 million.

-Gross margin increased to 22.3 percent from 19.1 percent in the prior year.

-Non-GAAP loss from operations decreased to US$4.3 million from US$33.0 million in the prior year. Non-GAAP operating loss margin improved to 0.6 percent from 14.5 percent in the prior year.

-Net loss attributable to ordinary shareholders decreased to US$9.5 million from US$156.5 million in the prior year period. Net loss margin improved to 1.4 percent from 68.9 percent in the prior year period.

-Non-GAAP net loss attributable to ordinary shareholders was US$1.9 million compared to a non-GAAP net loss of US$82.6 million in the prior year. Non-GAAP net loss margin was 0.3 percent compared with a non-GAAP net loss margin of 36.3 percent in the prior year period.

Eric Shen, Chairman and CEO of Vipshop, noted, "We are very proud of achieving another major milestone by reaching GAAP profitability in the fourth quarter of 2012. Over the past year of being a publicly traded company, we have successfully, consistently and now, profitably executed upon an e-commerce model that is significantly differentiated from other industry players. As compared to conventional on-line marketplaces or large-scale multi-category online retailers, we have successfully created and proven there is a third e-commerce model that can provide tremendous scale and profitability. By providing special offers and deep discounts on branded products, we have pioneered the online discount retail model in China and become the expert and leader trusted by our customers and brand partners alike. The success of our model is evidenced by the fact that we more than tripled our revenues in 2012 and significantly expanded our customer base, brand partnerships, sales volume and fulfillment capabilities. As we continue to grow, we will remain focused on improving our special offers and shopping experience for customers, expanding our logistics platform that is unique to our business model, cementing brand partnerships, and strengthening our specialized merchandising expertise. These advantages will further increase the significant barriers to entry and expand our leadership in China's booming online retail market." Donghao Yang, CFO of Vipshop, noted, "We are pleased with our exceptional growth in both top line and bottom line, which exceeded consensus estimates. Our continued efforts in optimizing and expanding our product offerings allowed us to further leverage the scale effects inherent in our business in attracting online shoppers and brands. Looking forward, we see expanding market opportunities ahead of us driven by China's growing population of online shoppers eager to buy branded products at bargain prices. Through our increased scale and improved operational efficiency, we remain confident in our capabilities to keep up with this surging demand, while delivering sustainable growth over the years to come." Fourth Quarter 2012 Financial Results NET REVENUES In a release on February 21, the Company noted that net revenues for the fourth quarter of 2012 increased by 184.8 percent to US$299.6 million from US$105.2 million in the prior year period, primarily driven by growth in the number of active customers and total orders.

The number of active customers for the fourth quarter of 2012 increased by 176.9 percent to 2.6 million from approximately 934,000 in the prior year period. The number of total orders for the fourth quarter of 2012 increased by 191.2 percent to 8.8 million from 3.0 million in the prior year period. This increase was primarily due to the Company's continued efforts to optimize brand and product selection, increase the number of sales events and increase the number of SKUs available on its website. In addition, the Company's regional warehouse expansion into Shanghai, Chengdu and Beijing has enhanced its ability to accommodate increased demand from end customers.

GROSS PROFIT Gross profit for the fourth quarter of 2012 increased by 227.4 percent to US$68.7 million from US$21.0 million in the prior year period. This reflects both the significant increase in net revenues as well as continued margin expansion. Gross margin increased to 22.9 percent in the fourth quarter of 2012 from 20.0 percent in the prior year period and 22.3 percent in the third quarter of 2012. This increase is attributable to the Company's increased bargaining power with its suppliers due to increased purchasing scale.

OPERATING INCOME AND EXPENSES Total operating expenses for the fourth quarter of 2012 decreased by 24.4 percent to US$64.1 million from US$84.8 million in the prior year period, primarily due to decreased share-based compensation charges, offset by an increase in fulfillment, marketing, technology and content and general and administrative expenses in line with the increased net revenues. As a percentage of net revenues, total operating expenses decreased to 21.4 percent from 80.6 percent in the prior year period and 24.7 percent in the third quarter of 2012.

- Fulfillment expenses increased by 90.9 percent to US$37.4 million from US$19.6 million in the prior year period, primarily reflecting the increase in sales volume and number of orders fulfilled. As a percentage of net revenues, fulfillment expenses decreased to 12.5 percent from 18.6 percent in the prior year period and 13.9 percent in the third quarter of 2012, which reflects the Company's strategy of shifting towards using regional and local delivery services and capacity expansion of regional warehouses. The sequential improvement in fulfillment expenses as a percentage of net revenues also reflected the seasonality associated with increased average revenue per order due to higher priced winter season products.

- Marketing expenses increased by 85.9 percent to US$12.5 million from US$6.7 million in the prior year period. As a percentage of net revenues, marketing expenses decreased to 4.2 percent from 6.4 percent in the prior year period and 4.7 percent in the third quarter of 2012, demonstrating the Company's ability to control marketing expenses by retaining repeat customers and achieving high growth of new customers through word-of-mouth referrals.

- Technology and content expenses increased by 112.5 percent to US$6.3 million from US$3.0 million in the prior year period, primarily reflecting the Company's continued efforts to invest in its website and IT systems to better support future growth. As a percentage of net revenues, technology and content expenses remained stable at 2.1 percent compared with 2.8 percent in the prior year period and 2.1 percent in the third quarter of 2012.

- General and administrative expenses decreased by 85.8 percent to US$7.9 million from US$55.5 million in the prior year period, primarily due to decreased share-based compensation expenses. As a percentage of net revenues, general and administrative expenses decreased to 2.6 percent compared with 52.8 percent in the prior year period and 4.1 percent in the third quarter of 2012, reflecting the effect of the decrease in share-based compensation expenses, the Company's increased operational leverage as well as continued cost- control efforts.

Income from operations was US$5.4 million, compared to a loss from operations of US$63.5 million in the prior year period reflecting the growing scale of the Company's operations, improved gross margin and costs control. Operating income margin was 1.8 percent, compared to an operating loss margin of 60.3 percent in the prior year period and an operating loss margin of 2.1 percent in the third quarter of 2012.

Non-GAAP income from operations, which excludes the impact of share-based compensation expense, was US$7.2 million, compared to a non-GAAP loss from operations of US$11.1 million in the prior year period. Non-GAAP operating income margin was 2.4 percent, compared to a non-GAAP operating loss margin of 10.6 percent in the prior year period and a non-GAAP operating loss margin of 0.7 percent in the third quarter of 2012.

NET INCOME/ LOSS Net income attributable to ordinary shareholders was US$6.3 million, compared to a net loss attributable to ordinary shareholders of US$63.5 million in the prior year period. Net income margin was 2.1 percent, compared with a net loss margin of 60.4 percent in the prior year period and from a net loss margin of 0.9 percent from the third quarter of 2012. Net income attributable to ordinary shareholders per diluted ADS was US$0.12, compared to a net loss attributable to ordinary shareholders per diluted ADS of US$2.75 in the prior year period.

Non-GAAP net income attributable to ordinary shareholders, which excludes share-based compensation expenses, was US$8.1 million compared to a non-GAAP net loss of US$11.2 million in the prior year period. Non-GAAP net income margin was 2.7 percent compared with a non-GAAP net loss margin of 10.6 percent in the prior year period and a non-GAAP net income margin of 0.4 percent from the third quarter of 2012. Non-GAAP net income attributable to ordinary shareholders per diluted ADS was US$0.16 in the fourth quarter of 2012 compared to a non-GAAP net loss attributable to ordinary shareholders per diluted ADS of US$0.48 in the prior year period.

For the quarter ended December 31, 2012, the Company's weighted average number of ADSs used in computing diluted income per ADS was 52,514,478.

As of December 31, 2012, the Company had cash and cash equivalents of US$124.5 million and held-to-maturity securities of US$86.1 million.

For the fourth quarter of 2012, net cash from operating activities was US$86.0 million.

Full Year 2012 Financial Results Net revenues increased by 204.7 percent year-over-year for the full year of 2012 to US$692.1 million, primarily driven by growth in the number of active customers and total orders.

The number of active customers for the full year of 2012 increased by 175.7 percent to 4.1 million from 1.5 million in the prior year. The number of total orders for the full year of 2012 increased by 201.5 percent to 21.9 million from 7.3 million in the prior year. This increase was primarily due to the Company's addition of several regional sub-sites in 2011, as well as continued efforts to optimize brand and product selection, increase the number of sales events and increase the number of SKUs available on its website. In addition, the Company's regional warehouse expansion into Shanghai, Chengdu and Beijing has enhanced its ability to accommodate increased demand from end customers.

Gross profit increased by 256.4 percent to US$154.5 million for the full year of 2012 from US$43.3 million in the prior year. Gross margin increased to 22.3 percent from 19.1 percent in the prior year. This increase was attributable to the Company's increased bargaining power with its suppliers due to increased purchasing scale.

Loss from operations for the full year of 2012 decreased by 88.8 percent to US$11.9 million from US$106.9 million in the prior year, reflecting the growing scale of the Company's operations, improved gross margin and costs control. Operating loss margin improved to 1.7 percent from 47.1 percent in the prior year.

Non-GAAP loss from operations for the full year of 2012 decreased to US$4.3 million from US$33.0 million in the prior year. Non-GAAP operating loss margin improved to 0.6 percent from 14.5 percent in the prior year.

Net loss attributable to ordinary shareholders decreased to US$9.5 million from US$156.5 million in the prior year. Net loss margin improved to 1.4 percent from 68.9 percent in the prior year. Net loss attributable to ordinary shareholders per diluted ADS was US$0.21, compared to a net loss attributable to ordinary shareholders per diluted ADS of US$6.77 in the prior year.

Non-GAAP net loss attributable to ordinary shareholders decreased to US$1.9 million from US$82.6 million in the prior year. Non-GAAP net loss margin improved to 0.3 percent from 36.3 percent in the prior year. Non-GAAP net loss attributable to ordinary shareholders per diluted ADS was US$0.04 compared to a non-GAAP net loss attributable to ordinary shareholders per diluted ADS of US$3.57 in the prior year.

For the full year ended December 31, 2012, the Company's weighted average number of ADSs used in computing diluted loss per ADS was 44,424,603.

Business Outlook For the first quarter of 2013, the Company expects its net revenues to be between US$265 million and US$270 million, representing a year-over-year growth rate of approximately 162 percent to 167 percent. These forecasts take into consideration the seasonality associated with the Chinese New Year holiday period and reflect the Company's current and preliminary view on the market and operational conditions, which are subject to change.

Report information: http://www.ir.vipshop.com ((Comments on this story may be sent to newsdesk@closeupmedia.com)) (c) 2013 ProQuest Information and Learning Company; All Rights Reserved.

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