Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Baozun Inc (BZUN, Financial) achieved a 3% year-over-year revenue growth in Q2 2024, reflecting ongoing efforts to strengthen core operations.
- The e-commerce segment (BEC) returned to growth after 10 consecutive quarters of contraction, driven by strong performance in services and product sales.
- Baozun Inc (BZUN) successfully integrated Location, a top Douyin partner, into its livestreaming business unit, enhancing its omnichannel value proposition.
- The company received a prestigious Gartner Award for its Direct to Consumer Solutions, highlighting its technological excellence.
- Baozun Inc (BZUN) continues to advance its ESG commitments, with two logistic parks certified as carbon neutral and a partnership with Nike on a shoe recycling program.
Negative Points
- BBM (Brand Management) segment experienced a 10% year-over-year decline in product sales due to weaker consumer sentiment in the fashion apparel industry.
- Gross margin for e-commerce product sales decreased to 11.7%, impacted by a change in category mix and higher cash rebates from brand partners.
- Despite narrowing losses, BBM still faces top-line pressure and cautious consumer sentiment, affecting overall performance.
- The company’s adjusted income from operations was only RMB10 million, indicating modest profitability.
- The macroeconomic environment remains challenging, with weak consumer sentiment and cautious spending impacting overall business performance.
Q & A Highlights
Q: My question is about the recent consumer sentiment and expectations for the Tmall and the non-Tmall. How do we see the competition of e-commerce segment in the second half of the year? And any thoughts on the upcoming Double Eleven? Thanks.
A: From the first half of the year, we have seen a recovery in terms of the Tmall growth compared with last year. Although Douyin’s growth rate is slowing down, it still has a double-digit growth. We think this trend will continue through to the second half of the year. For Double Eleven, we anticipate it will start earlier than last year, and the duration will be longer. The planning is becoming more complex, which creates a value-added opportunity for Baozun to help our brand partners to be successful.
Q: Recently we have seen some e-commerce platforms shifted from price competition to GMV growth. Does this trend influence the advertising strategy of the brands operated by Baozun?
A: The shift to GMV focus is a good opportunity for Baozun. For large-scale brands we operate, this is positive as platforms like Tmall now give more attention to big international brands. This trend aligns well with our strategy and capabilities.
Q: We have seen a good performance of Gap Global this year. Can management share some details about the future trend of Gap fashion design? And will Baozun consider introducing more global styles?
A: We plan to increase our global adoption of Gap Global products, but we will do it season by season based on market feedback. We will adopt Gap's Global products that have been successful globally and use localized fabrics and fittings to meet Chinese customers' needs. We will also continue to expand our self-development on some special categories.
Q: We have observed that you have been engaged in share repurchase in recent quarters. Could you please share your outlook on future share repurchase and long-term plans for shareholder return?
A: We will maintain our pace of share repurchase and strive for better performance across our business categories to turn around the whole business to positive this year. We also plan to develop synergies between business units like BBM and BEC to create new value for our clients and shareholders.
Q: Can management comment on the intensified competitive landscape among e-commerce players in China and how it might have affected or benefited Baozun?
A: The intensified competition has offered more opportunities than challenges for Baozun. Our omnichannel capability, supported by our investment in technology, is a significant competitive advantage. The advisory role of Baozun is becoming more important to our clients, and we are in a good position to innovate together with e-commerce platforms.
Q: Can management share your view on the latest consumption trend into the second half, especially regarding Gap offline store traffic?
A: The overall trend is still weak due to cautious spending by consumers. However, we have seen positive sales growth in August for Gap stores. We will continue to optimize our store locations and expect a year-over-year increase in Gap sales for the second half.
Q: With intensified competition in the e-commerce sector, what is Baozun's core competitiveness and barrier in the next stage of development?
A: Our core competitiveness lies in our focus on customer service, supported by our investment in technology and data. We have also launched lean programs to improve operational efficiency and introduced the exclusive distribution business model to leverage our strengths in e-commerce and digital marketing.
Q: Can management share some updates on your observation of QBT consumption trend and your outlook for the second half? Will there be any adjustments to your business strategy?
A: The overall trend is still weak due to cautious spending by consumers. However, brands that carefully plan their campaigns can still find growth opportunities. We will continue to focus on optimizing our operations and enhancing our product offerings to capture these opportunities.
Q: Regarding the BBM business, how should we think about the loss reduction trajectory amid the current macro backdrop? What are the key priorities for investment to drive long-term growth?
A: We see an opportunity for Gap's business targeting the mass market. We will continue cost optimization and improve our products by adopting successful global designs and investing in new Tier 1 and Tier 2 cities. Our long-term growth will be driven by BEC's growth, BBM's growth, and synergies between the two.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
