Why Vipshop Holdings Shares Plunged Today

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What happened

Shares of China-based e-commerce company Vipshop Holdings Limited (NYSE: VIPS) have plunged today, down by 15% as of 12:00 p.m. EST, after the company reported third-quarter earnings.

So what

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Revenue in the third quarter rose 38% to $1.8 billion, which was driven by a 43% user increase to 20.8 million active customers. Total orders rose 34% to 60.1 million. Non-GAAP net income came in at $89.3 million, or $0.15 per American depositary share. FiveAmerican depositary sharesequals one ordinary share. CEO Eric Shen said the results were solid despite a seasonally soft quarter for retail companies.

Now what

Investors may be concerned about Vipshop's margin compression. Non-GAAP operating margin fell to 6.1%, as operating expenses rose faster than sales and the average customer is ordering less. The company's guidance wasn't particularly inspiring, either. Sales in the fourth quarter are expected to be in the range of $2.6 billion to $2.7 billion, which represents year-over-year growth of 30% to 33%. For more detail, don't miss fellow Fool Rick Munarriz's earnings breakdown here.

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