Vipshop Bounces Back After Blowout Earnings
Image source: Vipshop.
It's been a good month for Chinese online retailers. Shares ofVipshop (NYSE: VIPS)initially moved higher in after-hours trading on Monday after posting blowout financial results. Revenue climbed 49% to $2.02 billion, comfortably ahead of the $1.9 billion that Wall Street pros were targeting.
Gross profit, operating profit, adjusted income from operations grew between 44% to 47%, in line with Vipshop's top-line spurt. Net income moved just 13% higher, but that was weighed down by a one-time investment impairment loss as well as lower interest income. Vipshop's adjusted earnings rose 31% to $0.17 a share, besting the $0.15 a share that analysts were forecasting. The online discounter of brand-name apparel and related accessories has now handily beaten Wall Street profit targets for three quarters in a row, but that wasn't enough to save Vipshop last time out.
The stock took a 12% hit the day after posting its first-quarter results in May. It may have delivered better-than-expected results on the bottom line, but revenue growth of 41% fell just short of analysts projections. Its guidance at the time for the second quarter -- calling for year-over-year revenue growth of 37% to 42% -- also failed to inspire the bulls.
It was clearly a different story this time around. Vipshop's 49% surge on the top line blew past that guidance range. It also represents sequential top-line acceleration. The 41% year-over-year growth in net revenue for the first quarter was its weakest showing as a public company. It was comforting to see that the bar didn't get lower this time around.
Shopping around
There are now 23 million active customers for Vipshop, 62% more than a year earlier. They placed 54% more orders during the quarter than they did during the second quarter. The average order size may be shrinking -- revenue growth didn't keep with the order volume -- but it's hard to nitpick when Vipshop is clearly making it up in volume.
The return to accelerating growth and busting through its guidance comes at a great time. Vipshop stock was one of the biggest winners between 2012 and 2014, soaring174%, 370%, and 133% in each of those years, respectively. You won't find too many stocks that more than double three years in a row. All of those gains led to a 10-for-1 stock split in late 2014.
Vipshop proved mortal in 2015. It slipped 22% last year. However, it was trading marginally higher in 2016 just ahead of yesterday's strong quarterly report.
The accelerating growth isn't likely to continue. Vipshop is only targeting 37% to 43% in revenue growth for the current quarter. Then again, that's in line with the 37% to 42% growth that it was forecasting for the second quarter, and we now know how conservative that outlook turned out to be. If we're back in the mode that Vipshop was from 2012 to 2014, when it would routinely bump guidance higher and blast through it, the stock could be gearing up for an encore as a market darling.
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