Vipshop Q1 Revenue Drops Amid COVID-19 Pandemic but Still Beats Estimates

Chinese online retailer Vipshop reported sliding revenues and profit in the first quarter of 2020 as the COVID-19 pandemic disrupts logistic services and supply chains, according to the company’s earnings results released Wednesday.

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Vipshop’s net revenues for the first quarter of 2020 dropped 11.7% year on year to RMB 18.8 billion ($2.7 billion), though it still beat the average estimate of $2.54 billion of 11 analysts compiled by Yahoo Finance. The company attributed the decline to soft consumer demand, delayed logistic services, and slow response from the supply chain during the COVID-19 pandemic.

Gross profit shrunk 18.2% to RMB 3.6 billion compared to the same period last year, with gross profit margin dropping slightly to 19.2% from 20.4% from the first quarter of 2019, primarily due to higher revenue contribution from standardized products with lower gross margin during the coronavirus lockdown.

Net income for the first three months of 2020 decreased 21.5% year on year to RMB 684.8 million. Net margin also dropped to 3.6% compared with 4.1% in the same period last year.

The operating expenses of Vipshop saw a sizable 17% year on year decrease during the first quarter, as the company changed its existing fulfillment logistic arrangements and imposed strict cost control during the pandemic.

Despite a tumultuous first quarter, Eric Shen, Chairman and CEO of Vipshop, said the company has been recovering from the impacts of COVID-19. “We are glad to see that daily life in China has returned to normal, and as a result, our business has seen healthy recovery since March. We believe that we are well positioned to gain share in the discount retail market in China, and are committed to continuing to help our suppliers monetize on their excess inventory effectively,” he said.

The company said in the earnings call that it has returned to normal levels of marketing spending in late April and seen strong growth in May. It also intends to use the June promotion as an opportunity to boost the sales of the platform’s suppliers.

Looking ahead, Vipshop estimated its total net revenues for the second quarter of 2020 to be between RMB 22.7 billion and RMB 23.8 billion, representing a year on year growth rate of approximately 0% to 5%, mainly attributable to the continued impact from the COVID-19 pandemic.