Vipshop (VIPS) is up 7% premarket after beating Q4 estimates and guiding Q1 above consensus last night. Vipshop is a leading online discount retailer for brands in China.
Fourth quarter revenue rose 27% to RMB24.1 billion ($3.7 billion) versus guidance for 20-25% growth as total orders increased 27% 104.2 million. Non-GAAP net income diluted ADS was RMB1.41, or $0.22, as compared with RMB1.58 in the prior year period. Management said logistic efficiency improved.
Vipshop guided for first quarter revenue up 20-25% to RMB19.1-19.9 billion, above estimates.
The stock is up nearly 100% since the company announced a strategic investment of ~$863 million from Tencent (TCEHY) and JD.com (JD) in December. As a result, Tencent and JD.com beneficially own ~7% and 5.5%, respectively, of Vipshop. Tencent and JD.com have the right to appoint a director and an observer, respectively, to Vipshop's board of directors. In order to maintain director and board observer rights after the lock-up period, Tencent and JD.com have to increase their holdings of Vipshop's total shares issued to 12% and 8%, respectively, unless otherwise agreed to by Vipshop.
Concurrently with the strategic investment, Tencent, JD.com and Vipshop established strategic partnerships, through which Vipshop will have traffic access on WeChat Wallet, JD.com's main page, and JD.com's WeChat Discovery shopping portal. This is a huge deal for Vipshop as Tencent is the internet giant of China and JD is the second largest online retailer.
As a result of the partnership, management said customer acquisition costs should come down. Vipshop will still have a flash sales model but will adjust it accordingly for its new partners.
The company continues to plan growing the top line as fast as possible while maintaining a stable margin and reinvesting in the business.
The spin-off of the internet finance business was delayed due to the new partnership, but should be completed in the coming quarters. Customers in that unit were up 107% to 5 million.
Vipshop has a ~$11.5 billion market capitalization and trads at ~20x earnings estimates.