Chinese online retailer Vipship Holdings Ltd. beat Wall Street expectations in the third quarter as it showed strength in China’s highly competitive e-commerce space. The question remains, however, whether the major discount e-tailer and its high-end online shop, VIPLux, can continue to grow as the Chinese economy shows signs of slowing down.
The company reported revenue growth of 16.4 percent year-on-year to 2.6 billion (RMB 17.8 billion). While that figure shows slowing sales growth for the company, it met Vipshop’s August guidance of 13-18 percent growth and beat analysts’ forecasts.
Vipshop’s revenue growth can be partly attributed to the 11 percent year-on-year growth in active users, which totaled 25.6 million as of the end of the third quarter. The company also saw a 29 percent increase in order volume in the quarter.
The mismatch between order volume and revenue growth may concern some investors, however, as it indicates the company is offering greater discounts. Vipshop added that overall spending per customer increased 5 percent from the previous year.
Another bright spot for the company is that it reported there are 2.3 million customers enrolled in Vipshop's Super VIP Paid Membership Program, up 21 percent from the previous quarter. The program gives customers early and exclusive access to sales, special discounts, as well as free shipping and returns.
Meanwhile, as adjusted earnings per share declined more than 10 percent from the previous year, it still beat Wall Street forecasts. The company had missed analysts’ estimates in the previous two quarters.
Vipshop noted that it plans to grow its customer base while retaining its repeat customers, which accounted for 96 percent of orders in the quarter. It will also expand the brands and products it offers, particularly international brands that are in higher demand in China. The brand expansion, including luxury labels, has been part of the company's strategy since last year.
The company cautioned that it expects decelerating growth to continue and again guided for 8-13 percent revenue growth for the fourth quarter. The results may hinge on the Chinese government supporting e-commerce in the face of a continued trade war with the U.S. that has put more pressure on an already slowing economy.
While U.S. markets opened lower on Thursday, shares of Vipshop on the New York Stock Exchange were up over 8 percent at midday. The stock is still trading significantly below its 52-week high of 19.14 following a precipitous fall since February.