Secoo Beats Forecasts as Competitors Push into Territory

Chinese luxury e-commerce company Secoo Holding Limited saw a significant surge in revenue in the third quarter, rising 60.1 percent year-on-year, making it and Vipshop the only companies to beat expectations for the quarter.

Secoo beat revenue estimates with $228.9 million (RMB 1.572 billion) in the quarter. In its second quarter earnings call, the company predicted a revenue increase of 36-40 percent year-on-year to RMB 1.34 billion-1.37 billion due to a 59.7 percent year-on-year increase in orders as well as rising advertising sales.

CEO Richard Li said in a statement that the company’s number of monthly active users in the quarter increased 91 percent from the previous year. He added that Secoo has brought in 97 new brands to sell on their platform — including LVMH’s beauty brand Cha Ling and Calvin Klein — as a way to attract more users.

The company, which competes in a crowded market that’s currently dominated by e-tail giants Alibaba and JD.com, turned from a loss per share of RMB 0.61 in the third quarter last year to an earnings per share of $0.25 (RMB 1.74). Profits increased 31.7 percent year-on-year despite a gross margin of only 17.2 percent, which is a slight improvement from 17 percent in the same quarter last year. Its larger competitors, however, saw their margins slip in the quarter.

Secoo said it expects revenue to rise 35-42 percent year-on-year in the fourth quarter to RMB 1.9 billion-2 billion. The company, however, will have to face rising competition as JD.com’s TopLife and Alibaba’s Luxury Pavilion continue to make significant inroads into the luxury e-commerce space.

In terms of revenue, Secoo holds a small share of China’s e-commerce market. In comparison, JD.com reported 3Q revenue of $15.3 billion (RMB 104.8 billion) and Alibaba reported $12.4 billion (RMB 85.1 billion). Its closest competitor by revenue in the sector is Vipshop, which reported $2.6 billion (RMB 17.8 billion) in 3Q revenue.

As markets continue to digest the meeting between Presidents Donald Trump and Xi Jinping, they have given back much of Monday’s gains. This positive news from Secoo has not helped its stock much on the Nasdaq, which is up 3 percent on the day at $10.97 at midday.

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