Vipshop Posts Profit, Enters $1 Bln Club 唯品会公布利润，进入10亿美元级俱乐部
Online discount retailer Vipshop (NYSE: VIPS) emerged as one of China’s most remarkable turnaround stories in 2012, as its shares rallied sharply in the second half of the year after a miserable IPO. Now the company is passing more new milestones, reporting its first-ever profit in the fourth-quarter of 2012 and also entering the relatively small club of Chinese Internet firms that can boast of market values of $1 billion or more. The company has also solidified its position as China’s most valuable publicly traded e-commerce firm, after taking the title from older rival Dangdang (NYSE: DANG) last fall.
Vipshop’s life as a public company didn’t begin very well, as its shares tanked after an IPO nearly a year ago amid a broader investor confidence crisis towards Chinese stocks. But after reaching a bottom last April, Vipshop shares began a remarkable rally and now trade at nearly 4 times their IPO price. The company’s shares have rallied 27 percent in the first 2 months of 2013 alone, giving it a market capitalization of $1.1 billion. That’s nearly 4 times the value for former market leader Dangdang whose shares have moved steadily downward as it fell deeply into the red in China’s ultra-competitive e-commerce market.
So what has been driving this remarkable rally for Vipshop? The answer lies in a single word: profit. While most of China’s e-commerce companies now operate at a loss due to the highly competitive environment, Vipshop turned its first-ever profit in the fourth quarter of last year, reporting net income of $6.3 million versus a net loss of $63.5 million a year earlier. (earnings announcement) The move into the profit column came as revenue nearly tripled to $300 million, and as the company’s margins showed steady improvement.
Even Vipshop’s announcement that it is preparing to boost the amount of its publicly traded American Depositary Shares (company announcement) didn’t seem to discourage investors, who bid up the company’s stock by 5.4 percent after the earning report came out. The company forecast its revenue growth rate would slow a bit in the current quarter, rising around 165 percent from a year earlier from the fourth quarter’s 184 percent growth rate.
So, what do I think about this company and its big turnaround? Over the longer term, Vipshop really does look like an interesting proposition, as it seems to have found a profitable niche in China’s e-commerce market by focusing on lower end, discounted goods. By comparison, Dangdang and other big names like Jingdong Mall and Suning.com (Shenzhen: 002024) have found profits to be much more elusive due to their focus on a broader, general merchandise approach that has put them in direct competition with names like Walmart (NYSE: WMT), Amazon (Nasdaq: AMZN) and domestic e-commerce leader Alibaba.
Dangdang has been losing money for more than a year now due to the stiff competition, and recently rolled out its own plan to become more of a niche player in a bid to return to the profit column. (previous post) Over the shorter term, Vipshop’s shares could be due for a rest, including a possible correction, since they have rallied quite a bit over the last few months on investor appetite for a strong Chinese e-commerce play. But over the longer term, the stock and the company do look like strong bets, as long as Vipshop remains profitable and keeps its focus on the niche discount retailing space.
Bottom line: E-commerce firm Vipshop looks like a strong bet over the long term due to its rapid development as a niche seller of discounted merchandise.
Related postings 相关文章:
