Vipshop Holdings Limited 2026 Q2 Earnings Call

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Hello, everyone, and thank you for joining Vipshop's Second Quarter 2026 Earnings Conference Call. With us today are Eric Shen, our Co-founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made.

Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop shareholders, and non-GAAP net income per ADS are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone. Welcome and thank you for joining our second quarter 2026 earnings conference call. The second quarter presents a challenging retail environment defined by a customer who is not just value conscious, but highly selective across the multi-media promotional landscape. Shoppers was intensely focused on clear utility and real value. Prioritize essentially meet great cautions in discretion categories like apparel, weighing on our near-term top-line performance. In this climate, rather than chasing unprofitable- Unprofitable.

Rather than chasing unprofitable value growth, we stayed true to our core value proposition, delivering a highly curated select of high demand, deeply discounted brand products to our loyal customer base. While overall traffic was muted, our SVIP cohort served as a resilient anchor for our business. During the quarter, active SVIP grew by 8% year-over-year, driving 54% of our online spending, showing that as customer budget tighten, high intent shoppers Prioritize prioritize platforms offering trust, value, quality, and service.

At the strategic level, our 1P model gives us a different edge. By leveraging deep category expertise, we built greater trust with brand partners to the point when they actively adjust that merchandise allocations for our platform. For instance, closer collaborations with key partners in fashion apparel has helped buffer against the broader market awareness. This level of brand integration strengthens our moat and protects our core business. On top of this, our merchandising team has been moving quickly to align our product mix with the more selective customers. We have sharpened our curation along the core apparel and lifestyle essentials, matching our assortment to real life occasions to capture immediate demand. This target approach ensures that we always deliver a clear utility, recognized brand, and compelling value. Our opportunities sourcing strategy adds another layers of inventory flexibility.

As brand partners manage inventory in a softer market, we serve as a reliable off-price partners, locking in unique, high-demand inventory at deep discounts. This reinforces our differentiated merchandise pipeline and forced deep brand collaborations. At the same time, we continue to advance the repositioning of our exclusive Made-for-Vipshop line to drive stronger customer mindshare and loyalty. By raising product standards and aligning the seasonal launches close with brand partners, we are seeing high-quality halo products emerging, lifting conversion rate, and support overall portfolio stability. As we kick off the upcoming season, we are pleased to see that our SVIP membership has hit the 10 million milestone. To continue the momentum, we are launch an integrated campaigns pair with the four collection and the major upgrade to provide sales.

At the core of this push, we are refresh our signature slogan, "Dress the best for 70% less," which has long resonant deep with our loyal base. To ensure we keep evolving alongside the modern Chinese shopper, we are refreshing our campaign reach to both younger and mature demographic while reinforced, enduring true across every market cycle. That shoppers consistently demand great high-quality fashion at unbeatable price. Grounding our mind share in smart value allow us to double down on our off-price advantage, attract high-value shoppers, and drive high-quality growth. Alongside our branding refresh, our customer engagement strategy focused on retention and lifetime value. Real 70% less, saving power our core apparel, delivering pleasant surprise affordability that convince new shoppers. Providing a tailored tiered service model to our SVIP allow us to capture greater wallet share over time.

Making SVIP loyalty as a primary engine of operational stability and profitable growth. Turning to our technology roadmap, we are deepening AI integration across our business. On the custom side, our AI product suites is driving tangible results. Virtual try on thickness is steadily up. Integrate customer Intelligent. intelligent customer service with AI voice interactions and predictive capabilities is lifting conversion rate, and AIGC is enabling faster discovery.

Marketing remains our most impactful up case to date. Our upgraded AI marketing agent now enables optimized from placement planning to AIGC creative matching across the right channels. We see clear room for this integrated approach to further drive acquisitions efficiency while improving customer quality. Operationally, we are scaling AI beyond individual tools into a unified, secured intelligence layer across the business. We are already seeing early win in supply chain optimizations, and daily operational workflows. Overall, we remain focused on disciplined execution today while building towards our long-term vision. While we continue to navigate near term macro headwind with caution, I have full confidence in our proven model, solid foundations, and team.

As we sharpened our merchandising, elevate the customer experience, and scale technology, we are firmly positioned on the pace back to the sustainable growth. Finally, I would like to brief cover Shan Shan Outlet, a key part of our omni-channel discount retail strategy. Since our acquisitions in 2019, we have driven disciplined expansion across emerging tier 1, tier 2, and key cities. Today, Shan Shan has scaled from 5 to 22 operational outlets mall, becoming China's largest outlet chain by store count, and maintain a top-tier position by total GMV. In the first half, Shan Shan Outlet continue its strong scale momentum with over 20% year-over-year growth, capitalizing on the value-seeking trend and the unique in-person shopping experience of offline retail. Looking ahead, we expect its business contributions to the group to increase steadily.

At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Thanks, Eric, and hello, everyone. In the second quarter, our top line came in at the lower end of our guided range, reflecting broad-based softening in consumer sentiment. Despite ongoing pressures, we maintain disciplined execution, which provided strong visibility into our operational trajectory, enabling us to preserve core operating profitability and margin health. As noted in our earning release, our non-GAAP net income was temporarily impacted by a one-time withholding tax adjustment. I will elaborate on shortly. Adjusting for this non-recurring item, our underlying non-GAAP net profit remained solid at RMB2.0 billion, with a net margin of 7.9%, demonstrating our underlying profitability and the core cash generation remains fully intact. As Eric mentioned, quality sustainable growth remains our core priority. While micro headwinds persist, we continue to focus on strengthening our competitive moat and strategically reinvesting to fortify our fundamentals for profitable and long-term expansion.