FAST NEWS: Vipshop’s Profit Rises on Cost Cuts, Even as Revenue Falls

The latest: E-commerce company Vipshop Holdings Ltd. (VIPS.US) on Friday reported its revenue fell 17% year-on-year to 24.5 billion yuan ($3.6 billion) in the second quarter, while its profit rose 17% to 1.3 billion yuan.

Looking Up: The company cut its operating costs by 19% during the quarter to 3.9 billion yuan. As a result, its gross margin improved to 20.5% from 20.1% a year earlier, which was a big factor behind the profit improvement.

Take Note: The company blamed the revenue decline on weak consumer demand due to a “challenging macro environment” caused by China’s recent strict pandemic-control measures. It forecast revenue would continue to decline by between 10% and 15% in the third quarter.

Digging Deeper: Vipshop rose to fame as an e-commerce company selling brand-name merchandise to online shoppers at a discount, similar to the “outlets” style model in the west. Despite its relatively old age – the company was founded in 2008 – Vipshop has managed to fend off challenges from numerous rivals by staying focused on its core areas and not trying to directly compete with much bigger names like Alibaba (BABA.US; 9988.HK) and JD.com (JD.US; 9618.HK). The company was an investor darling for many years, with its shares soaring as high as $37 last year from a split-adjusted IPO price of just $0.65. But the stock has lost more than two-thirds of its value from that high as it slipped into revenue contraction.

Market Reaction: Vipshop’s shares rose 3.9% to $9.99 on Friday after its latest announcement. The stock is up nearly 20% this year, and now trades in the middle of its 52-week range.

Reporting by Doug Young

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