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Baozun's (BZUN) Earnings and Revenues Improve Y/Y in Q3

Zacks Equity Research

Baozun Inc.’s BZUN third-quarter 2019 non-GAAP net income per ADS was RMB 0.99 (14 cents), up 15% from the year-ago period.

The company’s revenues also surged 35.3% year over year to RMB 1,503 million ($210.3 million).

Strong growth in Gross Merchandise Volume (GMV) was a key driver. However, termination of service agreement with one of the company’s electronics brand and a challenging macroeconomic environment are a downside.

Nonetheless, despite macro challenges, resilience in the ecommerce sector is a positive.

Quarterly Details

Services revenues rose 38.7% from the year-earlier quarter to RMB 840.8 million ($117.6 million). Strong growth in the company’s consignment model and the service fee model as well as its digital marketing services drove results.

Product sales revenues of RMB 662.3 million ($92.7 million) were up 31.3% year over year as well, driven by the growing popularity of brand partners’ products, acquisition of new brand partners and the company’s effective marketing plus promotional campaigns.

Further, during the quarter under review, total GMV expanded 42.8% to RMB 9,081.8million. Notably, the company’s non-distribution business saw 44.3% growth in GMV.

Baozun’s number of brand partners climbed to 223 at the end of the third quarter from 172 in the same period last year. Number of GMV brand partners increased to 214 from 166 in the prior year. The newly added brands are mainly in the high premium apparel and FMCG categories.

Baozun Inc. Price, Consensus and EPS Surprise

Baozun Inc. Price, Consensus and EPS Surprise

Baozun Inc. price-consensus-eps-surprise-chart | Baozun Inc. Quote

Operating Details

On a non-GAAP basis, the company’s operating income was RMB 75.9 million ($10.6 million), reflecting an increase of 24.1% year over year.

Non-GAAP operating margin contracted 40 basis points year over year to 5.1% in the quarter under discussion.

Balance Sheet

Baozun ended the third quarter with cash and cash equivalents and short-term investments of RMB 2,154 million compared with RMB 2,554.8 million sequentially.

Outlook

For the third quarter, revenues are expected between RMB 1.5 billion and RMB 1.55 billion, indicating a 35-40% rise on the back of higher services revenues.

Zacks Rank and Stocks to Consider

Baozun currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are Alteryx, Inc. AYX, Fortinet, Inc. FTNT and CommVault Systems, Inc. CVLT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Fortinet and CommVault Systems is currently estimated at 39.9%, 14% and 10%, respectively.

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