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Baozun's (BZUN) Earnings and Revenues Increase Y/Y in Q4

Zacks Equity Research

Baozun Inc.’s BZUN fourth-quarter 2018 non-GAAP net income per ADS was RMB 3.46 (50 cents), up 14% from the year-ago quarter.

The company’s revenues surged 41% year over year to RMB 2,202 million ($320.3 million).

Its initiatives to strengthen its omni-channel matrix of solutions with the addition of innovative proprietary tools and its digital marketing services led to solid growth in the reported quarter.

Quarterly Details

Services revenues soared 56.7% from the year-earlier quarter to RMB 1,226.6 million ($178.4 million). A strong uptick in sales from the existing brand partners coupled with new brand partners under Baozun’s consignment model and the service fee model drove results.

Product sales revenues were RMB 975.4 million ($141.9 million), up 24.6% year over year, driven by the growing popularity of brand partners’ products and the company’s effective marketing and promotional campaigns.

During the quarter under review, total Gross Merchandise Volume (GMV) expanded 42.8% to RMB 12,038 million. Notably, the company’s non-distribution business saw 45% growth in GMV during the quarter under consideration.

A strong flourish in the e-commerce sector, backed by an emerging base of affluent middle-class Chinese consumers, is boosting growth.

Baozun’s number of brand partners grew to 185 at of the end of fourth quarter from 152 during the same period last year. The newly added brands are mainly in apparel, cosmetics and FMCG categories.

Operating Details

On a non-GAAP basis, the company’s operating income was RMB 247.1 million ($35.9 million), reflecting an increase of 30.1% year over year.

However, non-GAAP operating margin contracted 80 basis points to 11.2% in the quarter under discussion. Increase in investments in lower-margin digital marketing services is an overhang on margins.

Baozun Inc. Price, Consensus and EPS Surprise

Baozun Inc. Price, Consensus and EPS Surprise | Baozun Inc. Quote

Balance Sheet

Baozun ended the fourth quarter with cash and cash equivalents and short-term investments of RMB 514 million compared with RMB 445 million in the previous quarter.


Slowdown in China's economic growth coupled with US-China trade war are persistent concerns. However, the company anticipates to benefit from progress in the e-commerce industry and the digitization of retail industry, which they believe, will consistently grow at a faster pace than the overall economy.

For first-quarter 2019, revenues are expected between RMB 1.25 billion and RMB 1.3 billion with 45% rise in services revenues on a year-over-year basis.

Zacks Rank & Stocks to Consider

Baozun currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader technology sector are CommVault Systems, Inc. CVLT, eGain Corporation EGAN and Fortinet Inc. FTNT, each sporting 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 CommVault, eGain and Fortinet is projected at 15.8%, 30% and 16.8%, respectively.

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