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What's in Store for Vipshop Holdings (VIPS) in Q3 Earnings?

Zacks Equity Research

Vipshop Holdings Limited VIPS is set to report third-quarter 2019 results on Nov 13.

For the quarter, the company expects revenues between RMB 17.8 billion and RMB 18.7 billion, indicating year-over-year growth between 0% and 5%.

The Zacks Consensus Estimate for revenues currently stands at $2.65 billion, which indicates growth of 2.2% from the year-ago quarter’s reported figure.

The consensus mark for earnings has remained unchanged at 18 cents over the past 30 days, implying an increase of 63.6% from the figure reported in the year-ago quarter.

Notably, the company’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 11.2%.

In last reported quarter, Vipshop reported adjusted earnings of 23 cents per share that beat the Zacks Consensus Estimate by 43.8%.

Revenues increased 9.7% year over year to RMB22.7 billion from RMB20.7 billion in the last reported quarter.

Let’s see how things have shaped up prior to this announcement.

Vipshop Holdings Limited Price and EPS Surprise

Vipshop Holdings Limited Price and EPS Surprise

Vipshop Holdings Limited price-eps-surprise | Vipshop Holdings Limited Quote

Factors to Consider

Vipshop Holdings’ third-quarter results are expected to reflect the impact of growth in active customer base.

Notably, in the last reported quarter, the company’s active customer base increased 11% year over year. The momentum in customer addition most likely continued in the third quarter given the company’s focus on strong merchandising of its products, discount retails for apparel category and offline stores like Vipshop, Vipmaxx and Shan Shan.

Notably, on Jul 10 Vipshop acquired retail outlets of a leading player in the outlets industry in China, Shan Shan, to expand its offline outlet business. The management anticipates the acquisition to impact the bottom line positively in the to-be-reported quarter.

Further, Vipshop’s continued effort to reduce fulfillment expenses by outsourcing its product deliveries through third-party couriers is expected to have contributed to operating margin and consequently the bottom line in the to-be-reported quarter.

Notably, the company outsourced 12% of its deliveries in the second quarter. Management stated that during the third quarter, the company outsourced around 30% of daily orders

Moreover, the reduction of VAT tax rate in China from 16% to 13% is expected to have positively impacted the top- and the bottom line in the to-be-reported quarter.
On the second-quarter earnings call, Vipshop guided the impact of the reduction to the top line to be close to 3% and the impact on the bottom line to be between 0.5% and 0.6% in the third quarter.

However, the third quarter is seasonally the slowest for the apparel category, which is anticipated to have hurt top-line growth of the company.  Management expects sales to grow at a slower rate in the to-be-reported quarter,

What Our Model Says

According to the Zacks model, the combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of a positive earnings surprise.

Vipshop Holdings has a Zacks Rank #3 and an Earnings ESP of 0.00%, which makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming announcement.

Twin River Worldwide Holdings TRWH has an Earnings ESP of +13.25% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Viacom VIAB has an Earnings ESP of +13.38% and a Zacks Rank #3.

Momo MOMO has an Earnings ESP of +3.94% and a Zacks Rank #3.

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