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Baozun Inc. (NASDAQ:BZUN)
Q4 2019 Earnings Call
Mar 18, 2020, 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to Baozun's Fourth Quarter and Fiscal Year 2019 Earnings Conference Call. [Operator Instructions].

I would now like to hand the conference over to your first speaker today, Ms. Wendy Sun, IR Director. Thank you. Please go ahead.

Wendy Sun -- Director of Investor Relations

Thank you, operator. Hello everyone and thank you for joining us today. Baozun's fourth quarter 2019 earnings release was distributed earlier today and is available on our IR website ir.baozun.com, as well as on GlobeNewswire Services. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Mr. Junhua Wu, Chief Growth Officer; and Mr. Robin Lu, Chief Financial Officer. Mr. Qiu will review business operations and company highlights, followed by Mr. Lu, who will discuss financial and guidance. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectation and current market and operation condition, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results, performance or achievements to differ materially from those in the forward-looking statements.

Further information regarding these and other risks, uncertainties or factors are included in the company's filings with the U.S SEC. The company does not undertake any obligation to update any forward-looking statement, as a result of new information, future events or otherwise, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.

It is now a pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Thank you, Wendy and thank you all for joining us. I would like to start by expressing our deepest concerns and the well-wishes for all those whose lives have been impacted but the ongoing coronavirus outbreak, and also take the opportunity to thank our employees for their hard work, tremendous resilience and the dedication shown during this difficult period. We have always been committed to maintaining high standards of corporate social responsibility, and have prioritized the health and safety of our employees, and we will continue to offer our support as as the fight carries on.

Fortunately for us, and our brand partners, continuous plans were already in place with our IT infrastructure and the digitalization technologies already configured for seamless transition to remote working, with minimal disruptions to our business during the peak of the outbreak in China. The coronavirus outbreak has created the industrywide headwinds stemming from the softer consumer demands and the fulfillment shortages caused by the ongoing traffic restrictions, self quarantine rules and the work from home directives.

In general, the impact across the retail industry is significant, particularly within discretionary categories, such as apparel and footwear, where demand is more significantly affected by consumers spending less time outdoors. We foresee the near-term growth for the wider industry will be challenged. However, we also note that this might be an opportunity. If anything, the ongoing impact of the outbreak is highlighting just how important an online strategy is for brands, and e-commerce is showing significant resilience compared with offline retail.

This growing need by brands to refine their digital and O2O strategies plays to our strength as a leading branded e-commerce solution provider. As a young dynamic and adaptable company, we believe we are uniquely positioned to leverage our strong fundamentals and to capitalize on this emerging need over the long run. We believe that both digitization and innovation will continue to underpin growth in the retail industry. As long-term drivers of China's e-commerce growth remain unchanged, we are confident that we will generate long-term sustainable value for our brand partners and shareholders.

Now I will give an overview of our performance in the fourth quarter. During the fourth quarter, we continued to capitalize on the growth momentum of China's e-commerce industry. GMV grew by 48% and total net revenue rose 26% year-over-year.

In the year's most the significant online event, the Singles Day Shopping Festival, we surpassed a significant milestone of RMB10 billion in other value and we are proud to say that we helped many of our brand partners rank first in terms of total order value, within their respective verticals. We continue to make significant progress on acquisition of new brand partners. With a net addition of eight brand partners for the quarter. This brings the total number of our brand partners to 231 compared with 185 at the end of 2018. The newly added brands are mainly in the apparel, electronics and food and health categories. In particular, we signed a Japanese entertainment electronics brand and the domestic home care product brand.

We achieved our 2019 goals, which is reflected by our standout 35% revenue annual growth rate, which was the fastest growth we have posted over the last four years. We also posted record high increases in GMV and the net addition of new brands. I want to highlight, the incremental GMV from stores opened less than 12 months, contributed over 10% of GMV during the year. More than double its contribution a year ago. While we are proud of these achievements throughout the year, we are cognizant of the need to continue optimizing the fundamental infrastructure we have put in place, to further drive high quality growth and expand our operating margins. The industry continues to evolve rapidly and there is much work that remains to be done in this regard.

2019 was a transformative year of our company in terms of strategic reinvestments and competitive positioning. We have strengthened our market positioning through continued innovation and adopting of a more strategic flexible and responsive approach to evolving e-commerce industry. To date our retail operations support system or ROS has launched several modules and solutions that focus on automation and intelligence, which have generated very encouraging initial savings in man-hours.

The 2019 Singles' Day event marked the first time that we deployed our hybrid cloud infrastructure, Baozun Cloud to support high load transaction processing, which performed smoothly and efficiently throughout the entire event. We're encouraged by these achievements, especially since they reflect the continued execution of our strategy over the past few years, to empower a revolution in e-commerce through innovative technologies. While progress never follows the straight line, we are confident in the digitalization blueprint we have put together. Our focus for Tony will be squarely on driving the seamless integration, digitalization and enhancing the intelligence of our services, which we believe will drive great improvement and internal operational efficiency and the business flow management.

Beginning in the second half of 2019, we increased our capacity in terms of logistics or premium sectors and deploy the system upgrades toward WMS, and LMS, to further optimize resource allocation across our logistics network. During the 2019 Singles Day Shopping Festival, we launched an integrated print dispatch system in select cities, that supports brand partners in delivering cost to consumers within a few hours, or in some cases, within one hour. Expedited delivery was available immediately after the Singles Day event kicked off at midnight. These initiatives are in high demand from brand partners and the customers. Initial feedback gathered from reviews and social media channel indicate that they have also greatly enhanced the user experience.

As e-commerce evolves, we believe value-added services, such as marketing tech and the integrated digital marketing, will become increasingly important to boosting traffic and promoting better interactive user engagements. We've been closely following industry trends and remain to track on further expand our services, to include a wider array of comprehensive digital marketing solutions. These solutions include the new initiatives, such as live streaming, KOC and KOL, positioning to convert marketing power into sales results. In addition, our many programs are growing in popularity of our brand partners, as a way to enhance user engagement, and deploy smart retail strategies.

We've achieved some initial breakthroughs that leverage social networks and believe we are on the right track, as we explore new opportunities in this emerging channel. Above all, we believe our infrastructure enhancements and incremental contribution from new brand partners in 2019 have laid a solid foundation for our growth momentum to continue into 2020. However, we are not yet finished and we will continue expanding these initiatives to generate a high quality growth. In a sense, I would say that we are only just beginning, given the enormous growth opportunities still ahead of us. We are now entering next phase of quality growth, where our focus will be strategic margin expansion.

We have a long and exciting journey ahead of us. 2020 will be a year in which we prioritize quality growth, accelerate brand portfolio optimization and drive greater operational efficiency through digitalization and productization. We believe the net effect of our efforts will result in higher quality growth and the gradual margin expansion. Though the pandemic will create short term headwinds and add financial uncertainties, we also believe it creates business opportunities, and we firmly believe that our strategic goal will yield more balance and sustainable growth, in addition to operating margin improvements for 2020.

I will now pass the call over to Robin, to go over our financials for the quarter. Thank you.

Robin Bin Lu -- Chief Financial Officer

Thanks Vincent. Before providing more details about our financials, I would like to take some time to address our non-distribution model take rate, which is defined as a service revenue as a percentage of non-distributable GMV. As we know, this is one of key metrics used by the market to assess our performance. Even though internally, we do not believe is an appropriate method to use benchmarking, and we do not use this terminology -- for internal management purposes either. By nature, take rate by category fluctuates significantly, as each category tends to exhibit different patterns on service model. I will say that category mix could be the key factor in achieving the blended take rate over a certain period of time.

During the fourth quarter, there were noteworthy structure differences by category in the growth rate. Electronics, especially [Indecipherable] outperformed other sectors and was quite active during the Singles Day shopping festival, accounting for a larger proportion of our total GMV. Men's and women's clothing, in general, saw weaker growth. Likely within the apparel category, we are primarily exposed to sportswear, which continues to perform well.

Overall, the flowthrough in non-sportswear apparel reduced its GMV component in the apparel category. In addition, we have a growing GMV component from the broader FMCG category, especially food, health as a whole, which typically fell within the service fee model as well. As such, the dramatic change in category mix in the past year has actually led to a different blended take rate profile.

I want to also highlight that we achieved solid, positive free cash flow. For full year 2019, our operating cash flow totaled over $300 million and achieved positive free cash flow. We view this as a milestone in working capital management and as a validation of our high-quality growth strategy. This is especially important of the turbulence created by macroeconomic uncertainty and the pandemic persists. We believe, it is more essential than ever to accelerate the execution of our high-quality growth initiatives to build our business in a more sustainable way.

Lastly, a fire broke out at our third-party warehouse in Shanghai, on October 29, 2019. Fortunately, no one was hurt in the accident. It was one-off event that impacted our bottom line, as as we accrued operating loss of RMB45.5 million for the quarter. Because the products stored at this third party warehouse will generate slow moving goods, we do not anticipate any meaningful top line growth impact for 2020. This operating loss is below our previous estimate of RMB53 million, as we were able to recover some of damaged products, once the size [Phonetic] was opened by local authorities in late February.

Now let's go over the fourth quarter 2019 financial results in detail. We believe a year-over-year comparison is the best way to review our performance. All percentage change I am going to give, will be on GAAP basis. Once again, please note that all figures that I mention will be in RMB.

Total GMV during the quarter increased by 48% to RMB17.8 billion. The growth rate of both business models rebounded from the previous quarter. Distribution GMV grew by 29% to RMB1.5 billion and our non-distribution business once again outperformed this GMV increase of 49% to RMB16.3 billion. Total net revenues increased by 26% to RMB2.8 billion. Breaking this down, product sales revenue increased by 33% to RMB1.3 billion and services revenue increased by 22% to RMB1.5 billion during the quarter. The increase was primarily attributable to robust growth, during our Singles' Day campaign, as well as incremental contribution from new brands. In particular, product sales growth was also posted by the contribution from the newly added entertainment electronic brand, which we launched in December. Service revenue was impacted slightly by the weaker performance in both men's and women's clothing.

Total costs and operating expenses were RMB2.6 billion compared with RMB2 billion in the same quarter last year. In particular, cost of products increased to RMB1.1 billion from RMB719 million last year, primarily due to higher costs associated with the increase in product sales revenue. Due to category mix change, our gross margin for product sales declined slightly to 18.2%, compared with 19% a year ago. Our blended gross margin totaled 62%, a decline of 2%, but it was mainly due to an increase in proportion of product sales revenue.

Fulfillment expenses increased to RMB665 million from RMB512 million last year, mainly due to an increase in GMB from our distribution and consignment model. And the warehouse rental expenses, an increase in warehouse capacity to address additional growth opportunities. The increase was partially offset by improvements in the efficiency. Our cost control initiatives continue to drive operating efficiency improvements and optimization of delivery of resources/. As a percentage of GMV, our fulfillment expense ratio improved to 3.7% from 4.3% a year ago, which marks the fourth consecutive quarter that we will achieve greater operating leverage for fulfillment.

Sales and marketing expenses increased to RMB648 million from RMB544 million last year and as a percentage of GMV, our sales and the marketing expense ratio improved to 3.6% from 4.5% a year ago. The decrease in sales and the marketing expenses as a percentage of GMV reflects the increase in average we are getting, as our business grows to scale, especially in the Singles Day season, and the effectiveness of our marketing activities leading up to Singles Day back in the third quarter.

Technology and expenses increased RMB109 million from RMB84 million a year ago. We continue to invest in innovation and the productization in a very disciplined, focused and a streamlined manner. During the fourth quarter of 2019, our investments in innovation and the prioritization totaled RMB23 million, compared with RMB21 million last year, leveraging from expanding business scale, technology and content expenses, as a percentage of GMV declined slightly from 0.6%, from 0.7% a year ago.

G&A expenses increased RMB67 million from RMB43 million last year. In addition to increased spending in administrative, corporate strategy and the business planning staff as the business scales, they also approved a bad debt allowance of RMB9 million during the quarter for account receivables from best big brand partner in the men's clothing category, which began liquidation in 2019.

During the quarter, we incurred other operating loss of RMB42 million, which was mainly due to the loss related the third-party warehouse fire of RMB45.5 million that I mentioned earlier. All in all, income from operations decreased to RMB196 million from RMB213 million in the same quarter of last year and our operating margin declined to 7% from 10.4%.

On a non-GAAP basis, income from operations was RMB217 million, a decrease of 12% from from RMB247 million last year. Non-GAAP operating margin was 7.8% compared with 11.2% in the same quarter of last year. As a reminder, operating income and the margin during the quarter included RMB45.5 million impact from the fire.

Outside the interest income, interest expense totaled RMB6.8 million compared to RMB3.5 million a year ago. The increase in interest expense was mainly due to the issuance of convertible bonds in April 2019, which also embedded a debt accretion treatment, which is a non-cash item based on the accounting treatment associated with CB financing.

Income tax expenses totaled RMB38 million and we have an effective take rate of approximately 19% compared with the 13% last year on a non-GAAP basis. The increase in income tax was mainly due to a higher effective take rate, as some tax incentive policies was applied to the same period last year. In the fourth quarter, net income attributable to ordinary shareholders of Baozun totaled RMB141 million, basic and the diluted net income attributable to ordinary shareholders of Baozun per ADS was RMB2.42 and RMB2.36 respectively compared with RMB3.29 and RMB3.17 respectively during the same period of last year.

Non-GAAP net income attributable to ordinary shareholders of Baozun totaled RMB151 million. Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun per ADS was RMB2.77 and RMB2.71 respectively compared with RMB3.59 and RMB3.46 respectively for the same period of last year.

As of December 31st, 2019, we had RMB2 billion in cash and cash equivalents and short-term investments, compared with RMB514 million as of December 31st, 2018. The significant improvement in cash was mainly attributable to a strong positive operating cash flow for full year 2019, as a result of working capital optimization, as well as our CB financing back in April 2019.

Turning to guidance, we continue to closely monitor the ongoing pandemic across the globe, and are carefully evaluating its impact on our business. Since then, provided the macroeconomic environment that's now deteriorated further, we anticipate that GMV during the fourth quarter 2020 will grow by at least 10% compared with the same period last year. We expect total net revenues during the fourth quarter of 2020 to be between RMB1.4 billion and RMB1.45 billion, which represents a growth rate of 9% to 13% compared with the same period of last year. Even though we see positive signs of the recovery of our business, there are many unknowns to the duration and the severity of the pandemic. We have decided to temporarily suspend full year net revenue guidance and will have greater visibility.

This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session.

Questions and Answers:

Operator

[Operator Instructions]. Your first question comes from the line of Alicia Yap, please ask your question.

Alicia Yap -- Citigroup -- Analyst

Hi, good evening management. Thanks for taking my questions and wishing all well and safe. I have couple of questions. Number one is that, you know despite the impact from the virus, we actually think the 9% to 13% net revenue guidance is actually not too bad. And so, could you give us a bit of color in terms of the GMV, given you actually have a high base last year, If I understand correctly, last year there was this handset brand that was dropped out since 3Q. So excluding this handset brand, what would be your 1Q GMV growth look like? And then on your revenue guidance, could you give us some colors in terms of the breakdown of the product revenue versus the service revenue growth? And what are the brand category that actually have negatively affected more during this outbreak period? And what brand category is actually more resilient and see still the demand is on track. Thank you.

Robin Bin Lu -- Chief Financial Officer

Okay Alicia, It's Robin. Yeah, I am wearing the face mask, so maybe not very clear, but I try to speak loudly. Yeah about the Q1 outlook and the guidance, I think the fourth question is about the category. Yeah, we do see some natural impact on the men's and the women's clothes in, because you know, the offline store has been closed and the people sit at the home. So there is not much demand about this stuff. But unfortunately we -- in the meantime, we see that the growth there is not bad, and also the newly added brands, we add up in the second half of last year, it looks better for the GMV and also for the revenue, I think is pretty in line with the GMV growth. I think that's the overall picture about Q1.

Alicia Yap -- Citigroup -- Analyst

And so, there wasn't any non-apples to apples comparison on the GMV growth rate?

Robin Bin Lu -- Chief Financial Officer

I think about the handset, as I remember the questions; you know, we operated two handsets in last Q1, and this year primarily we focused on the wired handset, but the growth of this handset is pretty strong since the last Q4 and continuing the growth in Q1. So I think primarily, the handset is no big change from last Q1 to this Q1 in the GMV side.

Alicia Yap -- Citigroup -- Analyst

I see. And then if I may, in terms of the margins outlook for 1Q, given the impact on revenue, could you give us some colors in terms of how we should think about for 1Q margin? Thank you.

Robin Bin Lu -- Chief Financial Officer

Yes. Our margin will be dropped, because you know, we have less revenue growth and we have some costs associated with a fixed part. So our margin will be dropped, but definitely we are in the positive range, is not a negative margin.

Alicia Yap -- Citigroup -- Analyst

Okay, great. Thank you.

Robin Bin Lu -- Chief Financial Officer

Thank you.

Operator

[Operator Instructions]. Your next question comes from the line of Thomas Chong of Jefferies. Please ask your question.

Thomas Chong -- Jefferies -- Analyst

Hi. Good evening. Thanks management for taking my questions. I have a question about the full year GMV and the revenue trend. Looks like, there is a lack of visibility at the moment. But can management provide us some direction of qualitatively, in terms of the GMV growth rate, should we expect an acceleration starting in Q2? And in terms of the margin trend, should we expect the margin to be somewhat like stabilizing in Q3 and margin expansion will happen in Q4? Notice that quantitative is tough at this time, but any qualitative color would be great? Thank you.

Robin Bin Lu -- Chief Financial Officer

Okay. Hi, this is Robin again. I mean it's very hard to estimate or foresee the trend. You know based on our internal trend and based on what we estimated in the recovery in March, we think we are still very positive about our G&A and revenue growth for this year, and the we hope the coronavirus outbreak can be -- disappear very soon and we will get back to regular growth trend.

About the margin, definitely because we have something that typically about our business, suppose there is no much deteriorating in the outbreak, definitely we will be able to achieve the recovery of the operating margin. And also we think you know, if is there is no -- if things get even worse, our operating margin in this year could be in the midpoint between 7% and 8%, which will be recovered from last year. Thank you.

Thomas Chong -- Jefferies -- Analyst

Thank you.

Operator

Your next question comes from the line of Tina Long of Credit Suisse. Please ask your question.

Tina Long -- Credit Suisse -- Analyst

Hi, thank you management for taking my question. My question is actually on the brand pipeline. We are having -- we plan to add in 2020 and also what kind of split between the distribution versus non-distribution? And also we noted that in the fourth quarter distribution model, revenue actually outgrow that of the service model. So based on the brand pipeline we are having for 2020, how should we look at the revenue mix and also the gross margin? Thank you.

Robin Bin Lu -- Chief Financial Officer

I think I can give you some numbers, this is Robin, and then I think Junhua can answer you about outlook about this year. We don't -- I should say, we are not in [Indecipherable] to develop our distribution model and we have a very careful selection process to decide which one we can do the distribution. So but back in the history, I think you know the -- we keep a well balanced between the distribution and the non-distribution from both GMV and the revenue balance. And regarding the brand, I think in Q1, we add up something like home furnishing, very famous global furnishing brand, and also the domestic brand in the in-house products for this. But unfortunately in Q1, we see the slow acquisition of the brand, because you know we cannot go out to discuss with the clients and the partner. So I think this one will affect the whole year's new brand acquisition speed.

Junhua Wu -- Director and Chief Operating Officer

Yeah, so let me get back to you regarding the pipeline question. So it looks to us a little bit cautiously optimistic in terms of the pipeline growth. So on some kind of positive side from the COVID-19 stuff. So more and more brands have realized that, getting online and getting digitalized your online business is getting more important. So we have been rich and touched more and more from a lot of brands, some are very strong brands, they want to switch their business to Baozun, and some undeveloped brands are going to just develop their online business with us. So we are foreseeing a very strong pipeline in the year 2020, and we are very optimistic about this coming up in the next quarter.

Tina Long -- Credit Suisse -- Analyst

Thank you. How about the business model, like distribution versus non-distribution in terms of the new brand addition?

Robin Bin Lu -- Chief Financial Officer

No. We carefully select the distribution model. But I mean, we think about balancing the distribution -- I think you can take that as -- I think about like a 90% of GMV coming from non-distribution and the 10% -- 10% GMV from distributing, is kind of like the principal we keep.

Tina Long -- Credit Suisse -- Analyst

Okay, got it. Thank you very much.

Operator

[Operator Instructions]. Your next question comes from the line of Natalie Wu of CICC. Please ask your question.

Wade Hounja -- CICC -- Analyst

Hi, management. Thanks for taking my question. It's Wade Hounja [Phonetic] on behalf of Natalie. As we see, the outbreak is becoming a global issue. If the factory of overseas brands are shut down, what business impact and financial impact will we have? And my second question is, in prepared remarks, you mentioned that the company's positive free cash flow has reached a record high, would you please share more color on how you improved the free cash flow? For example, is it because we are having less capital expenditure than before, or we are having more leverages on the balance sheet? And how should we expect the trend going forward? Thank you.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Hi. Yeah, let me ask the first part of your question, and then Robin can do some follow-up answering up the questions. Up to now, we keep a very close communication with our client base, and so far, there is not a big worry and concern about the supply side. I think the part of the reason is that, most of the supply chain is right now in China and also Asia region, especially China. So we are seeing quite constant supply of the products, and there is no big signal from the brand side, telling us about the potential difficulties of the supplies, in the near future. But anyway, we will be closely watching the situation and adjust our sales tactics along with that. Yeah, so about supply.

Robin Bin Lu -- Chief Financial Officer

Okay. Yeah, let me get the second question about the positive cash flow. Yeah, we do have less capital expenditure in 2020, its about like RMB50 million less, but our free cash flow is over RMB100 million, which means you know, we have very strong operating cash flow -- positive operating cash, which drive through the free cash flow positive. I mean that's what we deal for the whole year last year. For example, you know I remember, I mentioned about you know how we can regulate the collection process and also the automatic billing system. And also, we have you set of rule inside the company to advertise the collectible. So that really makes the results -- turn positive for the cash flow.

Wade Hounja -- CICC -- Analyst

Thank you.

Operator

Your next question comes from the line of Sally Chan of CLSA. Please ask your question.

Sally Chan -- CLSA -- Analyst

Yes. Hello, good evening management. Many thanks for taking my questions and wish everyone good health during this period. I actually have two questions. Maybe I just go over the first one. First one is actually on the monetization trend in 2020. Agreed with management that the overall take rate is probably not meaningful, because it is very heavily impacted by category mix and then brand mix, etc. I'm just wondering, say, if we look at this on a more granular level, say on a per brand basis, for example when we negotiate contracts with new brands or renegotiate renewal with existing brands, how do you see our brand partners value our new value-added services, like the tools we just mentioned like new delivery services, [Indecipherable] cloud. Do you think potentially going forward, we could -- if we could enhance these kind of value-added services offerings, we could receive a better monetization or take rate from our brands? And if so, how should we think about the timeline when we could start to see meaningful contribution from the monetization of these new tools? This is my first question.

Robin Bin Lu -- Chief Financial Officer

Okay. This is Robin. Before I answer your question, let me give you more color about the take rate for the last Q4. Maybe when you do the very quick math, you'll see there like a 2% drop in the take rate -- around 2% drop, and we have about 1.5% coming from the product mix change. As we mentioned, we have a 3C increasing in Q4 GMV and another 0.5% coming from even the -- almost evenly from less marketing spending and also less logistic service due to the slowdown of the men's and women's clothing. So that's like a full picture of the take rate change in Q4.

And also regarding this year's take rate, we think you know, we still have very great potential to improve our take rate, and also about the monetization. For example, the revenue guidance we can give you, which is in -- still in the growth, I think thanks for our logistics service, you know, we can provide more service to the partners than other competitors. So -- and also for the new brands, we are gradually working with them for the new added service, including possibilities inside the digital marketing services for example, and we do think you know, we have great potential to improve for this year. Thank you.

Sally Chan -- CLSA -- Analyst

Thank you very much. So I have another quick question actually is, to follow up on the sort of guidance for this year, given the impact from the outbreak; because for my tracking, it seems that the January growth, while brands were quite healthy and then February, we saw it moderate. But not that big decline in GMV growth for key brands, and then it seems that for the March -- the 8th March promotions period, sales for some of our key brands actually rebounded very strongly. So I'm just wondering, if management could share how you have seen the recovery trend so far, as people gradually get back to work and the supply side infrastructure like logistics also continue to recover, probably after February and March? Thank you.

Junhua Wu -- Director and Chief Operating Officer

Okay Sally, this is Junhua. So let me get back to you about the question on Q1. So in January, we did pretty well. So we dramatically beat our internal target share. So the whole category was a disaster as you know. The total kind of the COVID-19 stuff, so really just lowered down the demand chain and lower down the communication efficiency, something like that. And from the beginning of March, especially from the big campaign like Queens Day, you mentioned about 8th March. So most of our key brands are recovering very well. So I can say that they're recovering about 80% of their normal, back to the Y-o-Y in the same campaign like this. And we are foreseeing a cautiously optimistic about the GMV and the trade as well growing in the coming quarters. That was before the virus had any kind of import impact. So now just like -- Robin just mentioned, it's very hard for us with a lot of unknown kind of the criteria based on the import the virus has affected. So yes, we can say that, most of our key brands are recovering very well. The market is leading pretty well as we can see, and we are cautiously optimistic about the coming quarter. And the demand chain has recovered about 80% to 100%, and the supply, we have more inventory and more products putting online. So yes, so everything is getting better now.

Sally Chan -- CLSA -- Analyst

Great. That's good to hear. Thank you.

Operator

Your next question comes from the line of John Choi of Daiwa. Please ask your question.

John Choi -- Daiwa -- Analyst

Hey. Thank you very much for taking my question. I had a couple of questions here. First of all, could you kind of talk to us about the latest development of mini programs, the contribution to your overall business? It seems like that mini programs has been doing pretty well over the past year? And just quickly on a follow-up on the operating margin. I think Robin, you mentioned hopefully you could be able to reach 7% to 8% this year. Can you kind of walk us through, whether that will be driven by more on the faster top line growth in the second half or pretty much more on the operating leverage, on the operating expense sided? I just want to have a brief sense on how you guys are going to be able to drive that, after things do normalize? Thank you.

Robin Bin Lu -- Chief Financial Officer

Hi John, its Robin. For the mini program, yeah, I think we made great progress, especially in the coronavirus outbreak, because you know it's the right tool to link between online and offline. Some of the partners come to us, ask us to provide service for their offline stores, so that they can easily go online. But in both GMV and revenue, I think comparing with the total number with Baozun power, the meaningful revenue is still very immature and we don't pay much attention to the GMV and the revenue contribution, instead, we just want to capture this model, so that you know, we have figured out a way, how we can ramp up our services, you know, to the brand partners and setup the branding e-commerce system in mini program ecosystem. So that's kind of like our main focus, which is not focused on GMV and revenue, compared with our work, the total number.

So that's the fourth question and about the operating profit margin, I think you're right, we both drive this one by improving our revenue resources from our existing and new brands, and also we have very tight even cost control and the efficiency improvement plan in our company. So that we can drive up operating margin.

Operator

Your next question comes from the line of Tian Hou of T.H. Capital. Please ask your question.

Tianxiao Hou -- T.H. Capital -- Analyst

Thank you management. So my question is this, so this coronavirus and before and after, there are lots of things changed. So from your customer side, like a brand side, I wonder -- so will you communicate with them, do they have -- in terms of brand strategy, do they have any new thoughts about in the future, how are they going to strategize or position their brands in the consumer side. So as you mentioned at your remark, and the apparels and in the handbags in this area, and it's impacted the most. So I wonder what's changed in the consumer side? And so going forward, what do you see can be the trend? So one is the supply side and one is consumption side? Thank you.

Junhua Wu -- Director and Chief Operating Officer

Okay. This is Junhua. So those are very good questions. So the first one is related to the brand side. So we communicated with a lot of key brand partners and they are being very positive to the digital, especially in your online business. So there are several initiatives we are going to just approach. The first one is, they are strengthened and already are emphasized on digitalizing their business, and realize that online and e-commerce are becoming more important, especially under this overall situation of the country. And that -- which means that they want to just lay more emphasize and they're putting more strategic efforts into digitalizing their business.

The second part is, in terms of the product inventory allocation. So most of our key brands are reallocating a lot of their offline, especially their exclusive offline product to online; because as you can see that, in the past several months, their offline business has been facing a lot of problems and challenges. So putting your offline resources to online is really helping the online growth. That's the second part. The third part is more about reallocating their brand marketing strategy and brand marketing spending. So they realized that, especially along with the development of the digital marketing like a livestream, KOL and KOC, so more and more brands, they have realized that, they want to just invest more on content management and enriching their online content development, provide more accurate content to the right consumers, at the right time, I think their more and more digital marketing spending will be allocated to online. So that are three approaches from the brand side.

So from the consumer side, we haven't seen a lot of behavior change from the consumer side. If you can -- if you just view the whole apparel category dropping down a lot, because they are basically staying at home. So it doesn't make any sense for more like women and men to purchase new apparels, because they're staying at home. So maybe that was just about -- or they are kind of the under a big environment for now, and we haven't seen any kind of changes from the consumer part. So we are seeing when everything is getting better, consumers can just really go to the street and back to their normal life and normal lifestyle, I think the category and all their consuming power will be recovered soon. Thank you.

Tianxiao Hou -- T.H. Capital -- Analyst

Thank you so much. Thank you.

Operator

[Operator Instructions]. Your next question comes from the line of Billy Leung of Haitong International. Please ask your question.

Ka Wai Billy Leung -- Haitong International -- Analyst

Hi management. Thanks for taking my question. I just had a -- the question I want to ask is related to what Vincent mentioned during the prepared remarks. Vincent said, the 2020 focus will be on accelerated brand portfolio. I just wanted to know what that meant? Does that mean that we should expect more brand partners or brand partners would be larger? That's my first question and just a housekeeping question, can management share the amounts of GMV that was from existing or same store clients for quarter one guidance and quarter four? Thank you.

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Yes, it is, in my prepared script. But I think you are the better person to answer the question, please.

Junhua Wu -- Director and Chief Operating Officer

Yes, about the portfolio and larger brand potentially. So yes, we are seeing a very strong pipeline in the year 2020, and according to our existing enrolled brands, they are being more qualified. So this year, our strategy is very clear. We are chasing qualified GMV. So the only -- we are not emphasized on the only GMV growth or GMV amounts, but the quality of the GMV revenue and the profit what we can make from the brand partner. So as far as we can see in Q1, the brands we enrolled in our -- including a very large brand in the home furnishing category are very high quality brands in our portfolio.

And in our strong pipeline, we are foreseeing a lot of the same kind of a qualified brands coming up. Yes.

Ka Wai Billy Leung -- Haitong International -- Analyst

Sir. Just to confirm, when you say, high quality, does that mean, it's a larger scale brand merchant? Sorry. Thank you.

Junhua Wu -- Director and Chief Operating Officer

So yes, well I mentioned about the qualified GMV brand, which means that we have a better take rate. We have a wider range of the scope of work. We have more stickiness with the brand partnership, and we have a longer term of the contract period.

Robin Bin Lu -- Chief Financial Officer

Yeah about the high quality growth. I think that's kind of like different fit in different scenarios in the topline, just as Junhua explained, and in the costs internally, we have very strong cost reduction initiatives and to create the efficiency and the you know and make all our cost structure more healthy about it. So that's kind of like different scenarios that we are working on. And back to your last question, I think you asked about that same-store sales growth, is the 51% same-store sales growth in Q4.

Ka Wai Billy Leung -- Haitong International -- Analyst

Thank you. And what was the assumption for quarter one GMV, how much coming from same-store sales growth?

Robin Bin Lu -- Chief Financial Officer

We don't disclose the number yet and we will have more color in the next earnings call.

Ka Wai Billy Leung -- Haitong International -- Analyst

Thank you. That was really helpful.

Robin Bin Lu -- Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Joyce Ju of Bank of America. Please ask your question.

Joyce Ju -- Bank of America Merrill Lynch -- Analyst

Good evening, Vincent, Junhua, Robin, Wendy, thanks for taking my question. My question was also a follow-up to the previous question. Actually, I just want to clarify, because this year, especially the first half, our existing brand probably is going to suffer a like demand shock. So shall we expect more of our growth actually contributed by new incremental brand or say we know, we launched a very big home furnishing international brand this quarter, right. So should we expect primarily this year new brands will contribute bigger chunk of GMV compared to last year-end? Could you give us some qualitative color in terms of, probably the take rate on margin profile of this new brand? And there is a small follow-up as I want to just get a broad sense, during the coronavirus like period of time, we know basically all the like brands, or like merchants kind of suffer the financial pressure. We know lot of platforms they are giving like subsidies or rebates to merchants. Just wondering from our service provider perspective, are we going to experience any pressure in terms of you know expenses or like you know services charged? Any qualitative colors will help. Thanks a lot.

Robin Bin Lu -- Chief Financial Officer

Yeah it's Robin. Yeah above your reports question, I think you know we do experience some kind of a slowdown in the men's and women's apparel continuously in Q1, especially in February. But also we experienced the delay of the new store opening for the new brands. So in balance, we think this really depends on the specific brands, who enjoy what growth rate in Q1 or the downturn in Q1. But in general I would say our, our GMV will still grow at least 10% and also that's partially contributed by the new brands that we acquired in the last year, which is less than 12 months. And the second question, drop the -- yeah, we do see some financial pressures in some of our brands, but not all, and at this moment, I think you know we didn't experience anything about the term change or something, because of they rely more on the -- on the online sales to drive overall prices.

And additionally, about a service fee, which is accounts receivable at this moment, we see some debate of the payment. But we closely monitor you know the collection process and up till now, we think that's pretty normal, with the exception of some delayed payments by the partners. Thank you.

Joyce Ju -- Bank of America Merrill Lynch -- Analyst

Thank you.

Operator

All right. Now I would like to hand the call back to Ms. Wendy Sun for the closing remarks.

Wendy Sun -- Director of Investor Relations

Thank you operator. In closing, on behalf of the Baozun management team, we would like to thank you for your participation in today's call. If you require any further information or keen to visit us in China, let us know. Thank you for joining us today. This concludes the call.

Operator

[Operator Closing Remarks].

Duration: 61 minutes

Call participants:

Wendy Sun -- Director of Investor Relations

Vincent Wenbin Qiu -- Chairman of the Board of Directors and Chief Executive Officer

Robin Bin Lu -- Chief Financial Officer

Junhua Wu -- Director and Chief Operating Officer

Alicia Yap -- Citigroup -- Analyst

Thomas Chong -- Jefferies -- Analyst

Tina Long -- Credit Suisse -- Analyst

Wade Hounja -- CICC -- Analyst

Sally Chan -- CLSA -- Analyst

John Choi -- Daiwa -- Analyst

Tianxiao Hou -- T.H. Capital -- Analyst

Ka Wai Billy Leung -- Haitong International -- Analyst

Joyce Ju -- Bank of America Merrill Lynch -- Analyst

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