Please ensure Javascript is enabled for purposes of website accessibility

Why Vipshop Holdings Ltd - ADR Got Slammed Tuesday

By Daniel Sparks – May 15, 2018 at 3:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Vipshop's first-quarter revenue came in at the high-end of guidance, but several items from the earnings release may have spooked investors.

What happened

Shares of online discount retailer Vipshop Holdings (VIPS -2.96%) plummeted on Tuesday, falling as much as 21.8%. At 2:23 p.m. EDT, shares were down 19.6%.

The stock's decline follows Vipshop's first-quarter earnings release. Though revenue during the period increased 24.6% year over year, Vipshop's net income declined and its second-quarter revenue guidance was below the consensus analyst estimate for the period.

A chalkboard sketch of a downward-trending chart

Image source: Getty Images.

So what

For its first quarter, Vipshop reported revenue of 19.9 billion RMB, or $3.2 billion as of May 15, 2018. Up about 25% year over year, the revenue was at the high end of management's guidance range for the period. This was driven primarily by a 25% year-over-year increase in Vipshop's average revenue per customer.

Non-GAAP net income, however, fell from 799.4 million RMB in the year-ago quarter to 727.7 million RMB. Part of Vipshop's lower net income was due to the company's investment in promotional activities to help drive growth.

Now what

Vipshop guided for second-quarter revenue to be between 20.5 billion RMB to 21.3 billion RMB. The low-end of this guidance range converts to about $3.2 billion as of May 15, 2018. On average, analysts were expecting second-quarter revenue of about $3.08 billion.

But management is confident about its long-term revenue growth, noting that its recent strategic collaboration with Tencent and JD.com should be a catalyst.

"Looking ahead, we will continue to work closely with Tencent and JD.com in order to improve the traffic flow and conversion rates, which will contribute meaningfully to our long-term customer and revenue growth," said Vipshop CEO Eric Shen in the company's first-quarter earnings release.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JD.com and Tencent Holdings. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Vipshop Holdings Limited Stock Quote
Vipshop Holdings Limited
VIPS
$9.18 (-2.96%) $0.28

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.