Vipshop Holdings (NYSE:VIPS) was off to a hot start in 2019, but now a mixed quarter could cool investor hopes for a turnaround. The Chinese online discounter of brand-name apparel checked in with its fourth-quarter results after Wednesday's market close, and it wasn't exactly what one would expect from a stock that had soared 34% year to date and nearly 70% since bottoming out four months ago.  

Net revenue rose 8% to hit the U.S. equivalent of $3.8 billion during the final three months of 2018. This is the first time that Vipshop has failed to deliver at least double-digit percentage growth on the top line, but there's a method to the decelerating madness. Vipshop is shifting some of its low-margin categories to its marketplace partners and away form being the first-party retailer. The move may ding its revenue gains in those categories, but it's having a positive impact on Vipshop's bottom line. Its adjusted profit of $0.19 a share for the quarter was just ahead of the $0.18 a share that analysts were targeting. 

Vipshop homepage with a Forever 21 flash sale.

Image source: Vipshop Holdings.

Saying yes to the discounted dress 

Earnings season has been a challenging time for Vipshop investors. The stock had taken a better than 20% high the day after two of its three previous quarterly outings. Unfortunately for those long Vipshop, the shares were initially moving sharply lower in Wednesday's after-hours trading. Landing at the low end of the 8% to 13% in revenue growth that it was targeting back in mid-November isn't helping.

In Vipshop's defense, the strategy to offload some of its lower-margin merchandise makes sense. The platform's popularity is a lot stronger than the 8% top-line uptick suggests. Active customers, gross merchandise volume, and the number of orders placed during the quarter rose 13%, 15%, and 35%, respectively. Vipshop's revenue may be decelerating for the tenth quarter in a row, but the platform itself is showing double-digit percentage bursts across all of the relevant metrics. 

Guidance remains a pressure point for Vipshop. If 8% revenue growth sounds unappetizing to investors, the 0% to 5% gain it sees for the current quarter isn't going to impress Wall Street. It landed smack dab at the low end of the range it put out last time, so we could be looking at flat growth for the first quarter.  

There are silver linings here. Profitability is starting to stabilize after a year and a half of buckling under the pressure of ramping up promotional activity and investing in fulfillment initiatives. The partnership it brokered with two of China's e-tailing behemoths last year may not seem to be moving the needle, but it has helped incrementally. We're also seeing Vipshop's Super VIP Paid Membership Program grow by 38% over the past year with a 70% renewal rate for the premium shopping subscription. Vipshop failed to live up to the hype behind the last few months of saucy stock gains, but key pieces are starting to fall into place to make this turnaround show some signs of legitimacy.