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Why Baozun Stock Lost 13% Last Month

By Jeremy Bowman - Dec 2, 2019 at 5:49PM

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A disappointing earnings report and outlook helped send the stock lower in November.

What happened

Shares of Baozun ( BZUN -8.39% ) fell last month after the Chinese e-commerce  services provider reported weaker-than-expected earnings for the third quarter, as it came up short on the top line and with its revenue outlook for the fourth quarter. As a result, the stock finished the month down 13%, according to data from S&P Global Market Intelligence.

As you can see from the chart below, the stock fell nearly 18% on its earnings report, but actually recouped some of those losses at the end of the month.

BZUN Chart

BZUN data by YCharts.

So what

Shares of Baozun fell 17.5% on Nov. 19 after the earnings report came out. The company, which specializes in providing e-commerce services to multinational companies like Starbucks and Nike in China, said that revenue rose 35.3% to $210.3 million. However, that was below analyst estimates of $214 million. Higher-margin revenue from its services division increased 38.7% to $117.6 million. 

An Asian woman holding a box and talking on a cellphone.

Image source: Getty Images.

The company continued to bring on new brand partners, growing its total to 223 from 172 the year before, but saw its adjusted operating margin compress from 5.5% to 5.1%. Adjusted operating income, meanwhile, increased 24.1% to $10.6 million, and adjusted earnings per share rose from $0.13 to $0.14, which matched expectations.

CEO Vincent Qiu highlighted the strong growth in gross merchandise volume (GMV), saying, "GMV during the quarter continued to grow strongly, increasing 43% year-over-year despite the impact from terminating our service agreement with one electronics brand and a challenging macroeconomic environment."

Now what

What may have been most concerning was the company's outlook for the fourth quarter, which includes the popular Singles Day spending holiday. Management said it expected revenue growth to decelerate to 23% to 25%, or $384 million to $391.2 million, and for services revenue to grow at the same pace. That figure was significantly below the consensus of $401 million, and the slower growth in services could indicate weaker bottom-line growth.

In the report, management called its Singles Day results "strong" and said that GMV growth would accelerate to 45% to 50%, though it said it would take a few quarters for those GMV sales to convert into revenue. That may explain the weak fourth-quarter forecast, as it would mark the company's slowest growth in at least four quarters.

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