What happened

Shares of Baozun (NASDAQ:BZUN) slipped 12.8% in December, according to data from S&P Global Market Intelligence . The Chinese e-commerce stock has been under pressure after after the company reported disappointing third-quarter earnings results on Nov. 21, and shares continued to slide last month as investors weighed uncertainty in the business's outlook, shareholder lawsuits, and news of a warehouse fire.

BZUN Chart

BZUN data by YCharts

Baozun's third-quarter results arrived in November with an earnings outlook for the third-quarter that was significantly weaker than many analysts had expected -- as well as the news that a large brand partners (believed by many to be Chinese hardware giant Huawei) had fully left the e-commerce platform. The company then published a press release on Dec. 16 announcing that there had been a fire at one of its third-party warehouses on Oct. 19 and that the damages were much worse than initially estimated.

Boxes on a conveyor belt.

Image source: Getty Images.

So what

Baozun expects to incur costs from the fire as high as 53 million yuan (roughly $7.6 million), with the adverse impact set to be recorded in the company's current quarter. The e-commerce company waited more than a month and a half to officially inform shareholders of the warehouse fire, and the delayed notification looks more concerning in light of class action lawsuits filed by U.S. firms in November alleging that management had made misleading statements about its business relationship with Huawei.

Despite a December rally for the Chinese market that stemmed from news that a "phase one" trade deal with the U.S. will soon be signed, Baozun stock closed out the month with a double-digit loss. 

Now what

Baozun stock has posted some recovery in January, with shares up roughly 5.1% in this month's trading so far.

BZUN Chart

BZUN data by YCharts

Baozun management has normally been pretty good about sharing relevant information with investors, but visibility on some important aspects of the business has recently left a lot to be desired. The investor-relations practices of Chinese companies often fall short of the standards investors expect from U.S.-based companies, and this dynamic presents a meaningful risk factor when investing in China and other emerging markets.

I own Baozun stock and added to my position after the company's third-quarter earnings release in November. I continue to see big potential in the Chinese e-commerce market and in Baozun's business in particular, but it's a stock that's best suited for risk-tolerant investors, and it's not surprising that recent issues have resulted in a pullback.