It may seem hard to call a quarter of declining net revenue and reported earnings a blowout performance, but that's just what Vipshop Holdings (NYSE:VIPS) pulled off on Wednesday. The Chinese online discounter of brand-name apparel and accessories saw its top line decline 12% to $2.7 billion for the first three months of 2020, relative to a year earlier. But that's not a bad thing. 

Back in early March, Vipshop was forecasting a 15% to 20% year-over-year slide in net revenue for the quarter. Analysts were perched at the kind end of that range, modeling $2.54 billion in revenue. Reported income took a 21% hit as margins contracted, but adjusted earnings actually managed to climb 20%, to $0.20 a share.

Vipshop doesn't offer bottom-line guidance, but Wall Street pros were bracing for the adjusted profit to decline to $0.11 a share. It may not be a blowout on an absolute basis but it's hitting all the right notes with investors on a relative basis. The stock shot higher on Wednesday morning following the report. 

The Vipshop homepage during a Forever 21 promotion.

Image source: Vipshop Holdings.

Riding out the storm

There were a lot of headwinds facing Vipshop during the first quarter. The COVID-19 pandemic hit China the hardest during the first three months of this year, and that disrupted Vipshop's supply chain, delayed logistic services, and naturally put a damper on consumer demand for discretionary categories. China's economy was slowing heading into 2020, too.

We also can't forget that the apparel industry has been one of the hardest-hit segments of the market. Folks aren't exactly buying new duds during the shelter-in-place phase of the coronavirus crisis, and apparel accounts for more than two-thirds of its business. 

Vipshop has historically put out conservative guidance with its quarterly updates, but one would think that the global economic outlook had deteriorated rapidly since the original March 5 forecast. Vipshop's report is obviously good for the e-tailer and also offers hope for China's ability to recover from the pandemic-fueled economic setback. It's also comforting to know that, even though folks were staying home and working or studying from there earlier this year, there was still an appetite for discounted fashionable clothing. 

Vipshop's active customer count for the first quarter held relatively steady at 29.6 million from the 29.7 million it was servicing a year earlier. This number of orders on its platform actually rose 4% to 121.7 million, which translates into a continued interest in shopping -- even if folks were spending quite a bit less per order. 

The cherry on top is Vipshop's guidance for the new quarter. It sees net revenue for the second quarter clocking in between flat to a gain of 5% from a year earlier. Remember that Vipshop is a serial lowballer here. The last time that it was targeting flat to 5% top-line growth was for the fourth quarter of last year, and it came through with a 12% increase in net revenue. 

There will always be risks with investing in China stocks, but Vipshop seems to be doing everything right these days. The stock more than doubled last year, and after taking a step back in January, the shares are moving higher for the fourth consecutive month. Vipshop, China, and the apparel industry are bouncing back better than most of us were expecting.