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Why Baozun Stock Was Sliding Today

By Jeremy Bowman – Updated Aug 21, 2020 at 11:48AM

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Shares of the Chinese e-commerce specialist flopped after disappointing guidance in its earnings report.

What happened

Shares of Baozun (BZUN -3.60%) were pulling back today after the Chinese e-commerce services provider offered disappointing guidance in its second-quarter earnings report. Despite strong results, the outlook for the current quarter was dim enough to drive investors away, and the stock was down 7.5% as of 10:28 a.m. EDT on Friday.

So what

For the second quarter, Baozun's revenue rose 26.3% to $304.6 million, ahead of analyst estimates at $299.1 million. Higher-margin services revenue increased 43.2% to $173.3 million and now makes up a majority of the company's revenue. Gross merchandise volume rose 31.2% to $1.8 billion.

The word Baozun made up of its customers' logos

Image source: Baozun.

Its number of brand partners, which include multinational companies like Philips, Nike (NYSE: NKE), and Microsoft (NASDAQ: MSFT), rose from 212 a year ago to 250.

The strong performance in the services segment led to a surge in profits as adjusted operating income jumped 81.4% to $26.5 million, and adjusted earnings per share rose 72% to $0.34, easily beating expectations at $0.23.

CEO Vincent Qiu summed up the quarter, saying, "Strong recovery in e-commerce, our unique value proposition to brand partners and the tenacity of our team underpinned a solid set of results in the second quarter of 2020, with strong top line growth and remarkably improved profitability."

Now what

Despite the strong second-quarter results, management anticipated a slowdown in the third quarter, calling for revenue growth of 16% to 20%. CFO Robin Lu cited "stronger seasonality and continued macro uncertainties," which was causing the company to be cautious, but Lu also forecast strong adjusted operating-profit growth.

Nonetheless, the revenue forecast seemed to be enough to scare away investors since the expected slowdown comes as e-commerce is booming in China and much of the world during the pandemic.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman owns shares of Baozun and Nike. The Motley Fool owns shares of and recommends Baozun, Microsoft, and Nike and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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