Shares of Vipshop soared 32% yesterday -- hitting yet another all-time high along the way -- after posting another quarter of blowout results. Revenue soared 117% for the fast-growing provider of branded-apparel flash sales. Given the scalable nature of the daily-deals model, it's probably not a surprise to see that profitability grew even faster. Vipshop's adjusted earnings skyrocketed 254% to $28.8 million, or $0.49 a share.
Analysts expected Vipshop's top line to climb by only 87%, ringing in an adjusted profit of $0.41 a share.
This isn't necessarily an endorsement for flash-sale providers. Global leader Groupon (NASDAQ:GRPN) continues to trade well below its 2011 IPO price of $20, and while it's starting to grow again -- gross billings climbed a modest 5% in Groupon's latest quarter -- it's still not the growth industry that investors thought they were buying into three years ago when Groupon and LivingSocial were the toasts of the town.
Vipshop is different. It's early enough in its growth cycle that it can continue to post stellar growth by sticking to its specialty of apparel and related accessories. Groupon eventually ran out of local eateries, spas, and merchants to promote, losing itself in actual merchandise and ill-advised overseas expansion. Doing business in a Chinese economy that is growing faster than most developed markets also helps, but that wasn't enough to save LightInTheBox last week.
Sales climbed a weaker-than-expected 22% for LightInTheBox, leading to an analyst downgrade and another Wall Street pro advising his clients to stay away from the e-tailer that has been a brutal disappointment since going public last year. Dangdang also posted 22% top-line growth, but that was far better than analysts expected.
It's not fair to compare the three companies. Dangdang's specialty is books, even though it's branching out into more general merchandise categories. LightInTheBox doesn't even market to Chinese users. It sources its apparel and gadgetry in the world's most populous nation, but then it goes on to sell its products primarily in Europe and the Americas. However, investors will continue to lump these three companies together as three of the more prolific publicly traded Chinese e-tailers.
Vipshop will continue to be the speedboat in this ocean. Its guidance calls for revenue to climb 106% to 109% in the current quarter. That may be decelerating growth, but keep in mind that Vipshop's guidance for the fourth quarter was initially calling for just a 94% to 97% advance in sales.
Vipshop has been one of the market's biggest winners because it has mastered the art of underpromising and overdelivering. That isn't likely to change anytime soon.