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Why Vipshop Holdings Ltd Shares Plunged

By Brian Pacampara – Feb 25, 2016 at 1:35PM

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Vipshop posts solid Q4. But Mr. Market isn't thrilled about the future.

Source: Vipshop Holdings

What: Shares of Chinese online discount retailer Vipshop Holdings Limited (VIPS 0.65%) were down 12% at 11:35 a.m. EST Thursday after its current-quarter guidance disappointed Wall Street.

So what: Vipshop's Q4 results managed to top estimates -- EPS of $0.18 beat the consensus by $0.02 on revenue growth of 65% -- but downbeat guidance for Q1 is forcing analysts to lower their growth estimates yet again. And while Q4 operating margins increased to 5.8% from 4.5% in the year-ago period, gross margin decreased 80 basis points to 24.6%, adding to Mr. Market's concern over Vipshop's long-term competitive strength.

Now what: Management now sees current-quarter revenue of 11.8 billion-12.3 billion yuan, below the average analyst estimate of 12.5 billion yuan. "As we diversify our product offering and further enhance the customer experience, we are confident in our ability to drive further growth and value for investors," said Chairman and CEO Eric Shen. More importantly, with Vipshop shares now off more than 60% from their 52-week highs, the downside might finally be limited enough to buy into that turnaround talk.

Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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