Vipshop: After finally hitting the bottom and warming up, is there more to look forward to?

$Vipshops(VIPS.US) released its Q3 2025 financial report on the evening of November 20, which, as guided by the company, showed a seasonal recovery with revenue growth finally turning positive (partly due to last year's low base). However, due to a decline in gross margin and an increase in expenses, the profit performance was not satisfactory. Specifically:

1. Core Operating Metrics -- Vipshop's GMV growth accelerated to 7% this quarter, slightly exceeding market expectations. Among them, order volume growth stopped declining and turned positive to 1.5%, which is the main source of marginal improvement. Further breakdown shows that the return of users contributed, with active users increasing by 500,000 this quarter (+1.3% yoy), while the average order frequency per user remained stable.

In addition, last year's low base is also an important reason for the positive growth, as order volume is still down nearly 8% compared to the same period in 2023.

Another contribution comes from the increase in average order value, which grew by approximately 6% year-on-year, thanks to the higher proportion of high-value users like SVIP and high-ticket items (such as luxury goods).

2. Driven by the return of users and the positive growth in order volume, Vipshop's total revenue growth finally stopped declining and rose by 3.4% this quarter, slightly better than Bloomberg's consensus expectation of 1.8%. The growth rate gap between GMV and revenue narrowed to 4.1% quarter-on-quarter, also contributing to the revenue growth recovery, but the impact of high return rates remains.

In detail, product sales revenue growth turned positive to 2% from -5% last quarter, with a stronger recovery in self-operated business. The already strong growth in advertising and merchant service revenue also increased slightly by 2 percentage points quarter-on-quarter.

3. Partly due to the increased proportion of lower-margin direct sales business, Vipshop's gross margin declined by 1 percentage point year-on-year, more than the market's expected decline of 0.5 percentage points. This resulted in gross profit still declining by 1%, slightly below market expectations.

4. At the same time, expenses this quarter were higher than expected, with total expenses around 3.95 billion, up 4.8% year-on-year, exceeding the growth rate of gross profit and revenue. The main reason is the rapid growth in fulfillment and marketing expenses directly related to the business, with both growing at 7%~8%. Management and R&D expenses remain controlled, with limited growth. It is evident that stimulating user and sales return is not without cost.

5. Due to the decline in gross margin and higher-than-expected expense growth, profit performance is naturally not good. Fortunately, this quarter confirmed about 300 million in other operating profits (higher than the approximately 200 million in the previous two quarters), partially offsetting the above impact. Therefore, although the operating profit margin declined by 0.5 percentage points year-on-year, the final operating profit of 1.26 billion still roughly met expectations.

6. In terms of shareholder returns, approximately 250 million USD was repurchased this quarter, with a cumulative repurchase of 610 million USD this year. The company previously promised that the total shareholder return for the year would exceed 900 million USD, corresponding to about 10% of the company's current market value, and a dividend is likely to be announced in Q4.

Dolphin Research's View:

Overall, Vipshop's performance this quarter, in terms of trend, finally bottomed out and warmed up under the backdrop of a low base, with major indicators such as users, order volume, and revenue all stopping their decline and turning positive, which is undoubtedly a positive situation. However, from the perspective of expectation difference, after last quarter's performance, the market had already fully expected the company's performance to bottom out and recover, and the current stock price, close to the historical high since 2021, is undoubtedly proof that the market has fully priced this in.

Therefore, while the performance on the growth side did not bring any particularly unexpected surprises, the decline in gross margin beyond expectations and the rise in expenses are "bad news" that the market did not anticipate. Although the increase in marketing and fulfillment expenses is reasonable with the growth in users and order volume, the market currently does not seem to favor the story of using expenses to drive growth.

Therefore, from the perspective of expectation difference, the overall signal conveyed by this performance is actually slightly negative.

For future judgment, the company's guidance for the next quarter still expects revenue to grow year-on-year between 0% and 5%, which means it is roughly consistent with this quarter's performance, and it is impossible to judge whether it will marginally improve from this alone.

However, considering the current macro environment and consumption tendencies, Dolphin Research tends to believe that it is more of a stabilization at a low base, and it is unlikely to see a significant recovery in discretionary consumption such as apparel and beauty in the short term. Moreover, in the context of still very fierce competition among giants, it is difficult to say that the "small and beautiful" Vipshop has a very good competitive environment, and future revenue should be in a situation of stable and slight growth.

The bigger question is whether the company will need to continue investing to maintain stable and slightly increasing business volume, to compete for or at least retain users, leading to profit pressure. Or can it achieve stable natural growth without obvious expense investment, releasing operating leverage and profit. Dolphin Research holds a cautious attitude towards this.

In terms of valuation, although revenue growth has turned positive, operating profit is still declining year-on-year. The company's operating profit for fiscal year 2025 should be slightly above 8 billion, and more optimistically, if the profit in 2026 can recover to slightly over 9 billion, then the current market value corresponds to about a 7.5x PE valuation. Since the company's stock price is currently close to historical highs, the valuation is also at the midpoint of the 6x~10x range, which is not cheap, and it is hard to say how much further upward space there is.

However, a considerable portion of Vipshop's investors may not be so focused on capital appreciation, but more on shareholder returns. The company's return rate of about 10% of the market value this quarter is undoubtedly outstanding. Attention should be paid to whether the company's guidance for shareholder returns in 2026 can continue to be raised.

Below are the core charts and detailed comments of the financial report:

I. User Return, Order Volume Growth Turns Positive (Low Base Contribution is Not Small)

This quarter, Vipshop's GMV growth significantly warmed up to 7%, in terms of price and volume factors, this quarter's order volume growth stopped declining and turned positive to 1.5%, but a considerable part is attributed to last year's low base, order volume is still down nearly 8% compared to the same period in 2023.

More contribution comes from the increase in average order value, which grew by approximately 6% year-on-year, thanks to the higher proportion of high-value users like SVIP and higher ticket items (such as luxury goods).

The driving factor for the positive growth in order volume is the return of users, with active users increasing by 500,000 this quarter, up 1.3% year-on-year. The average order frequency per user remained stable.

II. Revenue Growth Finally Turns Positive

Driven by the return of users and the positive growth in order volume, Vipshop's total revenue growth finally stopped declining and rose by 3.4% this quarter, slightly better than Bloomberg's consensus expectation of 1.8%.

In addition, the growth rate gap between GMV and revenue narrowed to 4.1% quarter-on-quarter, also contributing to the revenue growth recovery. The impact of high return rates remains, and the growth rate gap is still slightly higher year-on-year.

In detail, product sales revenue growth turned positive to 2% from -5% last quarter, with a stronger recovery in self-operated business. The already strong growth in advertising and merchant service revenue also increased slightly by 2 percentage points quarter-on-quarter.

Perhaps due to the increased proportion of self-operated business, Vipshop's gross margin declined by 1 percentage point year-on-year, more than the market's expected decline of 0.5 percentage points. This resulted in gross profit still declining by 1%, slightly below sell-side consensus expectations.

III. Decline in Gross Margin, Rising Expenses, Profit Not So Good

In addition to the decline in gross margin, Vipshop's marketing expenses this quarter were also higher than expected. This quarter's total expenses amounted to 3.95 billion, up 4.8% year-on-year, exceeding the growth rate of gross profit and revenue. In detail, the rapid growth in fulfillment and marketing expenses directly related to the business, with both growing at 7%~8%. Management expenses only grew by 3% year-on-year, while R&D expenses remained negative growth.

The growth in fulfillment expenses roughly matches GMV (also affected by high returns), and stimulating user and sales return is not without cost, as investments have increased.

Due to the decline in gross margin and higher expense growth, the profit margin is obviously not good. Fortunately, this quarter confirmed a significant amount of other operating profits (3 billion this quarter, higher than the approximately 2 billion in the previous two quarters), partially offsetting the above impact. Therefore, although the operating profit margin indeed declined by 0.5 percentage points year-on-year, it still met market expectations.

The final operating profit was 1.26 billion, with the year-on-year decline narrowing to 5%.

<End of Full Text>

Past Dolphin Research on [Vipshop]:

August 15, 2025 Commentary《Vipshop: Small and Beautiful Climbing Out of the Trough, Watching the Giants' "Life and Death Battle"》

August 15, 2025 Conference Call《Vipshop (Minutes): Expect Positive Revenue Growth in Q3 and Q4》

May 20, 2025 Conference Call《Vipshop (Minutes): Expect to Return to Positive Growth in the Second Half, Return 75% of Profits to Shareholders》

May 20, 2025 Commentary《Vipshop: Falling Back to the Bottom Again, Is There a Buyback to Support This Time?》

February 21, 2025 Commentary《Vipshop: Even if Performance Fluctuates, Shareholder Returns Save the Day》

February 21, 2025 Conference Call《Vipshop (Minutes): Strive for Positive Profit Growth in 2025》

November 19, 2024 Conference Call《Vipshop: Will 2025 Be Better?》

November 19, 2024 Commentary《Vipshop: Lying Flat and Surviving, Not Wanting to Win Means Not Losing》

August 21, 2024 Conference Call《Vipshop: Will Profits Decline in the Second Half?》

August 21, 2024 Financial Report Commentary《Vipshop: In the Nest, Only the Weak Get Weaker?》

May 23, 2024 Conference Call《Vipshop: Maintain Caution in the Short Term, Focus on Shareholder Returns》

May 23, 2024 Financial Report Commentary《Vipshop: Guiding "Bomb"? No Fear, Buyback to the Rescue》

February 29, 2024 Conference Call《Vipshop: Not Seeking High Growth, but Will Gradually Increase Dividends》

February 29, 2024 Financial Report Commentary《Cold Weather, Expensive Clothes, Vipshop Deserves "Small and Beautiful"》

Risk Disclosure and Statement of this Article: Dolphin Research Disclaimer and General Disclosure