China Stock Ideas

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Vipshop -- >>> China's Online Shoppers Loving Vipshop 'Flash Sales'



By MARILYN MUCH

INVESTOR'S BUSINESS DAILY

02/04/2014



http://news.investors.com/020414-688780-vipshop-flash-sales-site-a-hit-in-china-online-shopping.htm?ven=yahoocp&src=aurlled&ven=yahoo



When it comes to feeding the consumer appetite for bargains, China's Vipshop Holdings follows a tried and true recipe that's helped nurture a healthy growth spurt.

Vipshop (VIPS), which started in 2008 and went public in March 2012, is somewhat of a rare breed among retail websites. It sells quality branded apparel, accessories, home goods and other lifestyle products at a 30% to 70% discount to the original retail price using a "flash sales" model. Every morning at 10 Beijing time, it launches new flash sales on a finite quantity of products or services online for a limited time.

To provide shoppers with a greater opportunity to buy featured discounted products, each customer is limited to purchasing two pieces of the same item and each shopping cart can hold only 20 items at one time, except for food products.

As with other popular flash-sale sites, which sell everything from high fashion to hotel rooms, the idea is to create an impulse-driven shopping experience while helping to move excess inventory sourced from a variety of vendors.

As of the end of 2012, Vipshop had an impressive lineup of goods with exclusive rights to sell selective products from more than 700 brands.

Preferred Products

Vipshop features products from more than 5,800 brands, including international labels such as such as Nike (NKE), Disney (DIS), Hanesbrands (HBI) and Lee (owned by VF Corp. (VFC); and domestic brands like Hstyle. Its top three selling brands are Adidas, Nike and Kappa, a domestic sporting goods brand.

Vipshop's approach has played well with customers. In 2012, sales more than tripled to $692 million. It ended that year with close to 27 million registered users.

It has also scored a big hit with investors. Vipshop's stock price has rocketed nearly 450% over the past 12 months to around 100.

Vipshop has been profitable the past five quarters. It earned 26 cents per American Depositary Share (ADS) in the most recent third quarter, up from one cent a year earlier. Sales rocketed 146% to $383.7 million as it saw a 132% rise in active customers to 4 million and a 116% rise in total orders to 11.7 million.

Analysts polled by Thomson Reuters expect full-year 2013 earnings to reach $1.04 per ADS, up from a 4-cent loss in 2012. They see a 107% surge in 2014 and a 59% rise in 2015.

China-based UBS analyst Erica Poon Werkun forecast a 62% revenue compound annual growth rate from 2012 to 2017, driven mainly by growth on active customers, in her January initiation note on Vipshop, which she rates a buy.

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