NEWS RELEASES

SHANGHAI, China, Aug. 03, 2016 (GLOBE NEWSWIRE) -- Baozun Inc. (Nasdaq:BZUN) ("Baozun" or the "Company"), the leading brand e-commerce solutions provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2016.

Second Quarter 2016 Financial Highlights

• Total net revenues were RMB700.3 million (US$¹105.4 million), an increase of 35.3% year-over-year.
   
• Net income was RMB1.5 million (US$0.2 million), an increase from RMB51 thousand during the same period last year.
   
• Basic and diluted net income attributable to ordinary shareholders per American Depository Share (“ADS²”) were RMB0.03 (US$0.00), compared with basic and diluted net income attributable to ordinary shareholders per ADS of RMB0.00, for the same period of 2015.

Second Quarter 2016 Operational Highlights

• Total Gross Merchandise Volume (“GMV”)³ was RMB2,204.4 million, an increase of 81.4% year-over-year. Maikefeng, the Company’s online retail platform, contributed RMB39.5 million to total GMV, an increase of 3.8% year-over-year.
   
• Distribution GMV⁴ was RMB535.5 million, an increase of 18.0% year-over-year.
   
• Non-distribution GMV⁵ was RMB1,668.9 million, an increase of 119.1% year-over-year.
   
• Number of brand partners increased to 120 as of June 30, 2016, from 99 as of June 30, 2015.
   
• Number of GMV brand partners increased to 108 as of June 30, 2016, from 86 as of June 30, 2015.

“We are pleased to report another strong quarter of solid growth in which we beat our quarterly revenue guidance, as we did every quarter since our IPO in May 2015,” commented Mr. Vincent Qiu, Chairman and Chief Executive Officer of Baozun. “We recently entered into a strategic cooperation agreement with CJ O Shopping, a division of CJ Group, a Korean culture and lifestyle conglomerate, to establish an e-commerce joint venture. This joint venture is expected to leverage our respective market leading positions and resources in e-commerce operations, online marketing and logistics to introduce highly sought-after Korean brands to Chinese consumers. We remain committed to finding innovative ways to provide our brand partners with the best e-commerce solutions available to further reinforce our market leading position.”

Mr. Beck Chen, Chief Financial Officer of Baozun commented, “We delivered stronger than expected growth during the quarter with GMV increasing by 81.4%. With strong confidence in our strategy and operations, and a better than expected first half of 2016, we expect the fiscal year 2016 GMV to grow by over 60%, which is higher than our prior expectation of over 50%. Our core business saw significant improvement in profitability, mainly driven by the continuous optimization of our business model mix and improvements in our operational efficiency. We continue to review Maikefeng’s operations and strategy. Excluding a one-time inventory write-down due to the restructuring of its direct sales business, Maikefeng’s operating loss this quarter decreased dramatically on a sequential basis. We will continue to adjust Maikefeng’s strategy to the evolving Chinese market and focus on improving its performance.”

Second Quarter 2016 Financial Results

Total net revenues were RMB700.3 million (US$105.4 million), an increase of 35.3% from RMB517.6 million in the same quarter of last year. Maikefeng contributed RMB6.8 million (US$1.0 million) to total net revenues, a decrease of 70.6% from RMB23.3 million in the same quarter of last year.

Product sales revenue was RMB460.0 million (US$69.2 million), an increase of 18.2% from RMB389.1 million in the same quarter of last year. The increase was primarily due to the increased popularity of brand partners’ products and increasingly effective promotional and marketing activities. Maikefeng contributed RMB4.6 million (US$0.7 million) to product sales revenues, a decrease of 80.1% from RMB23.2 million in the same quarter of last year. The decrease was a result of Maikefeng’s transition from a direct sales model to a marketplace-focused model.

Services revenue was RMB240.3 million (US$36.2 million), an increase of 87.1% from RMB128.4 million in the same quarter of last year. The increase was primarily attributable to the rapid growth of the Company’s non-distribution model and in particular growth in sales of apparel products sold by existing brand partners as they expand their online presence. Maikefeng contributed RMB2.2 million (US$0.3 million) to services revenue, a significant increase from RMB0.1 million in the same quarter of last year.

Total operating expenses were RMB699.9 million (US$105.3 million), compared with RMB512.9 million in the same quarter of last year.

• Cost of products was RMB412.0 million (US$62.0 million), compared with RMB345.5 million in the same quarter of last year. The increase was primarily due to an increase in the volume of product sales from the Company’s core brand e-commerce business. Maikefeng accounted for RMB32.3 million (US$4.9 million) in cost of products, compared with RMB19.3 million in the same quarter of last year. The increase was mainly due to a one-time inventory write-down of RMB27.7 million as a result of the restructuring of Maikefeng’s direct sales business.
   
• Fulfillment expenses were RMB110.1 million (US$16.6 million), compared with RMB66.6 million in the same quarter of last year. The increase was primarily due to an increase in GMV contribution from the Company’s consignment business, an increase in the percentage of total orders fulfilled by a premium delivery service provider, and an increase in warehouse rental expenses. Maikefeng accounted for RMB1.2 million (US$0.2 million) in fulfillment expenses, compared with RMB4.3 million in the same quarter of last year.
   
• Sales and marketing expenses were RMB141.0 million (US$21.2 million), compared with RMB73.5 million in the same quarter of last year. The increase was primarily due to an increase in promotional and marketing expenses associated with the Company-operated stores. Maikefeng accounted for RMB4.0 million (US$0.6 million) in sales and marketing expenses, compared with RMB8.0 million in the same quarter of last year.
   
• Technology and content expenses were RMB21.6 million (US$3.2 million), compared with RMB13.1 million in the same quarter of last year. The increase was primarily due to increases in technology-focused staff and project-based variable technological expenses from brand stores. Maikefeng accounted for RMB1.7 million (US$0.3 million) in technology and content expenses, compared with RMB1.5 million in the same quarter of last year.
   
• General and administrative expenses were RMB19.5 million (US$2.9 million), compared with RMB16.9 million in the same quarter of last year. The increase was primarily due to increases in professional service fees associated with being a publicly listed company. Maikefeng accounted for RMB0.4 million (US$0.1 million) in general and administrative expenses, compared with nil during the same quarter of last year.

Excluding Maikefeng’s direct impact on revenues and expenses, non-GAAP income from operations was RMB39.8 million (US$6.0 million), a significant increase compared with RMB21.8 million in the same quarter of last year, and non-GAAP operating margin was 5.7%, compared with 4.4% in the same quarter of last year.  

Net income was RMB1.5 million (US$0.2 million), a significant increase from RMB51 thousand during the same quarter of last year. Basic and diluted net income attributable to ordinary shareholders per ADS were RMB0.03, compared with basic and diluted net income attributable to ordinary shareholders per ADS of RMB0.00, for the same period of 2015.

Non-GAAP net income⁶ was RMB8.2 million (US$1.2 million), an increase of 11.5% year-over-year. Basic and diluted non-GAAP net income attributable to ordinary shareholders per ADS⁷ were RMB0.17 and RMB0.15, respectively, compared with basic and diluted non-GAAP net income attributable to ordinary shareholders per ADS of RMB0.28 and RMB0.24, respectively, for the same period of 2015.

As of June 30, 2016, the Company had RMB737.6 million (US$111.0 million) of cash, cash equivalents and short-term investment, a decrease from RMB837.3 million as of December 31, 2015 due to the Company’s share repurchase program, investment in logistics and office space. For the quarter ended June 30, 2016, net cash provided by operating activities was RMB60.3 million (US$9.1 million).

¹ This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB 6.6459 to US$1.00, the noon buying rate in effect on June 30, 2016 as set forth in the H.10 Statistical Release of the Federal Reserve Board.

² Each ADS represents three Class A ordinary shares.

³ GMV includes value added tax and excludes (i) shipping charges, (ii) surcharges and other taxes, (iii) value of the goods that are returned and (iv) deposits for purchases that have not been settled.

⁴ Distribution GMV refers to the GMV under the distribution business model.

⁵ Non-distribution GMV refers to the GMV under the service fee business model and the consignment business model.

⁶ Non-GAAP net income is a non-GAAP financial measure, which is defined as net income excluding share-based compensation expenses.

⁷ Basic and diluted non-GAAP net income per ADS are non-GAAP financial measures, which are defined as non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of ADSs used in calculating basic and diluted net income (loss) per ADS, respectively.

Business Outlook

For the third quarter of 2016, the Company expects total net revenues to be between RMB740 million and RMB760 million, representing year-over-year growth of approximately 26% to 29%.

Conference Call

The Company will host a conference call to discuss the earnings at 8:30 p.m. Eastern Time on Wednesday, August 3, 2016 (8:30 a.m. Beijing time on Thursday, August 4, 2016).

A telephone replay of the call will be available after the conclusion of the conference call through 11:59 p.m. Hong Kong Time, August 10, 2016.

A live and archived webcast of the conference call will be available on the Investor Relations section of Baozun’s website at http://ir.baozun.com/.

Use of Non-GAAP Financial Measures

In evaluating the Company’s business, the Company considers and uses non-GAAP net income/(loss) from operations, non-GAAP operating margin, non-GAAP net income/(loss), non-GAAP net margin, non-GAAP net income (loss) attributable to ordinary shareholders and non-GAAP net income (loss) attributable to ordinary shareholders per ADS, as supplemental measures to review and assess the Company’s operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. Non-GAAP net income/(loss) from operations is net income/(loss) from operations excluding share-based compensation expenses. Non-GAAP operating margin is non-GAAP income from operations as a percentage of total net revenues. Non-GAAP net income/(loss) is net income/(loss) excluding share-based compensation expenses. Non-GAAP net margin is non-GAAP net income as a percentage of total net revenues.  Non-GAAP net income (loss) attributable to ordinary shareholders is net income (loss) attributable to ordinary shareholders excluding share-based compensation expenses. Non-GAAP net income (loss) attributable to ordinary shareholders per ADS is non-GAAP net income (loss) attributable to ordinary shareholders divided by weighted average number of shares multiplied by three.

The Company presents the non-GAAP financial measures because they are used by the Company’s management to evaluate the Company’s operating performance and formulate business plans. Non-GAAP income/(loss) from operations and non-GAAP net income/(loss) enable the Company’s management to assess the Company’s operating results without considering the impact of share-based compensation expenses. The Company also believes that the use of the non-GAAP measures facilitate investors’ assessment of the Company’s operating performance.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP income/(loss) from operations and non-GAAP net income/(loss) is that they do not reflect all items of income and expense that affect the Company’s operations. Share-based compensation expenses have been and may continue to be incurred in the Company’s business and is not reflected in the presentation of non-GAAP income/(loss) from operations and non-GAAP net income/(loss). Further, the non-GAAP measures may differ from the non-GAAP measures used by other companies, including peer companies, and therefore their comparability may be limited.

The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, which should be considered when evaluating the Company’s performance.

Safe Harbor Statements

This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "target," "going forward," "outlook" and similar statements. Such statements are based upon management's current expectations and current market and operating conditions, and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under law.

About Baozun Inc.

Baozun is the leading brand e-commerce solutions provider in China that helps brand partners execute their e-commerce strategies. The Company's integrated capabilities encompass all aspects of the e-commerce value chain, covering IT solutions, store operations, digital marketing, customer services, warehousing and fulfillment. The Company helps brand partners execute their e-commerce strategies in China by selling their goods directly to customers online or by providing services to assist with their e-commerce operations.

For more information, please visit http://ir.baozun.com 

(1) Share-based compensation expenses are allocated in operating expenses items as follows:

For investor and media inquiries, please contact:

Baozun Inc.
Ms. Caroline Dong
ir@baozun.com

Christensen
In China
Mr. Christian Arnell
Phone: +86-10-5900-1548
E-mail: carnell@christensenir.com

In U.S.
Ms. Linda Bergkamp
Phone: +1-480-614-3004
Email: lbergkamp@ChristensenIR.com