Baozun Q2 2023 Earnings Call Transcript

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Provided by Quartr
August 28, 2023

There are 8 speakers on the call.

Operator

Good morning, ladies and gentlemen, and thank you for standing by for Bowzone's Second Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. After management's prepared remarks, there will be a question and answer session. As a reminder, today's conference call is being recorded. I will now turn the meeting over to your host for today's call, Ms.

Operator

Wendy Sun, Senior Director of Corporate Development and Investor Relations of Alzone. Please proceed, Wendy.

Speaker 1

Thank you, operator. Hello, everyone, and thank you for joining us today. Our Q2 2023 earnings release was distributed earlier before the call and is available on our IR website at ir. Baozun.com as well as on Global Newswire Services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for download.

Speaker 1

On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer Mr. Arthur Yu, Chief Financial Officer and President of Baozun E Commerce and Ms. Sandri Zerbeek, President of Baozun Brand Management. Ms.

Speaker 1

Qiu will review the business and outlook and then by Ms. Zerbe to share more about Thousand Brands Management. They will all be available to answer your Before we begin, I would like to remind you that this conference call contains forward looking statements Within the meaning of the U. S. Security Act of 1933 as amended, the U.

Speaker 1

S. Security Exchange Act of 1934 as amended and the U. S. Private Securities Litigation Reform Act of 1995. These forward looking statements are based upon management's current expectations and current market and operating conditions and relates to events that involve no 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 to differ materially from those in the forward looking statements.

Speaker 1

Further information regarding these and other risks, uncertainties or factors is included in the company's filings With the U. S. Exchange Commission and its announcement notice in the company's filings published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date Any forward looking statements except as required under applicable law. Finally, please note that unless otherwise stated, In place of non general accounting principle or non GAAP, in order to reduce overall position that may arise from our discussion about financials related to the Gap brand.

Speaker 1

It is now my pleasure to introduce our Chairman

Speaker 2

Thank you, Wendy. Hello, everyone, and thank you all for your time. Last quarter, we detailed our Exciting transformation roadmap where we are expanding Baozun Group into 3 business lines, Baozun E Commerce, Baozun Brand Management and Baozun International. As demonstrated on Slide number 2, These three business lines create an ecosystem in which each complements the other 2 and all 3 concurrently promote each other. This strengthened Baozun Group into a one stop ecosystem with the most comprehensive services.

Speaker 2

Today, I'm happy to share our strategic partnership with Authentic Brands Group or ABG, which exemplifies The advantages and benefits of Baozun Group's one stop ecosystem. Slide number 4 is a snapshot of ABG. ABG is a global leader in brand development, boosting a large portfolio of more than 50 iconic and world renowned sportswear and lifestyle brands. Earlier this year, ABG's Executives visited us to discuss Baozun brand management and our potential collaboration with Hunter, The British premium outdoor brand under its portfolio. We quickly recognize that Baozun's vision and ecosystem can elevate Business in Greater China.

Speaker 2

Especially specifically Baozun's advancements in marketing technology And digitalization as well as our game changing new retail philosophy and the broad international reach makes us the ideal strategic partner. Accordingly, ADG has chosen Baozun Group to become its Strategic partner in Greater China. We have signed a license agreement for Hamzah. Beyond the typical license partnership, We are moving further and are in the process of forming up a joint venture with ABG to co own This marks another milestone in our transformation where all three business lines will cooperate together to deliver an extraordinary suite of services to Leading Global Brand Partners. Looking forward, we anticipate the challenging macro environment in China to continue.

Speaker 2

However, we have set key objectives for each of our business lines for the rest of 2023. With a priority in higher business quality, BAWZY e Commerce delivered solid growth In profits and cash flows in the first half of the year, BEC is also prepared to transition into its second growth curve To adapt to the rapidly changing dynamics of China's e commerce market, Baozun Brand Management or BBM made through a smooth transition period as we have put in place the right infrastructure, Supply Chain Partners and the C and M team. BBM is now accelerating its China for China product offerings featuring Gap's new local designs and marketing. For Baozun International, we continue to establish infrastructures throughout Asia Currently, Thousand Asia employs around 150 employees across Singapore, Malaysia, Thailand, South Korea, the Philippines, Hong Kong and Taiwan. Over the past 16 years in our history, I'm thankful that Baozun has been successful, raising in a boomy industry.

Speaker 2

We quickly expanded the business, built the best team, accumulated the best knowledge and became the industry leader. Now as the e commerce industry matures, We have updated our aspiration to focus on refinement towards extraordinary. Whereas Booming environment, where success was built on catching the wave. We now are building future success on making a difference To create the trend, I'm pleased that in the such a short term since our acquisition of Gap, The team has already delivered notable achievements in its 1st 5 months of operations. With a solid new foundation in place, The team is accelerating its localization initiatives to drive further enhancements.

Speaker 2

Furthermore, By adding Hunter to its portfolio, BDM continues to scale and I'm confident that

Speaker 3

Okay. Thank you, Vincent, and hello, everyone. Let me do a quick review of Please note that we have prepared segment reporting to provide higher transparency as shown on Slide number At this time, we are reporting 2 segments, e commerce, which includes BEC, BZI and Group Headquarters and Brand Management, which includes Gap Greater China. Please turn to Slide 6. We are pleased to report that our e commerce segment achieved better year over year profitability and operating cash flows.

Speaker 3

This positive outcome can be attributed to our ongoing efforts in business optimization and cost reduction. Additionally, our brand management segment contributed incremental top line growth after the inclusion of Gap Greater China. This resulted in a 9% increase in net revenues for Baozun Group, reaching a total of RMB2.3 billion during the quarter. Notably, product sales Within the e commerce segment, we witnessed improved top line momentum As consumer sentiment has gradually recovered, particularly during the 6/18 promotion campaign, To further enhance our offerings, we prioritize value added services in digital marketing and IT services, Notably, the apparel sector displays a robust recovery in the 2nd quarter With double digit year over year growth in sportswear. Please turn to Slide 7.

Speaker 3

In this quarter, at the group level, our total gross profit increased by 8% to RMB1.6 billion. Our total cost of the products increased by 12% to RMB675,000,000, mainly due to the incremental cost of products for Gap China. For the quarter, product Sales gross margin of e commerce expanded by 110 basis points to 14.3 percent And product sales gross margin of BBM was 52%, which is ahead of our own plan for margin improvement. Our adjusted income from operations was RMB700 1,000,000 during the quarter, of which e commerce adjusted operating income grew by 29% to 61,000,000, reflecting our high quality strategy and effective cost optimization. These optimization efforts On BBM, GAAP China showed a good momentum both operationally and financially, Reducing its operating loss by nearly half on a year over year comparable basis, Our new season product launch in the recent months was quite successful and should provide a foundation for a better than expected financial results for GAAP China in the full year.

Speaker 3

Sanjuri will cover the details later in her part. Turning to Slide number 8, about our cash and cash flow status. As of June 30, 2023, Our cash, cash equivalents, restricted cash and short term investments grew Operating cash flow was RMB453 1,000,000. This is an improvement of RMB49 1,000,000 from the same period last year, mainly due to our efforts in improved working capital efficiency through back and process reengineering our inventory, billing and cash collection management. Now let's focus on our e commerce business.

Speaker 3

Overall, we achieved a solid set of business results With an end to the COVID pandemic, we are delighted to witness that many brand partners Are continuing to focus and invest on interactive engagement with consumers and omni channel strategy on e commerce. During this year's 6/18 promotion, Baozun achieved an overall GMV year over year growth for the brands we managed. We helped many of our brand partners achieve number 1 rankings in their own categories, including sportswear, Our new business development will continue to see a We added 41 new brands to our client portfolio, mainly from fashion apparel, luxury, health care and fast moving consumer goods. We continued to make progress in our omni channel initiatives. As demonstrated on Slide number 9, 46% of our brands engaged with us on ad's list 2 channels reaching a record high.

Speaker 3

Of those new channels expansions, JD, WeChat and Douyin delivered double digit growth in revenue. Please turn to Slide number 10. Value added service remains crucial in creating value for our brand partners. In this quarter, we established the Creative Content to Commerce Business Unit or called We aim to integrate creative content, intellectual property and brand building strategies with The rising trend of live streaming and short videos. To date, we have launched 5 live streaming studios Located in Shanghai, Hangzhou, Wuhan, Hefei and Nantong, totaling over 10,000 Given the shift of China's e commerce market dynamics, we view the next Now let me share our key initiatives during this transition period.

Speaker 3

Please turn to Page 11. Firstly, we will put our brand partners' needs at the center of everything we do. By staying ahead of curve and adapting our experience to the dynamic e commerce landscape in China, We ensure that our brand partners receive the best possible support and solutions to be successful in this market. We will continue to strengthen our structured client management framework and to improve our service This program enables us to gather valuable feedback from our brand partners and make For example, we worked with a leading luxury brand to implement 1 on 1 live customer services. We helped a leading All Star Sports brand to implement an omnichannel CRM solutions, and we implemented an online merge offline solution with single inventory for a leading electronics brand.

Speaker 3

By combining our expertise of e commerce with our brand partners' industry insights, we aim to stay at the forefront of the e commerce innovation, while delivering exceptional value to our brand partners. Secondly, we will focus on the quality of the business. Given the current challenging macro environment, We will continue our efforts in portfolio optimization. By evaluating our low margin accounts which will help us to be better equipped to navigate challenges and maintain the long term sustainability of our business. Thirdly, we will continue to invest in building our capability to provide end to end services across different categories and the different business models.

Speaker 3

We will strategically invest in and strengthen the categories where we have already built a competitive edge such as apparel, sports, luxury and electronics. At the same time, we will expand into those categories that show improving demand with low online penetration, such as health, in e commerce in China. We have also engaged in some early discussions to become the sole distributor for some international brands in China. On the other hand, we will continue to incubate our own brands domestically. We witnessed an early breakthrough during the quarter with our self incubated brand, Finally, we aim to enhance our cost effectiveness and efficiency through the implementation of technology and provide training opportunities, at the same time decreasing our labor expenses for entry level employees.

Speaker 3

Furthermore, we will continue to promote the Lean 6 Sigma process to enhance both quality and efficiency. We are in the process to integrate AI technologies, including our self developed automation platform, Roche and AITC into our daily operation. We are confident that this initiative will We are embarking on a transition journey in the e commerce business to adapt to the changing market dynamics. This transition program will require some time and effort to realign our people, resources and business processes. However, we have full confidence that once this transition is successfully executed, our e commerce business will be better positioned to drive Now let me turn the call over to Sanjrin To elaborate more on BBM, here we go, Sandrine.

Speaker 4

Thank you. Thank you, Vincent and Arthur, and thank you all for joining us today. It is my great pleasure to speak with you. Please follow us to Slide number 12. Let me first reemphasize that BBM is a holistic omnichannel partner for global brands.

Speaker 4

We focus on growing a portfolio of premium consumer lifestyle brands that we manage with a data and technology driven China for China approach. We began our journey earlier in 2023 with GAAP And we are currently underway of transforming Gap China from a discount driven approach to one that focuses on building consumer love for our brand and product. In the Q2 of 2023, although the macro recovery was not as strong as everyone had hoped, We implemented our transition plan and successfully improved AUR, average unit retail and gross margin. Our store level operating profit after royalty fees turned positive and we exceeded our initial forecast on the bottom line. Please turn to slide number 13.

Speaker 4

As you may recall, We took a series of quick actions to improve store efficiency, including strictly controlling discounts, Updating existing store visual with a focus on mix and match storytelling and enhancing sales advisers training. Thanks to these actions, our blended gross margin reached 22%, sorry, 52%, A healthy level even post royalty fee. I want to highlight that this gross margin achievement is key to get China success. Overall, we generated a total revenue of EUR324,000,000 A decrease of 26% year over year, largely explained by the closure of 86 stores before we took over, which is equivalent to a decline of 40% year over year on store counts. Our same store growth reached 11% in the Q2 of 2023.

Speaker 4

As you can see, despite the disappointing micro recovery, We still managed to implement our transition plan, improve gross margin and reduce loss. We believe the new foundation for Gap China is in place as we have successfully upgraded the supply chain and significantly increased store efficiency as well as recruited talent for all key positions. This Q3, we will start selling our new locally designed China for China products And we will expand a larger product portfolio in the Q4. Now that the foundation is in place, We are ready to accelerate new store openings and marketing investments, and I'm very excited about our plans for the second half of twenty twenty three. Building on the new foundation, we aim to open up to 10 stores, beginning with the flagship destination store In Guangzhou, designed with new narrative that is younger and more interactive, We've prioritized product layouts, the new stores will be infused with our local design language.

Speaker 4

Walking into our stores, you will resonate with our modern preppy, urban workwear and premium blue aesthetics around which we have organized the product range. Walk deeper And you will discover core co branded designs as well as upgraded segmentation for men, women and kids. Our improved quick response, agile supply chain has enabled us to reduce our design to shelf lead time from previously 3 to 6 months to a matter of weeks. We are also rebuilding Our online brand image and upgrading our consumer base will further leverage our omnichannel capabilities To amplify our channel differentiation plans, our IT transition is on track, and we are ready to transition to Baozun enabled systems by the end of September. In addition, our CRM will also be upgraded with effective membership system.

Speaker 4

In marketing, we will focus on the I'm GAAP and new GAAP tagline to elevate brand marketing in the full We have actually included the I'm Gap brand team in our presentation, and I encourage you to read it to understand our upgraded DNA. We feel very good about where GAAP is heading, And we look forward to sharing with you more and more on our next call together. Now let me introduce an exciting addition to the BBM portfolio. We have been very selective in narrowing down to a possible few lifestyle brands. We and our strategic partner ABG see Hunter as an excellent fit for BBM.

Speaker 4

Please turn to Slide number 14. Hunter is a British heritage brand of original footwear and outerwear that currently sells exclusively online in China. Over the past 2 years, Hunter has seen rapid growth in China and has been profitable. We see Hunter as an iconic Premium lifestyle brands with excellent growth potential in Greater China, aligning perfectly with BBM's mission. We believe the combination of BBN China for China strategy combined with our technology and data driven approach In product and consumer operations, we'll empower Hunter for sustainable future growth.

Speaker 4

Post COVID, the outdoor lifestyle has become a trend, and Hunter has strong brand reputation and its Dynamics segment. Like Gap, Hunter was a BEC brand partner. So we have experience with Hunter's business, and we are comfortable with our ability and resources to grow its top line and bottom line in China. Unlike GAAP, which is a long term license, We will co own Hunter's Intellectual Property in Greater China as well as Southeast Asia. Naturally, our BZI division can help to grow Hunter's business in that region.

Speaker 4

We anticipate needing to add only several additional members to full run Hunter's current business, And we have already identified the personnel. As such, we don't anticipate the addition of Hunter to our BBM portfolio will cause any disruption to our GAAP business. In conclusion, Hunter is a good addition to BBM that not only offers excellent growth potential, but also establishes our strategic partnership with ABG Towards greater and deeper future collaboration, Hanford kicks off our partnership with ABG, And we aim to form up strategic alliance that broadly covers business development and planning, brand management, marketing and public relations for ABG's brand portfolio. With all this being said, I shall now hand the call back to Arthur. Thank you.

Speaker 3

Okay. Thank you, Sanjuan. In summary, we have achieved Another milestone in our transformation where all three business lines will cooperate together to deliver an extraordinary Suite of services to our brand partners, BEC continues to benefit from business and cost optimization and is Transitioning itself into a second wave of growth. BBM has put in place A new foundation for GAAP China and accelerating its China for China strategy. Baozun International is on track to build infrastructure and expand its mission.

Speaker 3

That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q and A session.

Operator

And the first question today comes from Alicia Yap with Citi. Please go ahead.

Speaker 5

Hi. Thank you. Good evening, management. Thanks for I have two questions. First, can management share with us the latest consumption sentiment you have seen For July August so far, what are the spending sentiment by brands, if you can give some color?

Speaker 5

And any major difference in terms of the international brands versus the domestic brands in terms of the ad budget spend willingness? And then second question is, can management help us to update On the store traffic for Gap China, with more offline activity post reopening, have you seen meaningful

Speaker 3

Okay. Hello, Alicia. It's Arthur here. So I will take the first question, and then I will hand over to Sandrine for the second one. So for the first one, as we all know, in the quarter 2 with the 6/18 promotion, The overall consumption is in a pretty positive recovery trend.

Speaker 3

But unfortunately, in July, what we witnessed The trend has stopped with both Tmall and JD into a negative territory in terms of the growth. But the good thing is in August, we have seen some recover, Even though it's still slightly below our expectation, but it's on the trend to recover. So hopefully, With the summer holiday ended, we will see that continue. People will start to spend. In terms of the category, So far, we have seen some good momentum in the Q3 to date on luxury, On jewelry and also travel related products, so for example, the outdoor and also the suitcase, so those we have Experiencing a double digit growth.

Speaker 3

In your final A question about the domestic and the international brands. We actually see both The international brands and domestic brands have the willingness to spend if the ROI is good, So which leads to the quality of operations for both Tmall and JD. So that's where we see The customer, either international or domestic, are looking for the good quality and stable team. They're looking for data analytics. They're looking for technology to help them, which gave Baozun a strength to stand out from our peers.

Speaker 3

So that's why I mentioned in the second half of the year, we'll have a stronger pipeline than the past year. So after the Kuwait, The brand, both international and domestic, are starting to spend their money wisely. Therefore, The capability of Baozun can play a big part in this area. So I will hand over to San Jun for the second question on GAAP.

Speaker 4

Okay. So Alicia, to answer your second question, let me stress the fact that Our same store growth for the Q2 is 11%. And now if I look at August, It has picked up to more than 30%. And if I look at year to date, as of today, we are close to 30%. So All in all, this is very positive and it's actually the combination of increased traffic to answer more directly your question and increased conversion in spite of stopping or at least drastically reducing the discounts in store and therefore actually increasing our margin quite significantly.

Speaker 4

So all in all, yes, we see traffic and I insist and conversion Picking up very significantly and momentum continuing to go up until today in August. And we expect that the last 4 months will be continuing on this trend and potentially even accelerating Because this is when we're going to really start accelerating not only store opening, but also marketing investments With the I'm GAAP and new GAAP campaigns, as well as launching the new products that are designed China for China. I'm done with my reply.

Speaker 1

Okay. Thank you so much.

Operator

Thank you. And the next question comes from Thomas Chong with Jefferies.

Speaker 6

Hi, good evening. Thanks management for taking my questions. My first question is regarding the growth outlook for Lon Tmall channels. Can management comment about how it is Trending and its contribution to GMV in the future. And my second question is about our international strategies.

Speaker 6

Can management comment about any strategic updates and our thoughts in second half and next year? Thank you.

Speaker 3

Okay. Thank you, Thomas. I will take the first one, then I will hand over to Vincent for the international In terms of the non Tmall channels, as I mentioned in the early prepared remarks, We actually have seen an increased trend that the clients are looking for our mini channel. Therefore, our Tmall contribute is actually come down in terms of the total GMV. And non Tmall is representing 34% of the overall GMV for quarter 2.

Speaker 3

And that trend is continue with the clients looking for the omni channel strategy. In terms of in Baozun, we have 47% Okay. Let me hand over to Vincent for the second question.

Speaker 2

Okay. Thank you, Thomas, for your questions. I'm Vincent here for the second question about the Baozun International overseas strategies. Of course, Baozun International is of course a key element of our strategy. I think in the past one and a half years, we have finished constructioning the infrastructures, Including the team building capability and also territory coverage.

Speaker 2

So we have Several offices in different countries with a quarantine to help us to come back not only brand e commerce business, but also brand management business. So with the addition, just now Sanjuan mentioned that we have a new member, very capable guy joining us for the BBM expansion In the region. So for the strategies, I think one thing is that about localization. We want the local team can Through the BD service provisioning and also all the other elements of the e commerce business themselves in the region, so that is lower localization. And we also have another keyword called lending, means that the Baozun International team will help our global E commerce clients or brand management clients to land in that area.

Speaker 2

So these two key elements. Right now, I think we are doing a quite good job. Also, this year we'll start to conduct the Hunter Business in the region, after the joint venture and license equipment. And also next year, we have some other brands, strong brands in our pipeline. So early next year, we will We roll out more brand management business in the region.

Speaker 2

So I think it's quite promising. Thank you, Thomas.

Speaker 1

Thank you.

Operator

Thank you. And the next question comes from Sophie Wang with CMB Bank International.

Speaker 5

Okay. Thank you for taking my question. I have two questions here. The first one is regarding live streaming e commerce update. Last time, you already stated the plan to enhance live streaming commerce capacity.

Speaker 5

So would you mind share us more The second question is about the Hunter acquisition. What is the rationale behind this deal? And how do we look at

Speaker 3

Hi, Sophie. I will take the first one on the live streaming, and then I will pass to Sandrine For the second one, yes. In terms of the live streaming, I think our idea is to With the world class facility and operations, which we are start To build, those two things can combine together to achieve a very good Kind of a model for our brand partner to find the new growth area in terms of the e commerce. So this is a new area that Bozun next gets into, but our strength in terms of the connection with the brand Also the content creation will help us to stand out. So far this year in the first half of the year, We have seen some good progress in terms of some luxury brands we start to perform the Douyin, which has achieved very good results.

Speaker 3

And also very recently, only this month, we launched So if you look at Douyin, you can find in terms of the details on that one. I'm not going to throw the detail. But what's that proof As Baozun's capability, plus our investment into the live streaming can create a good result for all clients. Okay. Now I will hand over to Sandrine.

Speaker 3

Yes.

Speaker 4

Okay. So Hunter, what's the rationale to Add Hunter to the portfolio. So 2nd brand in the portfolio. The first reason is that It really fits the philosophy of how we want to build this portfolio, because Hunter is a premium lifestyle brand By essence, I would say, or in essence. It has a strong DNA.

Speaker 4

It has very iconic products. That's the second reason. On top of this, it's in a category which is like urban outdoor, Which has a lot of momentum and especially after COVID, we have seen a lot of growth. Then to add to this, We know the brand. We know the brand because we've been its e commerce partner for a couple of years.

Speaker 4

We therefore saw it growing very fast In the last two years and also being in China at least a profitable brand and all these are actually Positive reasons to go this direction. On top of this, also among the criteria which are important for us, It's a brand that sells strongly online. Actually, for the time being in China, it's only online. So online potential is very strong. And it's a brand that we believe that we can do China for China to expand the product portfolio in an efficient way.

Speaker 4

So All this combined together made us think that it's actually a good brand for our portfolio. And in addition to this, this time we can have some ownership over the brand, which makes a big difference versus Pure license. And then in terms of financial impact, at the beginning, it's Relatively marginal. We plan to grow this brand significantly in Greater China, but also in Southeast Asia because we have the IP in San Felipe Dejot, Asia as well. And the good thing is that, as we said, it's a brand which is operationally positive From the very beginning.

Speaker 4

So of course, at the beginning, we will have to add some royalties. But Overall, it's the brand which is operationally positive from day 1, which is not a turnaround like we have experienced previously.

Operator

And the next question comes from Janet Young with Bank of America.

Speaker 5

Hi. Thank you, Vincent, Arthur, and Zhenli for taking my questions. My question is regarding the product sales. Since you have mentioned that the optimizing optimization of product distribution model and client portfolio has put some pressure downward pressure on our product sales. It has been going on for a while.

Speaker 5

Can you give us an update on the progress? And looking into the future, how long do you think you will last and what product categories still have much room to improve? And can you give a sense of how much further impact you could potentially have on the product sales and margins? Thank you.

Speaker 3

Okay. Thank you, Jenny. And I think as I mentioned in the earlier call, our focus The BEC business is on quality and on the operating cash flow. And the rationalization has made a Good contribution to our portfolio and the quality of the portfolio has enhanced. Therefore, you see the result is in quarter We have a fairly healthy positive cash inflow of RMB450 1,000,000, which is a very good result.

Speaker 3

And a lot of these come down to rationalization of product sales portfolio. As You may remember, we started this journey about a year ago and now is coming to the point that Our product sales portfolio has significantly improved. So we will continue our journey In terms of improving the quality, we will add on new good quality product sales like The sole distributor model I talked about earlier to our product sales portfolio. We think from quarter 4 This year, you will see a positive trend in terms of the growth from this area.

Speaker 5

Thank you very much.

Speaker 3

Okay. Thank you.

Operator

Thank you. And the next question comes from Andrei Shang with JPMorgan.

Speaker 7

Thank you, management, for taking my question. I have a follow-up question on Hunter, the deal and The company's strategy on BBM going forward. So it's a relatively short interval from us doing the deal of GAAP And now the deal with Hunter, and we also talked about like potential more cooperation with Authentic Brands Group. So can management help us And how we consider the how far we can go based on our current financial resources And how to think about the opportunity cost? Say, we are doing several deals in a short period of time.

Speaker 7

What about the potential going forward? And what's the reason for us to have the confidence to accelerate progress on the BDM front? Thank you.

Speaker 3

Go ahead, Sandri.

Speaker 2

Do you

Speaker 4

want to start off? No, no. Okay. Well, I'll go ahead and I'll let you compliment if you feel especially on the resource question. Actually, we started working on DBM even before the Gap deal.

Speaker 4

So we've been looking and selecting brands Very carefully. And we continue to be extremely selective. So for 1 Hunter, we have looked at Dozens and dozens of brands. So we're not rushing. In any manner, we're not rushing.

Speaker 4

However, Going forward, what we want is indeed to build a portfolio that brings significant revenue and profit and value to Balzun Group. So we will continue to be extremely selective, but we will continue to look at the best opportunities, Especially when they fit the portfolio philosophy so well, when they are positive operationally from the beginning, Has a marginal impact financially and enable us to also create value by acquiring ownership and not Only being in the license mode. So that's the way I would summarize, but I'm sure that Arthur want to complement on this.

Speaker 3

Yes. I think I totally agree, Sandri. Just one more point I would like to add, Andriy, is we have been operating as the as a HMO partner for Hunter over the last 2 years. And we know this brand operationally And financially, so the same as GAAP, as a result, you can see we managed to turn around only after 5 months. And we have confidence given the information we know about Hunter The resource and platform and capability of Baozun Group.

Speaker 3

So that's why we go ahead to make this deal. And also, this has opened another cooperation model with the ABG Group, All different venues of cooperation with APG Group. So that will help us to grow both the BPM and BDC business as well.

Speaker 2

Yes. Some more color from my side of Vincent here is that For the positioning angle, we are positioning premium fashion category. So no matter GAAP for Hunter is totally within this positioning. Secondly, I think it's going more Because Hunter represents co ownership of brands. And thirdly, I think as always, we think financial Fundamentals or the strength of our financials is very important.

Speaker 2

So in the meantime, we will carefully evaluate our So, 100 decisions made consider all these kind of aspects. So, I think it's quite mature and solid and careful selection. Yes. Thank you.

Operator

Thank you. And this does conclude the question and answer session. I would like to turn the floor to management for any closing comments.

Speaker 1

Okay. Thank you, operator. On behalf of the Baozun management team, we would like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us today.

Speaker 1

This concludes the call.

Operator

Thank you. And as mentioned, the conference has concluded. Thank you for attending today's presentation. You may now disconnect your lines.

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