Vipshop - Q4 2023

Transcript

Operator (participant)

Ladies and gentlemen, good day everyone, and welcome to Vipshop Holdings Limited's Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, I would like to turn the call to Miss Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.

Jessie Zheng (Head of Investor Relations)

Thank you, Operator. Hello everyone, and thank you for joining Vipshop's Fourth Quarter and Full Year 2023 Earnings Conference Call. With us today are Eric Shen, our Co-founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our Safe Harbor statements in our earnings release and the public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made.

Please note that certain financial matters used on this call, such as Non-GAAP operating income, Non-GAAP net income, and Non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our Non-GAAP matters to GAAP matters. With that, I would now like to turn the call over to Mr. Eric Shen.

Eric Shen (Co-Founder, Chairman and CEO)

Good morning and good evening everyone. Welcome and thank you for joining our Fourth Quarter and Full Year 2023 Earnings Conference Call. We delivered a strong finish to the year of 2023 with a set of results well ahead of expectations. This has been achieved with the successful execution of our merchandising strategy to seize the opportunities in value spending amid strong seasonal demand. In the fourth quarter, apparel categories were once again the bigger driver, with 29% growth in GMV year-over-year. For the full year, apparel categories have been consistently outperforming the industry average, up 24% from a year ago. That helped us close RMB 200 billion in total annual sales for the first time in our history. We also gained strong momentum with high-value customers.

In the fourth quarter, active Super VIP members increased by 14% from a year ago and accounted for 46% of our online spending. On an annual basis, we had 7.6 million active Super VIP members who purchased 45% on our platform. Our strategy is simple: it's to be laser-focused on discounted retail for brands. We embrace change and focus on retail fundamentals. We are consistently adapted so that customers can find desired brands, seek great value, and enjoy worry-free service with us. That's how we try to gain further mind share. When customers feel like shopping for clothing, they would come to us first. On merchandising expansion, we did well to enrich and diversify our brand portfolio. Our team brought in over 1,500 new brands last year, covering more trendy and high-end brands.

A majority of apparel-related sales came from the several hundred core brands who took advantage of our featured channels like Super Brand Day, Super Category Day, and Today's Top Brands, which all hit record highs in sales last year. New brands also ramped up sales quickly, leveraging our targeted support from traffic allocations, customer engagement, to promotional campaigns. Our merchandising team is more skilled through our internal certificate program. They demonstrate their expertise to identify, select, and negotiate for quality brand goods at a deep discount across the wider range of categories. They built strong relationships as they worked closely with brand partners to address their business needs and challenges. We now have a talent pipeline ready for more opportunities to differentiate our product offerings. On Made for Vipshop, brand partners are happy to deepen their collaboration with us after they see meaningful sales contributions.

Currently, we have over 150 brand partners in this program. They provide a unique supplement to our value offering within trending categories and a certain price range. Giving value is top of mind with most everyone right now. Being able to deliver an affordable experience every day differentiates us in the market. The key is to better leverage merchandising capability to provide an efficient and cost-effective inventory solution for brand partners. This has been and will continue to be the foundation for us to secure increased supply at competitive pricing, especially in unique and customized products. Lastly, we stay true to being customer-centric. We are making shopping easy for customers, taking a simple, clear, and direct way to interact with them. Also, leveraging the first-party model, we are gaining trust from customers who rely on us to bring them great brands and real value.

We continue to enhance product authenticity through upgraded supply chain management from all aspects. This also differentiates us in an environment where everyone is touting lower pricing. We are happy to see customers coming back and spending more because of trust, value, and ease they will enjoy here. There is still a lot of potential in growing customer wallet share, and the loyalty program has been at the heart of it. Last year, Super VIP members renewed at a high rate, and they spent a lot more with us, with average spending over eight times as much as non-SVIP members. When we look at our business today, we now have a more compelling foundation. We believe our business model is a durable low-cost one that allows us to reinforce the value propositions that are most relevant to our brand partners and customers.

We will continue to be pragmatic, efficient, and flexible to fuel the long-term growth. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Mark Wang (CFO)

Thank you, Eric, and hello everyone. We delivered another quarter of solid financial performance, ending 2023 as the most profitable year in our history. We are very pleased with the progress we have made over the past years in upgrading our platform from all aspects. We are acting faster, pushing forward company priorities, and building greater synergies. This has been the foundation for us to regain growth momentum while achieving impressive profitability. Benefiting from a number of efficiency improvement initiatives, gross margin improved quarter by quarter and on an annual basis reached the highest level since 2017. Operating and net profit margin on a Non-GAAP basis hit all-time highs both quarterly and annually. With such healthy financial conditions, in addition to the existing buyback program, we are pleased to announce the annual cash dividend policy and approximately $250 million cash dividends for the fiscal year of 2023.

This reflects our confidence in future growth and earnings, as well as our long-term commitment to delivering returns to shareholders. Looking ahead, we are clear about strategic initiatives while investing in areas that can better engage with brand partners and customers. We will continue to maintain operating discipline to drive organic and profitable growth. Now, moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below are in RMB, and all the percentage gains are year-over-year gains unless otherwise noted. Total net revenues for the fourth quarter of 2023 increased by 9.2% year-over-year to RMB 34.7 billion from RMB 31.8 billion in the prior year period, mainly attributable to the growth in active customers and spending driven by the recovery in consumption of discretionary categories.

Gross profit increased by 19.3% year-over-year to RMB 8.2 billion from RMB 6.9 billion in the prior year period. Gross margin increased to 23.7% from 21.7% in the prior year period. Total operating sales increased by 4.8% year-over-year to RMB 4.9 billion from RMB 4.6 billion in the prior year period. As a percentage of total net revenues, total operating expenses decreased to 14.0% from 14.6% in the prior year period. Fulfillment expenses increased by 17.0% year-over-year to RMB 2.5 billion from RMB 2.2 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.3% as compared with 6.8% in the prior year period. Marketing expenses decreased by 10.7% year-over-year to RMB 843.2 million from RMB 944.1 million in the prior year period.

As a percentage of total net revenues, marketing expenses decreased to 2.4% from 3.0% in the prior year period. Technology and content expenses increased by 21.5% year-over-year to RMB 496.4 million from RMB 408.5 million in the prior year period. As a percentage of total net revenues, technology and content expenses were 1.4% as compared with 1.3% in the prior year period. General and administrative expenses decreased by 11.7% year-over-year to RMB 1.0 billion from RMB 1.1 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses decreased to 2.9% from 3.6% in the prior year period. Income from operations increased by 46.2% year-over-year to RMB 3.7 billion from RMB 2.5 billion in the prior year period. Operating margin increased to 10.6% from 7.9% in the prior year period.

Non-GAAP income from operations increased by 42.5% year-over-year to RMB 4.0 billion from RMB 2.8 billion in the prior year period. Non-GAAP operating margin increased to 11.4% from 8.7% in the prior year period. Net income attributable to Vipshop shareholders increased by 32.2% year-over-year to RMB 3.0 billion from RMB 2.2 billion in the prior year period. Net margin attributable to Vipshop shareholders increased to 8.5% from 7.0% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS increased to RMB 5.35 from RMB 3.66 in the prior year period. Non-GAAP net income attributable to Vipshop shareholders increased by 43.4% year-over-year to RMB 3.2 billion from RMB 2.2 billion in the prior year period. Non-GAAP net margin attributable to Vipshop shareholders increased to 9.2% from 7.0% in the prior year period.

Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 5.79 from RMB 3.65 in the prior year period. As of December 31, 2023, we had cash and cash equivalents and a restricted cash of RMB 26.3 billion and short-term investment of RMB 2.0 billion. Now, I will briefly walk through the highlights of our full-year results. Total net revenues for the full year of 2023 increased by 9.4% year-over-year to RMB 112.9 billion from RMB 103.2 billion in the prior year. Gross profit increased by 19.0% year-over-year to RMB 25.7 billion from RMB 21.6 billion in the prior year. Gross margin increased to 22.8% from 21.0% in the prior year. Income from operations increased by 46.9% year-over-year to RMB 9.1 billion from RMB 6.2 billion in the prior year.

Operating margin increased to 8.1% from 6.0% in the prior year. Non-GAAP income from operations increased by 43.3% year-over-year to RMB 10.6 billion from RMB 7.4 billion in the prior year. Non-GAAP operating margin increased to 9.4% from 7.2% in the prior year. Net income attributable to Vipshop shareholders increased by 28.9% year-over-year to RMB 8.1 billion from RMB 6.3 billion in the prior year. Net margin attributable to Vipshop shareholders increased to 7.2% from 6.1% in the prior year. Net income attributable to Vipshop shareholders per diluted ADS increased to RMB 14.42 from RMB 9.83 in the prior year. Non-GAAP net income attributable to Vipshop shareholders increased by 39.1% year-over-year to RMB 9.5 billion from RMB 6.8 billion in the prior year. Non-GAAP net margin attributable to Vipshop shareholders increased to 8.4% from 6.6% in the prior year.

Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 16.90 from RMB 10.67 in the prior year. Looking forward to the first quarter of 2024, we expect our total net revenues to be between RMB 27.5 billion and RMB 28.9 billion, representing a year-over-year increase of approximately 0%-5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Operator (participant)

Thank you. If you wish to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We ask analysts to repeat their questions in Mandarin after asking it in English. Please stand by while we compile the Q&A roster. This will take a few moments. We will take our first question. Your first question comes from the line of Alicia Yap from Citigroup. Please go ahead. Your line is open.

Alicia Yap (Managing Director and Senior Equity Analyst)

Hi. Can you hear me? Hello?

Jessie Zheng (Head of Investor Relations)

Yes. We can.

Alicia Yap (Managing Director and Senior Equity Analyst)

Can you hear me okay? Oh, okay. All right. Thank you. Good evening, management. Thanks for taking my questions. Congrats on the really strong results. I have a couple of questions. First is, do you anticipate most of the future growth will come from the higher frequency and higher wallet spend on the existing loyal customer? Given there is some cautiousness on consumer spending in China, are you worried any potential slowdown of the growth if your loyal customer base started to shop more I mean, shop less frequently and spend at a smaller amount? Just wondering if you have any plans, target for new user acquisition strategy. [Foreign language] 我自己翻译一下。就是因为我们增长得很不错，但是很多是重复购的用户，其实是很忠诚的用户给我们带过来的。我想请教管理层一下，就是说因为在这样的一个背景，宏观的背景下，不知道管理层担不担心我们忠诚的这些用户在花费上会比较谨慎。如果是的话，其实会不会影响我们后续的一些增长？然后另外就是说，今年我们在新用户增长这边有没有一些什么样的一个想法，或者是一些想法要怎么去增长新的一个用户？谢谢。

Eric Shen (Co-Founder, Chairman and CEO)

[Foreign language] 我回答一下这个问题。我们的忠实的用户还是比较稳定的。那么包括我们其实看到从最近这几年的趋势，那么包括我们的SVIP它销售占比已经是45了。那么我们预计明年的不是明年，就24年的它的销售占比，整体的销售占比还在提高。那么另外我们包括用户的UP，这些SVIP的UP也会持续在增加。那么另外我们也会包括把很多非VIP继续把它转化成SVIP。那么另外包括你刚刚问的，就是我们目前在获客方面，我们认为还是有空间的。其实我们23年的整体的客户增长，我们认为还没有达到我们的理想预期。所以说今年我们继续在探讨，那么如何更好地坚持我们的品牌特卖定位，那么更好地让用户意识到我们的价值。那么我们继续在拓展用户。那么包括比如说我们跟一些原来合作的一般般的媒体等等，其实我们认为还会有很大的空间。包括我们还继续沿用的，比如说我们讲的精准获客，包括我们还会装很多手机等等，就是我们还会用各种各样的方法，那么继续获客。包括我们说也会做一些叫品牌方面的宣传等等，类似我们说我们总体对整体2024年的客户获取，我们还是会继续去努力做到更好。那么另外我们对目前的用户的购买，那么包括整体的经济环境，我们认为还不是太担心，因为毕竟我们的客单价不算高，对吧？大概在两三百。那么我们认为其实我们不会就是说认为说2024年就是这种叫客户的购买，包括客户的评次，包括他们的单价会受到影响。

Jessie Zheng (Head of Investor Relations)

Okay. First, on the loyal customer base, actually, I think our loyal customer group has been quite resilient in terms of spending. From the trend we have observed in the last couple of years, especially for our high-value customer, that is Super VIP members, their contribution to our total spending has been increasing to 45% in 2023. For 2024, we continue to expect that SVIP contribution will continue to grow very nicely. In addition to driving the contribution of spending, we have also noticed that their upward trend has been going quite well. ARPU is driven mostly by frequency, and we still think there is a lot of potential in driving the frequency of SVIP members. We only have 7.6 million annual active SVIP members, and we have a lot more with high potential in terms of spending to be converted into SVIP members.

Actually, among SVIP members, especially those high-potential customers, have become the most productive channel for us to acquire super VIP members. In terms of new customer acquisition, we think we still have a lot of potential. Actually, if you look at our annual active customer base in 2023, it hasn't lived up to our expectations. We think we can do better this year. We are tapping the potential on many fronts to see how to better leverage our value proposition in branded discount retail to increase customer mindshare of Vipshop. We will take a number of initiatives in driving new customer growth. For example, in addition to the traditional channels, we will look at some emergent and new channels that we haven't been working closely with, and we will continue to focus on targeted marketing, mobile pre-installation, and we will also do some branded advertising.

We will just take as many initiatives as possible to see whether we can better drive customer growth. For general consumption environment, we are actually not very concerned, especially for our customer base, for those high-value and the Super VIP members, because customers come to Vipshop, the average order size is not that high. It ranges from RMB 200-RMB 300. We think that's an affordable range of price. So we are not too much concerned on that front. We think as long as we focus on the branded discount retail, we can do better in terms of driving customer growth and also customer wallet share.

Operator (participant)

Thank you. We will take our next question. Please stand by. Your next question comes from the line of Eddy Wang from Morgan Stanley. Please go ahead. Your line is open.

Eddy Wang (Executive Director)

[Foreign language] 感谢回答我的提问。先恭喜非常好的业绩。那我先用中文提问吧，然后我自己用英文翻译一下。我这边可能也是几个问题先请教一下。第一个就是说，我看到我自己计算了一下，就是说如果你们来看，就是product sales每个order来算的话，就这个季度我看到可能趋势上是一个同比上升的，那前三个季度可能是一个同比下降的一个情况。所以我不知道就是说这个背后有没有隐含一些更加深层次的趋势上的变化，包括就是说我们平台上的用户是不是他在买单品的时候，这个就是ASP或者客单会不会在四季度可能看到，或者长期的趋势看到，这个会消费可能更加好、更加贵的东西。因为之前好像也有问，就是说现在整个大环境消费降级，但是我们平台上是不是看到一个可能不太一样的趋势。这是第一个问题。第二个问题就是说整个如果看这个quarter的sales marketing的费用，就是在我看了一下前可能5到6年，也比较少见，就是说四季度的sales marketing是比可能二季度的绝对数还是要低的。那我不知道就是说在这样的sales marketing花费下，其实我们增长也是非常不错的。那到2024年的话，我不知道就是sales marketing这边我们是不是可以理解为花费其实也不用特别大，但是增长也可以维持。就像前面Eric Shen在说，就是说整个的user growth虽然我们今年还是有点相对来说比较大的诉求，但是sales marketing可能没有，就绝对数也不会涨得非常多。这是第二个问题。第三个小问题还是想问一下，就是说这个quarter GMV和revenue的增速的gap可能又变大了一些。我不知道就是说从return rate的角度来说，退货率的角度，这个quarter有非常明显的不同吗？对，那我自己翻译一下。 Thank you, management, for taking my question. I have three questions. The first one is that if you look at the product sales per order, we find that in the fourth quarter last year, actually, we see a year-over-year increase. This trend actually is a little bit different from the first three quarters in last year, which we see a declining trend. So what's the reason behind that, especially given the overall consumption background is more focused on the consumption downgrade? And my second question is, if you look at the sales marketing expense in the fourth quarter last year, actually, in absolute dollar terms, it is lower than that in the second quarter of last year. This is quite seldom if you look at the historical of the company.

I'm wondering what's the expectation for sales marketing spending in 2024? The last question is, if you look at the growth gap between GMV and the revenue in fourth quarter, actually, the gap is widening if you compare with the first three quarters. I just wonder, is there a significant change in terms of the return rates, or is there any other reason behind that? Thank you.

Mark Wang (CFO)

[Foreign language] 对，我一个个回答问题。第一个就是关于我们的客单价，对吧？那么我们总体看到客单价还是比较稳定的。那么今年的Q4的客单价，那么我们看到等于还比去年还高，比前年还高。那个就是去年的客单价比前年还高。那么我们在想有可能是冬天的问题，大家还买，比如说天气更冷的话，买更贵的、更有价值的羽绒服等等。那么所以说这块我们看到，那么很多人也问我们，就是说最近看到我们的用户有没有这种叫类似消费降级。那么我们也看我们的客单价，包括我们的UP，其实我们看到没什么变化。那么另外还会有提升。所以说我们看到其实整体在我们这里是没有看到一些特别的这种消费降级现象。那么第二点是问关于市场费用。市场费用我们看，因为我们Q4的销售额比较大，所以说我们看到市场费用的占比比较小。那么整体我们整个公司的市场费用等于已经比较稳定了。那么因为我们有严格的LTV来管控，就是说比如说一个新客多少钱，那么老客多少钱，多少时间回本，所以整体比较稳健。那么在2024年我们会适当增加一点点，增加一点点市场费用，就是说我们希望还是继续获客。那么但是就整个比例是非常有限的，所以大家也不用担心，就我们整体市场费用的花费，那么还是OK的。那么如果碰到有好的渠道，对我们来讲，我们可以花更多的钱，包括LTV回本，各方面都符合我们的预期。那么第三点是关于退货率的问题。退货率我们看整个23年的退货率是比22年涨了不少。所以说我们看到，那么就是在GMV跟收入这里边的比例就能看得出来。那么我们目前看是增加了3到4个点，就是说整个退货率。那么虽然它不影响我们的净利，因为我们这些费用都已经刨掉了，包括退货费用、销售不计，但是我们看到主要有几个原因。一个就是说因为我们的穿戴的占比持续在提高，因为我们的穿戴的衣服类的退货率是蛮高的。所以说这点就是说尤其是比如说像去年天气Q4天气冷的话，衣服卖得更多更好，我们看到我们这几年的穿戴的占比在持续提升。这是一个。第二个就是说，那么有可能就是说我们说的消费者现在认为说今天我买个衣服试一试，就把它当成一个叫衣橱，那么或者一个试衣间。那么这种就是说中国的这种电商的这种服务匹配觉得好像是一个正常行为，所以大家觉得也OK的。如果平台能提供这样的服务，他们不断去试尺码或者试款式，或者试试穿着效果。所以说这点我们认为也会对整个电商好像，我据我了解的情况，好像整个电商其实都在提升。那么第三点就是我们没有准确的信息，就有可能说用户觉得现在钱还是要省着点花，就是说如果不合适就不要勉强。但是这点我们还没论证，只是猜想有可能有一点点有这样的原因。

Jessie Zheng (Head of Investor Relations)

Okay. On your question about average order size, actually, average order size has been relatively stable. In Q4, we did see a slight increase on a year-over-year basis, primarily because we sold more winter clothing, which have higher ticket size, especially when a lot of people in cold weather, they would buy a higher ticket size down jackets, etc. So that's the primary reason behind the increase in average order size. This also reflects that actually on our platform, there is not very significant sign that we have so-called consumption downgrade. At least the loyal and highly engaged customers with our platform, we have seen their average ticket size relatively stable or quite resilient, and UP has been growing very nicely. So that's how we benefit from the very resilient consumption trend among our customer cohorts.

In terms of sales and marketing expense in Q4, because we did much better than expected in terms of sales, that brought the sales and marketing expense ratio down a little bit. Actually, for this line, sales and marketing spend will continue to be relatively stable. Of course, we want to spend prudently, especially to acquire more high-quality customers in 2024. But we will continue to look at the effectiveness and the efficiency of customer acquisition from a number of perspectives, including LTV, ROI, payback period, etc. So sales and marketing expense ratio will continue to be very manageable, and we will continue to spend in a rational way to spend on those channels who can provide the best ROI. So basically, we don't worry too much about sales and marketing spend, and it's going to be very limited as a percentage of total revenue.

On return rates, for the last year, return rates have been growing on a year-over-year basis. We think we did see a 3-4 percentage point growth in return rates. But now we have mentioned this before, return and exchange services is a part of our value proposition to provide the best-in-class services to our customers, and it's built in our profitability model. It hasn't been impacting our profitability levels for the past several quarters. And the return rates are trending a little bit higher because of a number of factors. One is apparel contribution. In the last couple of years, we have seen apparel contribution growing on our platform, and apparel, as you know, they naturally have higher return rates.

Second, return and exchange has become a standardized practice within the industry, and a lot of customers are taking Vipshop as a fitting room, and the more they try, actually, the more likely they will buy. So it's not only us, as far as we know, the return rate within the industry is actually growing. That's the reality. Lastly, although we don't have accurate information about that, it's just our guess. We think that consumers are becoming more cautious and selective in terms of their spending. They want to spend money only on those essential pieces that they need. So that might be one of the reasons that return rate is going higher.

Operator (participant)

Thank you. We will take our next question. Your next question comes from the line of Ronald Keung from Goldman Sachs. Please go ahead. Your line is open.

Ronald Keung (Managing Director)

Thank you, Shen Dong, Mark and team. I have two questions, and I'll run with [Shen] [Foreign language] Wen in Chinese. 对，我有两个提问。第一就是想听一下我们一季度这个 revenue guidance，主要我们一、二月合起来看到这个 trend 是怎样，然后我们预计三月，尤其春节后，我们看到这个消费情况怎样，然后想知道我们 GMV 和 revenue 这个 gap 在 2024 年应该是会收窄，想知道可能我们应该怎么去想这个 GMV 和 revenue 的 gap。第二就想问我们给股东的回报，看到我们 2023 年大概有 11亿 美元的 free cash flow，自由现金流，非常好。但我们过去两个季度没做太多的 buyback，然后我们现在就宣布了一个 0.215 美元的 regular dividend。想知道我们可能未来 free cash flow 扣除了刚才说的这些 regular dividend 以外，有哪些想法，会不会在 dividend 或者 buyback 上可能还能有提升的空间。让我翻译一下。Thank you, management. I have two questions. One is I want to hear how our trends have been for the first quarter so far, January and February as a whole, and how do we see demand tracking since Chinese New Year? And how should we think about the gap between GMV and revenue for 2024 compared with the big gap in 2023? Second is shareholder return. I've seen a $1 billion free cash flow. We haven't done too much buybacks in the past two quarters.

Now we have a $250 million of regular dividends. So what is the plan for, let's say, the remaining free cash flow? Is there any room for further shareholder return? Thank you.

Eric Shen (Co-Founder, Chairman and CEO)

[Foreign language]我回答第一个问题。第一个问题是关于 Q1 截止目前的生意。那么整体而言，就是 Q1 的 1 月份，那么就是说整体因为天气情况，生意还是不错的。那么我们说春节回来以后再复苏。那么另外就是关于现在因为天气比较反复，就是说比如说一会儿又冷，那么就是没有真正说到开春的时候。所以说整体生意还在爬坡中。所以说我们其实总体认为我们讲的 Q1 的生意都比较稳健。那么这是一个。第二个问题就是关于问退货率的情况。我们自己预估，因为整体退货率还在提升，还会提升，但是 2024 年整体的提升有限。我们自己认为可能退货率的话比 2023 年会提升 1 个点到 1.5 个点，大概是这么样一个数撑死了。那么所以说我们其实对 2024 年的销售认为不会出现什么特别反常的异常的情况。那么接下来就是我们谢夫来回答您的第二个大问题。

Jessie Zheng (Head of Investor Relations)

Okay. First, on Q1 guidance, actually quarter to date, we have seen decent business momentum in January, actually benefiting from very favorable weather because at that time it was still quite cold. So our business performance was really quite good, and we continue to see recovery following the spring festival. Until recently, we've seen that our sales had been ramping up relatively slower than expected because of the unexpected weather conditions, sometimes very cold, which actually delay to some extent the seasonal shift to spring apparel. But overall, we think Q1 will continue to be another quarter of relatively stable growth. And in terms of the revenue and GMV growth gap, for this year, we continue to expect a slightly higher return rate because of the still higher apparel contribution as well as VIP contribution.

But return rate is not going to be significantly higher as we saw for 2023. We expect at most it's going to be 1 percentage point-1.5 percentage points higher, which means that there is a chance that we can narrow the revenue and the GMV growth gap to some extent.

Mark Wang (CFO)

Okay. For the second question, let me answer your question. Thanks for your question regarding the cash dividends and also the share buyback programs. Actually, we have been focusing on long-term capital policy, and the combination of the annual dividend and buyback reflects our confidence in long-term growth and profitability, as well as our long-term commitment to create value to our shareholders. Regarding the total amount of the dividends, we considered multiple factors such as working capital for business development, CapEx, profitability, and cash flow. The dividend amount will be reviewed and determined annually. Well, as to buyback, we have repurchased a total of nearly $2 billion from April 2021 to the end of 2023. The existing $1 billion buyback program, which is effective through March 2025, has been utilized $452 million as of December 31, 2023.

The remaining parts will be executed from time to time, taking into account factors such as price valuation and marketing fluctuations. So therefore, the cash dividends and the share buyback, I think, that's the two ways we would like to provide return to our shareholders. And these two ways or two regimes will implement parallel. Yeah. Thank you.

Ronald Keung (Managing Director)

[Foreign language]谢谢, Shen Dong。谢谢, Mark。

Operator (participant)

Thank you. We will take our next question. Your next question comes from the line of Andre Chang from JP Morgan. Please go ahead. Your line is open.

Andre Chang (Research Analyst)

[Foreign language] necessarily be executed? So, will our excess cash not necessarily return to shareholders' hands? These are my three questions; I'll translate them here. Hi, I have three questions for the management. First is we talk about now we will focus more on the user growth this year. Can you elaborate more about where are the areas that we can find new users to acquire? Second, we also talk about further improvement on the output. So with the rebounding spending from our loyal user last year, which was easy, what are the drivers for our users to spend more on our platform into 2024? And lastly, we talk about the share buyback will hinge on the market condition valuation. It seems that with our cash flow continued to be strong, cash balance increased by the end of last year versus end of 2022.

Does that mean that it's not necessary or we will use our strong cash flow to return to the shareholder? How do we think about that? Thank you.

Eric Shen (Co-Founder, Chairman and CEO)

[Foreign language] 我回答第一个问题就是关于新客获取。新客获取我们等于2023年基本还是老的，比如说是我们说的有一些自然新客。那么我们会投放，比如说精准营销在抖音上，在头条上，在腾讯上及其他一些媒体上。那么另外我们还有就是这种叫装手机，那么直接预装手机，所以等等。所以说今年我们会2024年我们会加强，那么包括我们继续拓展我们的品牌形象定位，更多让大家知道。那么或者说原先有些用户知道唯品会，但是没用，或者说原先的印象不一样，那么我们就加强这方面的灌输。那么另外刚刚说了，比如说像我们在原来一些没有合作或者合作比较少的那种叫用户量比较大的，像这种小红书B站上面，我们觉得其实也是有空间的等等。所以说我们今年也会继续拓展新客。那么我们另外就是对我们自己认为这种新客，那么现在就是说包括他们就是获回来的新客的整体的留存，那么还是OK的，就是说整体的质量都还比较健康。所以说我们觉得就花钱投在这里是没有问题的。那么第二个就是问关于output，output这里面我们自己认为，就去年的output的提升有天气的原因，但是也有就是说可能我们认为消费者更认可我们。那么我们在今年的output提升上面，我们觉得有空间的，就是我们希望我们比如说做服装类，我们做得更有越来越有特色。那么包括他们可以，比如说可以女士给她的老公买，给她的小孩买，给她的爸爸妈妈买。那么包括我们说的各个品类可以互相多买，买衣服、买鞋子、买包包等等。那么另外我们在2024年也会拓展一些标品，就是说我们要做一些有价值的标品，那么让我们的顾客也来买，包括我们的SVIP认为我们这些标品还是做得比较好的等等。类似这些我们觉得还是有机会提升用户的output。那么第三个问题Mark可以回答。

Jessie Zheng (Head of Investor Relations)

So on your first question on new customer acquisition, in last year, actually we invested a lot of channels to acquire new customers, to drive the organic growth in new customers, such as targeted marketing on a number of platforms like Douyin, Toutiao, Tencent, as well as mobile pre-installation. This year we would like to do better in terms of adding new channels, especially to elevate the company brand image through more brand advertising, especially targeting those customers who are not familiar with Vipshop or who have heard of Vipshop but have never used. Basically, we want to leverage branding to increase customer mind share of Vipshop as the best place to shop for apparel, including some emerging and younger channels like Xiaohongshu, Bilibili, etc., etc., where we think there is still quite a lot of potential there.

For the new customers we have acquired to our platform, we have actually seen the retention is pretty good, which means that the customers we acquired are relatively higher quality. So we think our current customer acquisition strategy does work relatively well. In terms of output growth, last year we did benefit from favorable weather conditions in some of the seasons, but we also think that customers have become increasingly recognized the value proposition of Vipshop as a discount platform for branded products. And especially through our best-in-class services, we find this is a great place to shop for apparel, especially for women. They tend to not only shop for themselves, but also shop for the whole family, including children, parents, etc. They also shop not only apparel, but also other categories like standardized items. We have seen increasing cross-category purchases among our customers.

This year we are also, in addition to driving the growth of apparel categories, we also want to build a stronger platform for standardized items so that we can increase the cross-sale opportunities for our high-value customers, especially Super VIP members.

Mark Wang (CFO)

Okay. Regarding the third question for share buyback, I think the track record has already shown our insistence to return value to our shareholders. Okay? For the buyback program, we will definitely evaluate the share price and also whether the market is in fluctuations. Okay? For example, if in the future the share price is lower than our expectation, lower than our normal value, okay, so we will definitely do the share buyback continuously from time to time. But that depends on the price and also depends on the other factors. So I think the cash dividends regime is a way to give you a more predictable value buyback to the shareholders. Okay? So in the future, we will have the annual cash dividends policy.

Of course, we will evaluate our cash position and also our profitability and also our CapEx, etc., to make sure to determine how much money we will distribute to our shareholders. Yeah. I think the cash dividends policy is a way to complement our return to our shareholders policy. Thank you.

Andre Chang (Research Analyst)

[Foregin language]谢谢。

Operator (participant)

Thank you. Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Jessie Zheng (Head of Investor Relations)

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.