Thank you, operator. Hello, everyone, and thank you for joining us today.

Our second quarter 2024 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website where they are available for your download.

On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms.

Catherine Zhu, Chief Financial Officer; Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group; and Mr.

Ken Huang, Chief Financial Officer of Baozun Brand Management. Mr.

Qiu will first share our business strategy and company highlights. Ms.

Zhu will then discuss our financials, followed by Mr. Wu and Mr.

Huang, who will share more regarding our e-commerce and brand management segments, respectively. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the US Securities Act of 1933, as amended, the US Securities Exchange Act of 1934, as amended, and the US 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 known or unknown risks, uncertainties, or 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.

Further information regarding these and other risks, uncertainties, or factors is included in the company's filings with the United States Securities and Exchange Commission and its announcement, notice, or other documents published on the website of The Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based on assumptions that the company believes to be reasonable as of this date, and the company does not take any obligation to update any forward-looking statement, except as required under applicable law.

Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB. In addition, we may elect to use adjusted in place of non-generally accepted accounting principles or non-GAAP in order to reduce oral confusion that may arise from our discussions about financials related to the Gap brand.

You may now turn to slide number 2 for the executive highlights for the quarter. It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr.

Vincent Qiu. Vincent, please go ahead.

Thank you, Wendy. Hello, everyone, and thank you for joining us.

We delivered another solid second quarter with our earnings quality continuing to improve. Group revenue grew 7% to 2.7 billion, while non-GAAP operating income reached 74 million, a year-over-year improvement of 25% compared with adjusted base of 59 million in the same period of last year.

Both BBM and BEC have contributed solid results, demonstrating the strength and resilience of our business in a competitive market. BEC achieved resilient 5% year-over-year revenue growth.

More importantly, BEC improved its efficiency and profitability with expanded non-GAAP operating profit margin. Against a weak e-commerce industry backdrop, we view this performance as a clear demonstration of BEC's improving business quality.

Our deep brand know-how has been instrumental in understanding and anticipating market trends, consumer behaviors, and brand needs. This expertise enables us to engage with our brand partners more strategically, while keeping value creation at the heart of our approach.

BBM sustained strong brand momentum, delivering 22% year-over-year top-line growth, double-digit same-store growth, solid gross margin expansion, and further improvement in operating profitability. Gap remains the primary driver of this performance, supported by our effective MMC initiatives and increased consumer engagement from our seasonal brand ambassador program.

At the same time, our emerging brands are progressing according to plan and beginning to make more contribution to the top line, as we start to invest in building their long-term presence. We also are very excited to share our advancements in technology innovation and AI empowerment.

We recently began piloting AI and automation initiatives within our Gap e-commerce operations to streamline selected the processes. The initial results have demonstrated substantial productivity gains, highlighting the potential to extend these capabilities across the broader BEC ecosystem.

We are glad that the success of our strategic transformation over the past three years have laid a strong foundation for more flexible and scalable business model. Leveraging AI and our established technology infrastructure, BBM provides an environment where we can develop and prove new operating capabilities, while BEC provides a scale to deploy them across a broader portfolio of brands.

With continued AI-driven empowerment and deeper synergies between our two business segments, we are raising our 2028 non-GAAP operating profit target from 550 million to 700 million, reflecting our increased confidence in long-term growth potential. Now, I will hand over the call to our team for deeper dive into our financials and business performances.

Thanks, Vincent, and hello, everyone. Now, let me provide a more detailed overview of financial results for the second quarter of 2024.

Please turn to slide number 3. Baozun Group's total net revenues for the second quarter of 2024 increased by 7% year-over-year to 2.7 billion.

Of this total, e-commerce revenue grew by 5% to 2.3 billion, while brand management revenue grew by 22% to 486 million. Breaking down e-commerce revenue by business model, services revenue increased 10% year-over-year to 1.8 billion, while BEC product sales revenue decreased by 10% year-over-year to 541 million, as we prioritize business quality.

Please turn to slide number 4. From a profitability perspective, gross profit for product sales increased by 21.3% year-over-year to 343 million for the quarter.

Our group level blended gross margin for product sales was 33%, representing an expansion of 499 basis points year-over-year. Within this, gross margin for e-commerce product sales was 13% compared with 4.8% in the same period of the last year, and gross margin for BBM was 56.1% for the quarter, compared with 52% in the same period of last year.

Now, please turn to slide number 5 for a walkthrough of our opex. Sales and marketing expenses increased by 239 million to 1.2 billion.

This included an increase of 188 million for BEC, which was mainly due to higher spending on creative content and marketing initiatives on Douyin and REDnote, consistent with the growth in digital marketing revenue. BBM sales and marketing expenses increased by 46 million, mainly driven by the expansion of offline stores and marketing activities in the quarter.

Fulfillment costs for the quarter decreased by 9% to 549 million. Technology and content expenses decreased by 0.4% to 140 million.

G&A expenses decreased by 22% to 175 million. The reduction in these three opex items reflected our focus on cost control and operational efficiency.

Turning to bottom-line items, please refer to slide number 6. During the quarter, our non-GAAP income from operations was 74 million, compared to 6 million in the same period of last year, or 59 million in the rebased same period of last year if we exclude one-time write-off cost.

BEC's adjusted non-GAAP income from operations was 107 million, a record level for the second quarter since 2022. BBM reported a non-GAAP operating loss of 33 million, compared with a loss of 35 million a year ago.

For the second quarter of 2024, our working capital turnover improved to 107 days, compared with 148 days a year ago. Within this, inventory turnover shortened to 112 days from 134 days a year ago.

This improvement was driven by both BEC and BBM segments. As of June 30, 2024, our cash, cash equivalents, restricted cash, and short-term investments totaled 2.9 billion.

Let me now pass the call over to Junhua to update on BEC, our e-commerce business.

Thanks, Catherine, and hello, everyone. For BEC, we have been focused on quality of growth, with greater emphasis on business where we can deliver high-value results.

We believe this approach better aligns the interests of our brand partners with our own, which will ultimately translate into improved productivity and margin expansion for BEC. During the second quarter, BEC's revenue grew by 5% year-over-year, and non-GAAP operating income reached 107 million, the highest second quarter level since 2022.

This highlights the improvement in our financial performance and a successful execution of our strategy. Underlying these impressive results, we have taken a proactive approach to refining our service model.

We expanded market share in key categories, including luxury, sports, and outdoor, driving 10% year-over-year growth in service revenue. Enhanced consumer engagement through content creation, digital marketing, and Douyin initiatives has also helped strengthen consumer awareness.

For example, this June, we produced a large-scale live broadcast of a women night run for one of our own one of our sportswear brand partners. More than just a race, the event was designed to empower women and foster a sense of community.

Our live broadcast enabled millions of viewers to join the excitement virtually, amplifying the brand's value while creating a memorable experience that resonated with its target audience. This event set a new benchmark for how we can leverage digital platforms to amplify business opportunities while driving both brand value and scales and sales.

We are proud to have, once again, being awarded Douyin e-commerce diamond service provider certification for the second quarter. These achievements validate our strategy of prioritizing high-quality revenue streams and expanding margins, and reinforce our confidence in growth momentum of our service business.

We also made a strategic decision to scale back to our participation in certain product sales categories where intense price competition and lower margins limit their attractiveness, particularly during the 618 campaign. This was most evident in standardized categories such as home and furnishing, beauty and cosmetics, and appliances.

As a result, product sales declined 10% year-over-year for the quarter. For the first half of the year, total product sales reached 1 billion, up slightly by 3% year-over-year and in line with our plans.

What is strategic, however, is our investment in infrastructure and capabilities needed to build an apparel product sales business. While this business requires a longer preparation period, we have make solid progress in supply chain management, advanced data analytics, and product development.

We believe this model can leverage our deep brand know-how to build a differentiated and a scalable product sales business, contributing to both the top line and bottom line from 2027 onward. Turning to this profitability, we remain focused on driving greater operating leverage through disciplined cost management and a structural efficiency improvements.

This significant improvement in BEC's operating performance this quarter reflects the benefits of those efforts, while our increased use of automation provides an additional opportunity to improve productivity over time. As Vincent just highlighted, our trials of AI-enabled systems position us well to re-engineer our operation process and unlock significant productivity gains.

Over the next 18 months, we expect to accelerate the development of these initiatives across our operations, with a particular focus on optimizing resources and aligning them with streamlined workflows. Over time, we believe BEC can evolve into a leaner operation model, allowing us improve margins while also increasing our capacity to serve a broader range of addressable markets.

Now, I'll pass to Ken for an update on BBM.

Thank you, team, and hello, everyone. Please turn to slide number 9 for BBM's performance in second quarter of 2024.

BBM sustained a strong momentum into the second quarter, with revenue growing 22% year-over-year, and non-GAAP operating loss further narrowing despite increased investment in emerging brands. For the Gap brand alone, our non-GAAP operating loss improved by more than 40% year-over-year.

Solid top-line growth was driven by improvements across key operating metrics, including traffic, offline store productivity per square meter, and blended gross margin. Leveraging our omnichannel capabilities and agile integration, Gap delivered another same-store sales growth in the 20s.

Our performance continues to validate the competitive advantage of our brand management model. By combining Baozun's local operating capabilities with Gap's global brand, we are able to develop products faster, localize assortments more effectively, execute integrated marketing campaigns, and respond more quickly to changing consumer demand.

Overall, BBM gross margin expanded to 56.1%, an improvement of 383 basis points year-over-year. Now, let me share our key initiatives around merchandising, marketing, and channel for Gap during the quarter.

Merchandising remained a key strength during the quarter. By optimizing our product assortments and leveraging data-driven insights, we are better able to meet consumer demand and drive sales growth.

We are pleased to have achieved double-digit growth across all three categories of women, men, and kids. An improved product mix, tactical pricing initiatives, and better supply chain management drove healthy gross margin expansion.

Inventory also remained healthy, with Gap inventory turnover days at 128, reflecting disciplined inventory management and a healthy sell-through. Our marketing efforts focus on building strong brand equity and deepening loyal customer loyalty.

Our Cheng Yi brand ambassador campaign, together with the Victoria Beckham collaboration and other global partnerships, generated strong consumer engagement during the second quarter. These campaigns, combined with strong execution around the spring break, Labor Day, 618, and summer sales, also drove excellent sales momentum.

Turning to our store network, we opened eight new stores during the quarter, bringing our total network to 167 stores. We remained disciplined in our site selection, and we are glad that new store productivity has consistently outperformed, reinforcing our confidence in the strength of our expansion strategy and the long-term productivity opportunity across our store base.

We remain on track to open more than 50 new stores in 2024, with a focus on expanding to Tier 1 to Tier 2 cities. This July and August, we are seeing further improvements in month-over-month momentum.

Our latest autumn launch and the Qixi campaign, featuring our brand ambassador, have reinforced the Gap China's marketing strengths, giving us increased confidence in the brand's trajectory for the second half of the year. Now, let me also elaborate our key efforts for Hunter brand in the first half of 2024.

Following our MMC philosophy for brand management, we have stepped in stepped up our efforts to strengthen Hunter's brand equity. In the first half of 2024, we opened three flagship stores in high-profile shopping malls, bringing Hunter's total store count to 16 by end of June.

We also enriched Hunter's product offering. Beyond the brand's renowned rain boots, we introduced new lines of urban apparel and outdoor wear, enabling us to reach a broader consumer base and address diverse lifestyle needs.

These initiatives are positioning Hunter as an energetic lifestyle brand that resonates with fashion-forward consumers and supports its long-term growth. In summary, the second quarter reinforced the progress we have made throughout 2024.

Our our differentiated brand management model continues to position our brands for outperformance through faster localization, stronger omnichannel execution, and operational excellence. We remain confident in delivering on our full-year objectives.

That concludes our prepared remarks. Thank you.

Operator, we are now ready to begin the Q&A session.

hi. Um good evening, management.

Um thanks for the opportunity to ask questions. Uh congrats on the solid results.

Um two questions from me. Uh first is that regarding the revised um 2028 annual non-GAAP operating income forecast, which obviously uh increase substantially from 550 million to um 700 million, uh wonder uh what gives management um the confidence to project this higher profitability?

What is the anticipated top-line growth that underpins this revised forecast? Then, the second questions um in light of, the weak macro conditions and also uh, muted consumption trends, have you observed any significant shift um in the spending budgets uh of your brand partners or uh their expectation for the China market uh in the future?

Uh additionally, concerning the adoptions of the AI tools, uh is there any noticeable divergence in sales growth between brands that have embraced the AI-enhanced tool versus those that have been slower to adopt them uh if you could share some example? Thank you.

Uh

thank you, Alicia. Vincent here.

Uh let me answer your this uh first question, and Junhua is is uh will answer the second one. Uh yes, we are quite excited to announce this uh updated uh uh forward-looking uh results for the uh 2028.

Uh we carefully uh analyzed all the in- all the facts, all the aspects. Uh we uh we think can help us to achieve this one, this uh new goal.

Uh the first thing is that we think we are seeing a stronger trend for BBM. Uh and uh in the past uh, 2, 3 years, uh we keep um uh uh strengthening uh BBM's positioning and also day-to-day operations, and we are seeing a a good results.

For a uh stronger trend for BBM, we are much more confident right now. This is uh uh the first uh consideration.

Uh secondly uh recently, we did uh a lot of experiments and uh pioneer uh, uh 40 uh AI tools and also along with other infrastructural uh tools we did developed along the uh these years. We see a quite uh, exciting results.

Uh so we think, given that the scale of our uh BEC business uh base, uh our potential uh, to be released from this uh tools and automation will be huge. That is uh quite important reason why we, just raise that up.

Uh and also um, although despite the uh the consumption uh is not very strong recently, but still we think combine these two factors, and also the potentials we can deploy this kind of tools and uh, uh AI uh uh capabilities into our broad client base, we will have uh, quite big potential. Uh and uh this gives us a confidence for this new goal.

Thank you, Vincent. For the second question, first of all, we have not seen any significant shift in spending uh budgets of brand partners, but we still see they focus on making solider marketing allocation in terms of the uh traffic fees, and they focus more on the content-driven, and they focus more on, uh shifting allocations and of inventory towards the uh livestream kind of platform, like Douyin and the others, uh from the original shelf-based e-commerce systems.

The second part is, the AI tools, just like Vincent mentioned, we leveraging AI scenarios more focus on driving our operation efficiency rather than just driving the top line. AI tools also can facilitate a lot of top-line, providing a lot of tools to facilitate our top-line operator, more focused on digital analytics, more focus on how do we analyze all those sales results data.

For sales growth, we have not leverage a lot in terms of AI, but also focus on automation-driven, efficiency-driven, that kind of stuff. Thank you.

Thank you.

hi. Thank you, management, for taking my question.

I have two questions. Uh the first one is regarding the Nike.

Uh we have observed some uh adjustments to its channel strategy. Uh as Nike's core partner, and uh have we observed any changes in consumer habits across uh channels recently?

How do we plan to capture the related opportunities going forward? My second question is about Hunter.

Uh I have observed that Hunter has seen a significant increase in attention on some China social media recently. Have we noticed this trend, and uh could we introduce any additional details?

Uh could we share an update, any outlook for Hunter in more detail? Thank you.

I'll answer the first question, and uh Vincent or Ken can answer the second one. Uh apologize to you that I will not mention a specific brand in terms of a strategy and their their roadmap.

I'll give you a feedback in general. Baozun is a very strong DTC partner of a lot of brand partners from since our founded, back in the year 2007.

In terms of behave like a DTC partner, Baozun is definitely has a great advantage, in in in in just serving them, supporting them in DTC strategy based on their growth strategy. If any brands, they are shifting their strategy back to DTC or focus on more, investing more, resources in driving DTC-based net GMV or growth, Baozun is definitely going to be their top choice.

That's my first answer. Thank you.

For Hunter, yes, we uh as we mentioned uh we are continuing uh investing in our emerging brands, espe- especially this year. Uh with Gap's uh the improvement of Gap's P&L and uh uh also the accumulated experience in Gap's uh past experience, now we are trying to strengthen our in uh emerging markets.

Uh and uh the your observation of the uh continues more um voices and investment in the brand equity, especially in Xiaohongshu uh for Hunter uh is is a is a happening. Uh our strategy for Hunter uh during the uh second half of the year, uh firstly we will continue open Hunter stores in high-profile shopping malls, uh especially MixC uh malls.

The second, we are expanding our apparel category, as we mentioned, and we do see the uh sales contribution of apparels in certain stores have exceed 30% uh during the sec- second quarter. The third, we are also uh doing a lot of uh collaborations uh with local, both local and international brands for Hunter.

Uh uh finally, as uh uh the IP owner, we are also actively uh looking for uh other category business opportunities to uh enhance the the brand's equity and also the uh profit performance. Thank you.

Yeah. Hello.

Hi, management. Thanks for taking my question.

I add my congrats on solid set of operating results as well. Uh my question is regarding we have seen more international brands exploring strategic alternatives for their China operations, including divestments and other forms of capital restructuring.

How does Baozun view this trend, and could it create a meaningful pipeline of opportunities for BBM? Will management become more aggressive in pursuing such opportunities?

What are Baozun's key competitive advantages in winning these deals and creating value after the transaction? Thank you.

Uh

thank you, Frank. This is Vincent, happy to answer your question.

Um uh yes, we are seeing that uh in the market there are uh, more and more this kind of opportunity, uh which uh is just as we expected, cuz um that's why one of the reason that we, stepped into brand management market. We are talking to we we keep kept talking to different brands for this.

Uh we are quite active uh in dealing with our portfolio brand partners or some other partners outside of our portfolio. They are trying to find new opportunities.

That's the truth, yeah. Uh but talking about the uh, uh our strategy and and the link between our strategy uh with the new uh updated uh 2028 goals, uh we think uh there are four important aspects uh which can make uh our, us uh to be more confident for the goal.

The first one will be uh, the um uh the AI efforts we have made. Uh this can contribute a majority uh of the contribution in the mid-term of our, plan.

Uh and we mentioned this, and we count this factor in. Uh secondly, there will be a very strong synergy between BEC and BBM.

Uh BBM along with its efforts will accumulate a lot of experiences and know-how for the whole group. We can utilize this in talking to potential brands and the existing portfolio brands, no matter acquiring new brands or uh deepening the relationship between the existing ones.

Also this can also uh, deliver very good contribution to us, uh for the future goals. Uh third one is about BBM itself.

Uh we we call this BBM organic. Uh BBM organically, including, the three major brands, uh Gap, Hunter, and Sweaty Betty, and they are doing well.

Uh there is for example, Gap is doing extremely well. The other others are following.

We believe this BBM organic is also a very important factor, uh in the source of our confidence. Uh number four is what you you just talk about the BBM new opportunities.

Yeah. Uh we are talking to different brands, uh but our priority is to uh make the exist- existing BBM brands uh better.

Uh and we are expecting there are some uh really, really good opportunities, and then we can have this kind of BBM in inorganic growth opportunity. Uh we also hope this can come true.

This give us uh more, how to say, uh possibility uh to deliver a better goal than before. Of course, thi- this is not counted yet.

Thanks for the question.

Yeah. Thank you, Vincent.

Good evening, management team. Uh congratulations on this quarter's strong performance, and thank you for taking my question.

My question is, uh as AI develops rapidly, many service providers are building their own AI SaaS system. Does does company believe uh its differentiation versus other e-commerce agency service provider is widening or narrowing?

What impact is AI having on industry concentration at this stage? Thank you.

Okay. Thank you for the question, Jiawei.

This is Junhua again. Uh if you have deeply tracking Baozun for a while, you will know that from day one when Baozun was founded, technology was the key to our success, and our mission is leveraging technology to make our business results more more more successful.

During the past 19 years, we've been investing a lot in our IT resources. We still maintain the highest IT resources in terms of the IT payroll and and different kind of the investment during technology.

Under the AI age, I'll be very proud to say that Baozun is definitely taking the leadership among all other competitors during that sector. We have definitely leverage a lot of our resources to help our existing brand partner over 480 to successfully deliver a lot of their backbone system, different kind of the sales system, their O2O system among all other kind of scenarios and categories.

Under the AI age, as we have so many resources and foreseeing a lot of opportunities, Baozun is definitely going to leverage a lot of AI-powered technology to increase our efficiency of operation, incre- facilitate our sales growth in terms of the top-line growth. Definitely, among this period, we we are we are we are still strengthening and and wider the the distance between us and our competitors.

Uh as you can see that, AI is really powerful a lot of industry. We don't see there is uh uh many things we can uh uh uh compromise in the future for seeing.

We still focus on a lot of all the category basically, AI data focused, automation increasing, AI knowledge-based, and GEO, consumer behaviors, a lot of scenarios we can help. Thank you for the question.

Thanks management for taking my question. Uh my question is, as we see BBM top-line 22% and double-digit same-store growth rate, which is quite impressive compared to many peers in the retail industry.

Um how should we think about the latest trend uh for for third quarter, also um uh we have relative high base for the same period last year? Also, could management um provide update on BBM top-line growth guidance of 15% to 20%?

Um thanks. Uh

thank you. This is Ken.

Um yes, uh Gap uh BBM, especially Gap, uh continues to deliver uh double-digit uh increase, especially same-store in 20s uh for the second quarter. Uh uh even for the third quarter uh quarter-to-date, uh we are seeing the trend of ever even stronger um same-store increase.

I I I would say it will be contribute to our uh MMC uh strategy. Uh first day is merchandising.

After uh several seasons product uh improvement, uh we are better and understand our customers. Uh when we launch our uh fall products uh in August, uh we see even uh better uh acceptance of the products from our consumers than before.

Our merchandising operating capabilities uh also keep enhanced. Uh we have our better category and assortment planning.

We have better strategy, pricing and uh discounting strategy. All these uh experiences and initiatives of our merchandising uh help us to improve the productivity of our performance.

The second for marketing, um we continue uh to deliver strong uh brand ambassador campaigns. Uh in the second quarter is April, and uh in the third quarter is uh in August.

Um both of them are exceeding our uh expectation, the performance. Uh we this year, we also benefit a lot from Gap's global brand assets.

Uh in the third quarter, we have the Hailey Bieber collaboration, and uh today, we also just announced the the collab- collaboration with Malbon, uh the golf brands, uh fashion fashion golf brands. Um the third, I I think is the channel.

The channel, uh as we mentioned, we are uh we are going to deliver over 50 uh new stores uh in this year. Uh in the in the uh second quarter, we have opened many good stores, including Shanghai New Prism, uh Beijing APM, uh Tianjin uh Joy City, uh we just opened in the third quarter, and also Nanning MixC.

Uh and uh we're also going to open our first Macau store in Venetian next month. Uh I think with this merchandising, marketing, and also uh channel strategy are working well, uh we are very confident to have to keep the uh strong same-store growth, and also the uh increase of the total scale.

For the full year, uh we believe we will achieve a 20% to 25% increase. Thank you.

Hi, management team. Thanks for taking my question again.

Uh I have another question is that the NBS data in July 2024 points to subdued consumption. Uh does company observe any change in sales trends across different platforms and different categories?

Thank you.

Thank you for the question, Jiawei. This is Junhua again.

Uh we haven't seen, a big change sales trends among different kind of platforms, but we can share something to you is the shelf-based e-commerce is become very stable, especially after the past 618, we can foreseeing a also expect a very strong finish in the coming Double 11. The livestream platform is still growing, for example, like Douyin and different kind of the livestream platform.

Uh for categories wise, we still seeing very strong growth in premium luxury sector, sports and outdoor sector, fashion sector, and health and and health and caring sector. Thank you.

Thank you.

Thank you, operator. On behalf of the Baozun management team, we would like to thank you again 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.

This concludes the call.