Ladies and gentlemen, everyone, and welcome to the Vipshop Holdings Limited Fourth Quarter and Full Year 2022 Earnings Conference Call. At this time, I would like to turn the call to Miss Jessie Zheng, Vipshop, Head of Investor Relations. Please proceed.

Thank you, operator. Hello everyone, and thank you for joining Vipshop's fourth quarter and full year 2022 earnings conference call. With us today are Eric Shen, our Co-Founder, Chairman and CEO and David Cui, 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 US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to those outlining our safe harbor statements in our earnings release and public filing with the Securities and Exchange Commission, which also applies to this quarter to the extent any forward-looking statements may be made. Please note that certain financial measures 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 reconciliation of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone. Welcome and thank you for joining our fourth quarter and full year 2022 earnings conference call. In the first -- in the first quarter, we once again demonstrated strong earnings power and made tropic [ph] backdrop. The top line recovery was impacted by the short term disruption on economic activities from the surge of COVID-19 infections. Apparel related GMV fared better than expected slightly down year-over-year as we actively worked out merchandising selection to satisfy seasonal demand. Customer trends continued to recover year-over-year. The desire to spend remained healthly with customer visits, clearly pick picking up and the active super VIP customers increase by 13% accounting for 42% of our online spending. Overall, we accomplished quality development in 2022, delivering cost level net income at RMB6.8 billion while navigating through extremely challenging year. Our business fundamentals has been stronger after we incrementally serious enhancement on merchandising pollutions and technologies. On merchandising, we now have a upgrade portfolio of blend and products offering that reinforced the value proposition of our platform with hundreds of brands at the core of our business. New trending and the high end plan and a lot more selections, integration size, bring a new look to our platform. For the full year of 2022, co-brands has positive growth on Vipshop with greater contributions to total GMV. Apparel-related GMV outperformance non-apparel categories, The made for Vipshop shop customized line developing into the more selective collection that enjoyed higher conventions than general merchandise. Operationally, we are more efficient in deploying resource to best support grand partners, launching innovative channels to build sales momentum and increasing customer engagement in a cost effective way. That's how we manage it to grow the base of quality customer with 6.7 million SVIP members repeatedly shopping with us last year. Technologies become more instrumental in every aspect of our business. For example, our fully upgrade merchant platform enabled brand partners to engage in a more measurable way, absolute base such as offering customers incentives and the generations sell lead. Our strong execution in 2022, gives us confidence as we look ahead for the post-pandemic opportunity. We are set to take advantage of our plentiful inventory. Our professional buyer team continue to be the great advantage as they work more effectively with brand partners. Though uncertainties still remain follow China's opening. we did stay, we did see some recovery in spending on apparel and other discretionary items since the beginning of this year. There is opportunities for us to attract new customs and capture more custom spend. We believe we are now in the health position than before to achieve both close and profitability and continue delivering value to our shareholders. At this point, let me hand over the call to our CFO, David Cui, who will go over our financial results.

Thanks Eric and hello everyone. In the fourth quarter, we did our level best to keep the business on track, despite the spike of COVID-19 infections in China. We are pleased that our revenues continue to recover. While another quarter of strong profitability demonstrated the resilience and strength of our business. Gross margin increased by two percentage points to 21.7% from a year ago and actually improved across all categories. Thanks to enhance the merchandising strategy, strengthen cost control as well as dedicate management of business processes. Our operating margin achieved an all-time high as we consistently focus on operational discipline. As a result, we had the most profitable quarter in two years with non-GAAP net income up by 24% to RMB2.2 billion and net margin at 7%. That helps us finish off the full year of 2022 at a record level of profitability. Last year, we generated in a more than RMB7.8 billion free cash flow repurchase the total of USD952 million of our ADS under our buyback programs. We are committed to delivering value to our shareholders by steadily executing the programs. As we entered the post-pandemic era, following China's reopening, we are moving quickly, but rationally to seize the opportunities for growth, while allocating our resources where we will provide the best returns over time. At the same time, we maintain our focus on everyday operation to generate the synergies and efficiency gains. We are positive on regaining growth momentum while sustaining healthy profitability. 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 Renminbi and all the percentage changes are year-over-year changes unless otherwise noted. Total net revenues for the fourth quarter of 2022 were RMB31.8 billion as compared with RMB34.1…

[Operator instructions] And our first question comes from Alicia Yap with Citi. Your line is open. Your line is open.

[Foreign language] Thanks, management for taking my question. This is Vicki Wei on behalf of Alicia Yap, and I have two questions. First, how management view the current competition landscape? Will the recent step-up marketing campaigns by e-commerce peers have any impact on Vipshop to step up on promotional discount as well? My second question is what is the company plans for this year in terms of new user acquisition and how will that impact margins channel for 2023? Thank you.

[indiscernible] Okay. First to answer your question on competition, obviously there is some buzz in the e-commerce industry, especially in the shelf model e-commerce. Some peers have launched subject campaigns. But remember, Vipshop remain highly focused on apparel, not standardized items. And that apparel does not only depend on pricing, but also depends on a lot of other factors like styles, sizes is a much sophisticated segment. Second even on standardized items, we are trying to secure unique product supply from our top brands with unique 1,000 SKUs. We are not looking for as many SKUs as possible. We are trying to build a much more selective SKU. So we were not getting involved in a pricing war. We are trying to grow our business in a healthier way. We are not going to sacrifice profitability by using a lot of subsidies in exchange for customer growth. I think the key -- the key point for the Vipshop to grow its customers, to grow its business is to reinforce this unique value proposition in discount retail and then naturally customers will have a better perception about Vipshop and will keep top mind -- top of mind with customers as well. On live streaming actually the competition has been already there, but we don't feel any additional pressure on the front. The competitive landscape has largely moderated. On your second question on new user growth strategy, in this year our goal is to achieve quality customer growth. We are definitely take this opportunity, during the post-pandemic era to try more proactively to acquire new customers. But at the same time, we'll continue to stick to the LTV model to evaluate the ROIs from different channels to ensure that we are indeed acquiring high quality customers. So overall, we -- probably we will have to spend a little bit more to acquire customers in absolute amount, but as a percentage of revenue on marketing expenses should stay at a very healthy level as comparable as we had for last year. So, this is going to continue for -- so we'll continue to stick to our practice last year in terms of customer acquisition and it won't have a big stress on our overall profitability.

Thank you. Our next question comes from [indiscernible] with Bank of America. Your line is open.

Sure. Good evening, David and Jesse, congrats on the solid results. I have two questions. The first one is regarding the overall apparel demand we observed year to date. Have we observed any trend of pent-up demand or any behavior change such as consumption upgrade, downgrade, or frequency change, or like whatever like, trends we observe from the supplier side, like brand side? Is there any clear goals of clearing the over -- clearing the stocks or like they have a plan of launching new products? Any colors will be good. The second question is we have observed this in the first quarter, the platform GMV actually grow a little bit faster than our 1Q revenue and this because of like previously we mentioned we have some like mix change in our marketplace. Is there any specific plan in terms of -- in our like three key marketplace?

Okay. Joyce on your question, the recent consumption trend apparently posted the pandemic. We did see faster than expected recovery in spending in apparel and other discretionary items. And on the ground, you will see a lot of people feeling more comfortable with moving or traveling around. So they do have strong demand for apparel categories. We've seen positive growth of customer numbers as well as conversion rate. So that's on the consumption side. On the supply side actually, there is plentiful inventory out there because a lot of brand partners had a very tough year last year especially a lot of offline stores actually locked it down due to the COVID impact. So, both on the demand side and on the supply side, we've seen a stronger momentum than expected.

Yeah. Your second question regarding the GMV and revenue changes, actually our GMV narrowed -- our revenue narrowed down by 7%, right? And then GMV is down by 4.6%. So the reason for that is because of the -- towards the year end post pandemic and the exchange and the return items were actually up. So that is the primary reason for that.

Thank you. Our next question comes from [indiscernible] with UBS. Your line is open.

Thank you management for taking my questions. I have two questions regarding the margin side. First is the net margin. So looking at 2023, how much room can we further optimize our expenses and costs? Do we expect that the net margin in 2023 can continue to improve year-on-year and are we becoming more confident on the long-term net margin target? And my second question is on the gross margin. How should we think about the trends in the first quarter as well as 2023? And how does management think about the opportunity to further improve on the gross margin longer term? Thank you.

Yeah, I will combine the two questions together. Our objective for both net margin, gross margin is to remain stable over the year. There could be a room for us to improve the net margin because of the leverage volume, for procurement cost. There might be a room over there. So, in terms of the gross margin, our aim is to remain stable.

Thank you. Our next question comes from Thomas Chong with Jefferies. Your line is open.

Thanks management for taking my question. Could you please provide some updates on the business development, GMV and consumer sentiment in recent months? How you receive the monthly trend and what's our outlook for the four year 2023?

Overall, we are pretty optimistic about the outlook for this year in terms of growth. After the spring festival, actually, a lot of people are coming back and we've seen a stronger momentum than expected in terms of their spending apparel and other categories and this momentum is going to continue into the second quarter, which we expect -- we expect to have a stronger recovery, partially because of a low base last year. Especially if you remember last year from March to May, we had a lot of problems such as supply chain disruption, lockdowns, and the Shanghai incident. So, a lot of dropdowns for the same period -- for the second quarter of last year and for the second half for Q3 and Q4 with the COVID thing cleared away, we think the momentum should continue into the second half, and we're quite optimistic about our growth outlook.

Thank you. Our next question comes from Natalie Wu [ph]. Your line is open.

Thanks for taking my question. My question is related with the spending power or AOB of the existing users. Just wondering post the pandemic, pandemic reopen, is there any chance that can be observed regarding that kind of the operating metrics? And also the second question is regarding the active paying customers. I think that the number of the active paying customers should return to positive goals in the first quarter, if that is true. I'm just wondering if they are target of your active paying customer goals this year?

On customer trend, we've seen apparently customers are becoming more active than before because of the lifting of the COVID restrictions and they have become more comfortable with moving around or travelling around. So we've seen they shop a lot more than before, but the order size, average order size remains quite stable. And yes, we are saying that customer -- active customer members are going to book positive growth in the first quarter. And, it'll continue to grow in the second quarter because we had all the low base for the for the second quarter of last year which we had 17% decline in customer members because of the COVID impact. And for the full year, we are pretty positive on the customer trend when we have achieved quality customer growth.

[Operator instructions] Our next question comes from [indiscernible]. Your line is open.

Okay. So in the last three years, the top plus growth may be due to the COVID really didn't grow that much. So the margin actually went up a lot. So I assume the margin, the room to improve is limited going forward. So under this conversation, the topline growth become critical. So Mr. Shen share some details or your thoughts about how to improve the topline growth in 2023? What's the strategy? Thank you.

Okay. On the margin side, we think there a limited first to improve gross margin because we don't increase the take raise from Palmers [ph] in the past year and we also were very -- were very restrained about providing the unnecessary subsidies. So gross margin would be remain -- would be stable for the future. And net margin side, we think there is still some room for us to improve the cost structure and the increase efficiency gains. So there is still opportunity for us to improve net profit margin, but the most important thing is of course how to grow the customers and the GMV and that should provide the most upside for any margin expansion. So we will focus on dedicated management of our business operations. We look at quality growth of a customer base. We'll continue to increase repeat orders from existing customers and add quality new customers and expand our super VIPs to improve average order size. And also we want to improve our customers thickness through innovative used cases, channels, and also improve conversions through personalization. So there are a lot of ways to increase our business to build our business momentum. And we are pretty confident that we can achieve our quality growth this year.

Thank you. Due to time constraints, that concludes today's question-and-answer session. At this time, I will turn the conference back to Jessie for any closing remarks.

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

Thank you. This concludes the conference. You may now disconnect. Everyone, have a great day.