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Mr. Vincent Qiu, Chairman and Chief Executive Officer of Baozun, commented, “Despite the ongoing challenging environment, I am encouraged with our business resilience. We continue to execute our medium-term plan with discipline, and strategically invest in our business to expand addressable market. Our recent launch of Baozun Brand Management, along with the acquisition of GAP Greater China, further advance our target to evolve into a technology-driven, omni-channel commerce player. While it will take time and hard work to fully actualize our vision, we believe a close-loop demand-to-supply value chain, as well as an integrated offline-and-online commerce, will make brands unique and much more successful.”

Mr. Arthur Yu, Chief Financial Officer of Baozun, commented, “Our effectiveness in maintaining operations and supporting our partners’ success during these periods of macro uncertainty underscores the durability and strength of our business model. Throughout this year, we prioritized cost optimization and working capital efficiency, and our efforts are bearing fruits in terms of higher product sales gross margin, lower operating expenses, and better operating cash flows. We are confident that our cash position provides us with a solid foundation for future expansion. In addition, we completed dual primary listing on November 1, 2022, marking another milestone in our capital market journey that offers more flexibility to our shareholders.”

Third Quarter 2022 Financial Results

Total net revenues were RMB1,741.3 million (US$244.8 million), a decrease of 8.3% from RMB1,898.8 million in the same quarter of last year. The decrease in total net revenue was mainly due to a reduction in revenue from online store operations, primarily due to lower product sales revenue, and partially offset by higher value-added services revenue in digital marketing and IT solutions.

The following table sets forth a breakdown of total net revenues by segments and business models for the periods indicated:

Breakdown of total net revenues of online store operations by key categories⁹ :

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¹ This announcement contains translations of certain Renminbi (RMB) amounts into U.S. dollars (US$) at a specified rate solely for the convenience of the reader. Unless otherwise noted, the translation of RMB into US$ has been made at RMB7.1135 to US$1.00, the noon buying rate in effect on September 30, 2022 as set forth in the H.10 Statistical Release of the Federal Reserve Board.
² Non-GAAP income (loss) from operations is a non-GAAP financial measure, which is defined as income (loss) from operations excluding share-based compensation expenses and amortization of intangible assets resulting from business acquisition.
³ Non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. is a non-GAAP financial measure, which is defined as net income (loss) attributable to ordinary shareholders of Baozun Inc. excluding share-based compensation expenses, amortization of intangible assets resulting from business acquisition, unrealized investment gain/(loss), gain/(loss) on disposal of subsidiaries and investment in equity investee and impairment loss of investments.
⁴ Each ADS represents three Class A ordinary shares.
⁵ Basic and diluted non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS are non-GAAP financial measures, which are defined as non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. divided by weighted average number of shares used in calculating basic and diluted net income (loss) per ordinary share multiplied by three, respectively.
⁶ GMV includes value added tax and excludes (i) shipping charges, (ii) surcharges and other taxes, (iii) value of the goods that are returned and (iv) deposits for purchases that have not been settled.
⁷ Distribution GMV refers to the GMV under the distribution business model.
⁸ Non-distribution GMV refers to the GMV under the service fee business model and the consignment business model.
⁹ Key categories refer to the categories that accounted for more than 5% of the Company’s total net revenues during the third quarter of 2022.

Product sales revenue was RMB497.1 million (US$69.9 million), a decrease of 28.9% from RMB699.6 million in the same quarter of last year. The decrease was primarily attributable to the Company’s optimization of its product portfolio in distribution model, and weaker macro environment and a decline in consumption sentiment in China during the quarter, resulting in sales contraction in appliances and electronics categories under the distribution model.

Services revenue was RMB1,244.2 million (US$174.9 million), an increase of 3.8% from RMB1,199.1 million in the same quarter of last year. The increase was primarily attributable to higher revenue contribution from value-added services, including digital marketing and IT solutions.

Total operating expenses were RMB1,767.5 million (US$248.5 million), compared with RMB2,055.3 million in the same quarter of last year.

• Cost of products was RMB414.8 million (US$58.3 million), compared with RMB596.0 million in the same quarter of last year. The decrease was primarily due to the decline in product sales revenue, as well as an improvement in product sales gross margin.

• Fulfillment expenses were RMB575.9 million (US$81.0 million), compared with RMB633.9 million in the same quarter of last year. The decrease was primarily due to lower freight expenses resulting from the Company’s divesture of a subsidiary of its warehouse and supply chain businesses that was acquired in the second quarter of 2021, and additional savings in customer services expenses resulting from the Company’s expanding use of regional service centers.

• Sales and marketing expenses were RMB602.4 million (US$84.7 million), compared with RMB535.6 million in the same quarter of last year. The increase was mainly due to additional front-end staff from an acquired business in the past 12 months, growth in digital marketing revenue and services, and an addition of strategic business development staff, which was partially offset by efficiency improvements.

• Technology and content expenses were RMB98.3 million (US$13.8 million) compared with RMB113.9 million in the same quarter of last year. The decrease was mainly due to the Company’s cost control initiatives and efficiency improvements, which was partially offset by the Company’s ongoing investment in technological innovation and productization.

• General and administrative expenses were RMB97.7 million (US$13.7 million), compared with RMB191.1 million in the same quarter of last year. The decrease was attributable to the Company’s effective cost control initiatives and efficiency improvements during the quarter. Additionally, in the same quarter of last year, general and administrative expenses included a write-down of accounts receivable totaling RMB86.1 million.
  

Loss from operations was RMB26.3 million (US$3.7 million), an improvement from RMB156.5 million in the same quarter of last year. Operating margin was negative 1.5%, compared with negative 8.2% in the same quarter of last year.

Non-GAAP income from operations was RMB16.9 million (US$2.4 million), compared with non-GAAP loss from operations of RMB84.3 million in the same quarter of last year. Non-GAAP operating margin was 1.0%, compared with negative 4.4% in the same quarter of last year.

Unrealized investment loss was RMB8.2 million (US$1.2 million), compared with RMB134.3 million in the same quarter of last year. The unrealized investment loss was mainly related to a decrease in the trading price of iClick Interactive Asia Group Limited, or iClick Interactive, a public company listed on the Nasdaq Global Market that the Company invested in January 2021.

Loss on disposal of subsidiaries and investment in equity investee was RMB99.5 million (US$14.0 million), compared with nil in the same quarter of last year. During the third quarter of 2022, the Company disposed a loss-making subsidiary of its warehouse and supply chain businesses.

Exchange loss was RMB8.8 million (US$1.2 million), due to exchange rate fluctuation between Renminbi and U.S. dollar in the quarter ended September 30, 2022, compared to net exchange gains of RMB1.5 million in the same quarter last year.

Net loss attributable to ordinary shareholders of Baozun Inc. was RMB168.9 million (US$23.7 million), an improvement from RMB292.5 million in the same quarter of last year.

Basic and diluted net loss attributable to ordinary shareholders of Baozun Inc. per ADS were both RMB2.88 (US$0.40), an improvement from both of RMB4.00 for the same period of 2021.

Non-GAAP net loss attributable to ordinary shareholders of Baozun Inc. was RMB13.1 million (US$1.8 million), an improvement from RMB88.1 million in the same quarter of last year.

Basic and diluted non-GAAP net loss attributable to ordinary shareholders of Baozun Inc. per ADS were both RMB0.22 (US$0.03), an improvement from both of RMB1.21 for the same period of 2021.

As of September 30, 2022, the Company had RMB2,899.3 million (US$407.6 million) in cash, cash equivalents, restricted cash, and short-term investment, compared with RMB4,699.8 million as of December 31, 2021. The decrease in cash position was mainly due to the Company’s repurchase of its 1.625% convertible senior notes due 2024 totaling RMB1,760.0 million, and cumulative share repurchase of RMB446.6 million during the first nine months of 2022.

Update in Share Repurchase Programs

During the third quarter of 2022, the Company repurchased approximately 0.7 million of ADSs for approximately US$6.1 million under its share repurchase program.

Conference Call

The Company will host a conference call to discuss the earnings at 6:30 a.m. Eastern Time on Tuesday, November 29, 2022 (7:30 p.m. Beijing time on the same day).

Due to the outbreak of COVID-19, operator assisted conference calls are not available at the moment. All participants wishing to attend the call must preregister online before they can receive the dial-in numbers. Preregistration may require a few minutes to complete. The Company would like to apologize for any inconvenience caused by not having an operator as a result of COVID-19.

Participants can register for the conference call by navigating to https://register.vevent.com/register/BIcf3d6c08b76a4bfab4879f1bfeaabbc1. Once preregistration has been completed, participants will receive dial-in numbers and a unique access pin.

To join the conference, simply dial the number you received after preregistering, enter your personal PIN, and you will join the conference instantly.

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

Use of Non-GAAP Financial Measures

The Company also uses certain non-GAAP financial measures in evaluating its business. For example, the Company uses non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net margin, non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. and non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS, as supplemental measures to review and assess its financial and operating performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation, or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP.

The Company defines non-GAAP income (loss) from operations as income (loss) from operations excluding the impact of share-based compensation expenses and amortization of intangible assets resulting from business acquisition. The Company defines non-GAAP operating margin as non-GAAP income (loss) from operations as a percentage of total net revenues. The Company defines non-GAAP net income (loss) as net income (loss) excluding the impact of share-based compensation expenses, amortization of intangible assets resulting from business acquisition, unrealized investment gain/(loss), gain/(loss) on disposal of subsidiaries and investment in equity investee and impairment loss of investments. The Company defines non-GAAP net margin as non-GAAP net income (loss) as a percentage of total net revenues. The Company defines non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. as net income (loss) attributable to ordinary shareholders of Baozun Inc. excluding the impact of share-based compensation expenses, amortization of intangible assets resulting from business acquisition, unrealized investment gain/(loss), gain/(loss) on disposal of subsidiaries and investment in equity investee and impairment loss of investments. The Company defines non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS as non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. divided by weighted average number of shares used in calculating net income (loss) per ordinary share multiplied by three.

The Company presents the non-GAAP financial measures because they are used by the Company’s management to evaluate the Company’s financial and operating performance and formulate business plans. Non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. and Non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS reflect the Company’s ongoing business operations in a manner that allows more meaningful period-to-period comparisons. The Company believes that the use of the non-GAAP financial measures facilitates investors to understand and evaluate the Company’s current operating performance and future prospects in the same manner as management does, if they so choose. The Company also believes that the non-GAAP financial measures provide useful information to both management and investors by excluding certain expenses, gain/loss and other items that are not expected to result in future cash payments or that are non-recurring in nature or may not be indicative of the Company’s core operating results and business outlook.

The non-GAAP financial measures are not defined under U.S. GAAP and are not presented in accordance with U.S. GAAP. The non-GAAP financial measures have limitations as analytical tools. One of the key limitations of using non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc., and non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS is that they do not reflect all items of income and expense that affect the Company’s operations. Further, the non-GAAP measures may differ from the non-GAAP measures used by other companies, including peer companies, potentially limiting the comparability of their financial results to the Company’s. In light of the foregoing limitations, the non-GAAP income (loss) from operations, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net margin, non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. and non-GAAP net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS for the period should not be considered in isolation from or as an alternative to income (loss) from operations, operating margin, net income (loss), net margin, net income (loss) attributable to ordinary shareholders of Baozun Inc. and net income (loss) attributable to ordinary shareholders of Baozun Inc. per ADS, or other financial measures prepared in accordance with U.S. GAAP.

The Company compensates for these limitations by reconciling the non-GAAP financial measures to the nearest U.S. GAAP performance measures, which should be considered when evaluating the Company’s performance. The company encourages you to review the company’s financial information in its entirety and not rely on a single financial measure. For reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures, please see the section of the accompanying tables titled, “Reconciliations of GAAP and Non-GAAP Results.”

Safe Harbor Statements

This press release contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “potential,” “continue,” “ongoing,” “targets,” “guidance,” “going forward,” “outlook” and similar statements. Statements that are not historical facts, including quotes from management in this announcement and statements about the Company’s strategies and goals, are or contain forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company’s operations and business prospects; the Company’s business and operating strategies and its ability to implement such strategies; the Company’s ability to develop and manage its operations and business; competition for, among other things, capital, technology and skilled personnel; the Company’s ability to control costs; the Company’s dividend policy; changes to regulatory and operating conditions in the industry and geographical markets in which the Company operates; timing and results of any current or proposed acquisition activities; and other risks and uncertainties. Further information regarding these and other risks, uncertainties or factors is included in the Company’s filings with the U.S. Securities and Exchange Commission and the Company’s announcements, notice or other documents published on the website of The Stock Exchange of Hong Kong Limited. All information provided in this press release is as of the date of this press release and is based on assumptions that the Company believes to be reasonable as of this date, and the Company does not undertake any obligation to update any forward-looking statement, except as required under the applicable law.

About Baozun Inc.

Baozun Inc. is the leading brand e-commerce service partner and digital commerce enabler that helps brands execute their omni-channel strategies. Baozun Inc. empowers a broad and diverse range of brands to grow and succeed by leveraging its end-to-end e-commerce service capabilities, omni-channel coverage and technology-driven solutions. Its integrated and technology-empowered one-stop solutions address all core aspects of the e-commerce operations covering IT solutions, online store operations, digital marketing, customer service, warehousing and fulfillment.

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

For investor and media inquiries, please contact:

Baozun Inc.
Ms. Wendy Sun
Email: ir@baozun.com

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

(2) Including amortization of intangible assets resulting from business acquisition, which amounted to RMB5.8 million and RMB9.3 million for the three months period ended September 30, 2021 and 2022, respectively.

(3) Including income tax benefits of RMB0.9 million and RMB1.8 million related to the reversal of deferred tax liabilities, which was recognized on business acquisition for the three months period ended September 30, 2021 and 2022, respectively.