Baozun Inc. (NASDAQ: BZUN) is set to report its earnings results for the second quarter on Wednesday before the market opens. The Chinese e-commerce company’s results will be benefited by the popularity of brand partners’ products and the effectiveness of its marketing and promotional campaigns. The bottom line will be driven by its ability to manage costs and expenses.
The company’s future success will be tied to the success of its future brand partners as it continues to expand and optimize its brand partner base. Baozun generates a substantial majority of its revenues from the solutions it provides on E-commece channels, including marketplaces, social media, mobile channels, and other emerging E-commerce channels.
In recent years, the company has experienced rapid growth. The business and prospects could be hurt by the failure to manage its growth and maintain profitability. There are many reasons for the failure, including competition, slower growth of the China retail or China online retail sales, fulfillment bottlenecks, emergence of alternative business models, changes in government policies and other general economic conditions.
The long-term viability and prospects of the online retail business in China remain relatively untested. The wide acceptance of e-commerce has been interlinked with the continued demand of the company’s services and solutions and its ability to pursue its growth strategy.
Baozun expects competition to intensify in the future for brand e-commerce solutions and services. The intense competition could result in lower pricing for its services and solutions or a decline in the company’s market share. This could negatively impact its ability to retain existing and attract new brand partners, future results, and its ability to grow its business.
The company believes that its current levels of cash balances, cash flows from operations, and existing credit facilities will be sufficient to meet its anticipated cash needs to fund operations for at least the next twelve months. The payment terms with the company’s brand partners could bring in a variation to its cash flows from operations.
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Analysts expect the company’s earnings to jump by 28.60% to $0.18 per share and revenue to climb by 34% to $223.9 million for the second quarter. The company has surprised investors by beating analysts’ expectations in all of the past four quarters.
For the first quarter, Baozun reported a 128% jump in earnings driven by a 40% growth in the top line with strong contributions coming from the services segment. GMV soared by 58%. For the second quarter, the company expects revenues to increase by 34% to 38% year-over-year to the range of RMB1.55 billion to RMB1.60 billion. Service revenues are estimated to grow about 40% for the second quarter.
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