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Baozun (NASDAQ: BZUN) stock retreats on near-term concerns

Baozun Inc. (NASDAQ: BZUN) stock opened lower on Tuesday and has fallen to a 10-month low of $33.18 on Monday due to fire damage and class action lawsuits from US investors’ rights litigators. This comes after the company’s shares reached a yearly high of $56.47 on July 1.

The company expects to incur damages of about $7.6 million related to a fire at a warehouse in Shanghai, which took place in late October. Also, the company faces suits that alleged false and misleading statements regarding one of its largest brand partners, Huawei Technologies.

Image for representation. Courtesy: Clark Street Mercantile on Unsplash

After recovering from the trade war, the company continues to trade at depressed valuations due to concerns surrounding the brand churn or falling take rates. Traders believe that the brands could create their own e-commerce platforms or leave for reduced-price operators and this could stand as a major concern for Baozun.

Despite this, the company continued to remain excited about the emerging opportunities that will become its growth drivers for the next few years. The opportunity is to sell key brands to give add up more active mini-app businesses. This is likely to acquire superior technological capability more interactive marketing tools and an innovative type of acquisition.

Read: Lululemon Athletica Q3 earnings review

For the recently completed third-quarter, Baozun posted a 32% jump in earnings helped by growth in services and product sales. The rapid growth of the consignment model and service fee model, as well as strong growth in digital marketing services, drove services revenue higher by 39%.

The acquisition of new brand partners increased popularity, and rising effective marketing and promotional campaigns drove product sales higher by 31%. The company has been struggling in a challenging macroeconomic environment along with the termination of service agreement with one electronics brand. But, the evolving e-commerce in China is likely to be beneficial for the company.

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