In the fourth quarter of 2023, Yunji (NASDAQ:YJ) Inc. (ticker not provided), a company specializing in brand building and sales services, reported a stable average order value despite intense price competition in the e-commerce sector. The company's focus on cost-effective products with low return rates and a curated product selection has helped maintain its brand identity. Yunji has successfully expanded and upgraded its product categories, incorporating popular ingredients like collagen and probiotics into new offerings.
Financially, Yunji's total revenues were RMB 149 million, down from RMB 289 million a year ago, with a gross margin of 46.6%. Operating expenses decreased, and the company reported a net loss of RMB 66 million, slightly improved from RMB 68 million in the previous year. Yunji's cash and liquid assets remain sufficient to cover obligations without holding long-term debt.
Key Takeaways
- Yunji maintained a stable average order value in Q4 2023, despite intense price competition in the market.
- The company has expanded and upgraded its product line, focusing on cost-effective products with popular ingredients.
- A new healthcare brand upgrade and integrated sales model launched with strong initial sales.
- Total revenues for Q4 were RMB 149 million, a decrease from the previous year.
- Gross margin remained solid at 46.6%.
- Net loss for the quarter was RMB 66 million, an improvement over the previous year's RMB 68 million.
Company Outlook
- Yunji plans to continue its strategy of curated product selection and cost-effectiveness to enhance brand image.
- Focus will be on enhancing efficiency and adaptability to ensure resilience in the evolving economic environment.
Bearish Highlights
- Revenue saw a significant decrease from RMB 289 million in the previous year to RMB 149 million.
- Adjusted net loss increased to RMB 65 million from RMB 31 million a year ago.
Bullish Highlights
- Successful healthcare brand upgrade and product launches, with sales surpassing RMB 80 million.
- Gross margin remained relatively stable due to sustained customer loyalty and effective product creation strategy.
Misses
- Total revenues and adjusted net loss did not meet the previous year's performance.
Q&A Highlights
- Yunji's CEO addressed concerns about new consumer-biased policies on major e-commerce platforms, emphasizing the importance of unique product offerings and cost-effectiveness over loose sales policies.
Yunji Inc . remains committed to its long-term strategic objectives despite the challenges posed by the competitive e-commerce landscape. The company's dedication to maintaining a strong brand identity and fostering customer loyalty through high-quality, cost-effective products has enabled it to navigate market pressures effectively. As Yunji continues to refine its operations and product offerings, it is equipped to face future challenges and seize opportunities in the shifting economic climate.
InvestingPro Insights
In light of Yunji Inc.'s recent financial performance and strategic developments, the following insights from InvestingPro provide a deeper understanding of the company's current market position and future potential:
InvestingPro Data:
- Market Cap (Adjusted): 14.46M USD, indicating the company's valuation in the market.
- Price / Book LTM as of Q3 2023: 0.08, suggesting the stock may be undervalued relative to the company's book value.
- Revenue Growth LTM as of Q3 2023: -41.67%, reflecting the challenges the company faces in increasing its top-line figures.
InvestingPro Tips:
1. Yunji Inc. is trading at a low Price / Book multiple, which could attract investors looking for potentially undervalued stocks.
2. Despite the company not being profitable over the last twelve months, its liquid assets exceed short-term obligations, providing a degree of financial stability.
For investors seeking to delve further into Yunji Inc.'s financials and stock performance, additional InvestingPro Tips are available, offering insights that could inform investment decisions. With the use of coupon code PRONEWS24, users can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips. As of now, there are 11 more tips listed on InvestingPro that can provide a comprehensive analysis of Yunji Inc.'s financial health and stock trends.
Full transcript - Yunji Inc (YJ) Q4 2023:
Operator: Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to Yunji's Fourth Quarter 2023 Earnings Conference Call. With us today are Mr. Shanglue Xiao, Chairman and Chief Executive Officer; Mr. Yeqing Cui, Senior Financial Director; and Ms. Kaye Liu, Investor Relations Director of the company. As a reminder, this conference call is being recorded. Now I would like to hand the conference over to our first speaker today, Ms. Kaye Liu, IRD of Yunji. Please go ahead, ma'am.
Kaye Liu: Hello, everyone. Welcome to our fourth quarter 2023 earnings call. Before we start, please note that this call will contain forward-looking statements within the meaning of Private Securities Litigation Reform Act of 1995 that are based on our current expectations and current market operating conditions and relate to events that involve known and unknown risks, uncertainties and other factors of Yunji’s industry. These forward-looking statements can be identified by terminologies such as will, expect, anticipate, continue or other similar expressions. For a detailed discussion of these risks and uncertainties, please refer to our latest document filed with the U.S. SEC. Any forward-looking statements that we make on this call are based on assumptions as of today and are expressly qualified entirely by cautionary statements, risk factors and details of the company filing with the SEC. Yunji do not undertake any obligation to update these statements expect as required under applicable law. With that, I will now turn over to Shanglue Xiao, Chairman and CEO of Yunji.
Shanglue Xiao: Hello, everyone. Welcome to Yunji's 2023 earnings call. During 2023 and in particularly in the fourth quarter's peak e-commerce promotion season, the prevailing trend relatively to the market was intense price competition. Major e-commerce and live streaming platforms adopted low-price strategies alone fostering a bargain hunting mindset among consumers. However, Yunji is not really an e-commerce platform. We are also a brand building and a sales service provider. We understand the long-term repercussions of relying on low pricing strategies, which can lower the brand identity over time. The value we deliver to users was in our cost-effective products with low return rates as well as in minimizing decision-making and wait times for our users. Our commitment to a heavily curated product selection ensures that Yunji maintains a stable average order value even amidst in the market focus on low prices. The stability of our average order value is intrinsically linked to our highly developed product capabilities, centered around the saying of love for food, beauty and health. We have developed a range of cost-effective private label products. We have not only expanded the existing categories, but also successfully upgraded our lineup of [indiscernible] medicinal products. Over the span of many years of product development and sales, we have identified key ingredients that resonate strongly with our user base such as collagen and probiotics. Building on successful trials and increased active user feedback, we have introduced a variety of new products across multiple categories that innovatively incorporate these popular ingredients, while performed in different ways to harness these ingredients and enhance product functionality leveraging the existing popularity of these ingredients. Our new offerings have been warmly embraced by our users. We aim to cultivate loyal users of individual products who appreciate our carefully selected ingredients. In doing so, we will develop a user base that is loyal to the entire Yunji brand ecosystem, fostering a deeper trust in our brand. At Yunji, we are committed to supplementing in terms of our ingredients. And we generally use the feedback. We draw upon the niche average user offering over 5,000 years of Chinese history to sell high-quality natural ingredients such as the dendrobium and [indiscernible]. These renowned Chinese medicinal herbs are carefully processed using advanced technology to produce healthier foods that are easier to digest and absorb. Over the past year [indiscernible] to authenticate the quality of our ingredients and products, ensuring that our users can consume them with confidence and peace of mind. In terms of marketing, we recognize the powerful link between exceptional service and a strong sales performance to enhance customer service and drive sales. We are committed to the continued improvement of our service managers still through a comprehensive professional training and technical support. Furthermore, we have invited a number of our sales managers to explore and trace product origins. This first-hand experience allows them to generate more product-related material, which they can then share with users in our communities. During March, we rolled out a range of new products as part of our healthcare brand upgrade. Alongside these products, we also unveiled a novel product cost service integrated sales model. Upon purchasing a product, user can gain access to Yunji's 28-day body image management program, which include personalized one-on-one services and convenient online tracking via mini-program. Our new healthcare products were responding to that with sales surpassing RMB 80 million on launching. When it comes to basic daily customer service, we focus our third-party merchant management, internal customer service training and service policy optimization. We also conduct regular customer follow-ups and online services to improve and ensure overall customer satisfaction. AI was a significant trend in 2023, and we are having -- exploring new ways to apply in our operations. During the year, our capabilities evolved significantly. And we now integrate AI into a range of functions, from basic customer service chatbots and handling routine call center tasks to more advanced support for service managers. For example, users of our 28-day body image management program can now consult with service managers regarding their daily nutritional needs and calorie intake. Our AI health consultants similarly support service managers by rapidly and then accurately calculating personalized recommended calorie intake in real time and provide an informed and insightful advice. That concludes our strategic summary, our reflection for 2023. Moving forward, we remain committed to our strategy of curative product selection, ensuring product cost effectiveness, enhancing brand image and actively exploring diverse marketing avenues to further elevate the Yunji brand. With that, I will go over to Yeqing Cui, our senior financial director to go through the financial results.
Yeqing Cui: Okay. Thank you, Shanglue. Hello, everyone. Before I go through our financial results, please note that all numbers started in the following remarks are in RMB terms and all calculation and the percentage changes are on a year-over-year basis unless, otherwise, noted. During the fourth quarter of 2023, our operations remained relatively stable, and we continue to reinforce our core operational process. Our requirement to inventory management practice allowed us to generate a stable gross profit. We maintain a strategic focus on inventory management, actively and monitoring various product categories on a weekly or monthly basis to ensure optimal stock levels. This approach should not only optimize our asset's utilization, but also effectively manages our cash flow. Meanwhile, we are actively pursuing more efficient cash flow management. Now let's take a close look at our financials. Total revenues were RMB 149 million compared to RMB 289 million a year ago. Revenues from sales of merchandise were RMB 112 million, and the revenues from our marketplace business were RMB 34 million. These changes were primarily driven by ongoing refinement to our product range across all categories. This coupled with the optimization of our supplier and the merchant network resulted in a short-term impact on sales. Despite these changes, our gross margin remained relatively solid at 46.6%. This was due to sustained customer loyalty towards our private labels and our effective product creation strategy. Now let's take a look at our operating expense. Fulfillment expense were RMB 25 million compared to RMB 32 million a year ago. This was primarily driven by a decrease in warehousing and logistics expense, stemming from lower merchandise sales, reduced personal cost due to staffing structure optimization and a decrease of service fee charged by third-party payment settlement platform. Sales and marketing expense were RMB 29 million compared to RMB 59 million a year ago. This was primarily a result of a decline in member management fee and a decrease in business promotion expense. Technology and content expense were RMB 12 million compared to RMB 17 million a year ago. The decrease was mainly due to a reduction in personnel costs as a result from staffing structure optimization and a reduced server cost. General and administrative expense were RMB 44.5 million compared to RMB 44.9 million a year ago. This was mainly due to the reduction in personnel cost as a result of staffing structure refinement and the share-based compensation expense, partly offset by an increase in allowance for credit loss. Total operating expense in the fourth quarter decreased to RMB 110 million from RMB 153 million in the same period of 2022. Loss from operations was RMB 40 million compared to RMB 33 million a year ago. Net loss was RMB 66 million compared to RMB 68 million a year ago while adjusted net loss was RMB 65 million compared with RMB 31 million a year ago. Basic and diluted net loss per share attributable to ordinary shareholders were about RMB 0.03 compared with RMB 0.02 in the same period of 2022. Turning to the liquidity. As of December 2023, we had a total of RMB 552 million in cash and cash equivalents, restricted cash and short-term investments on our balance sheet compared to RMB 669 million as of December 31, 2022. Our liquid assets were sufficient to cover our payable obligations, and we do not hold any long-term bank loans or debt on our balance sheet. In addition, we are dedicated to making the most of our working capital and smart managing of our assets to better support our operations. In summary, the fourth quarter saw us taking significant strides towards our long-term strategic objectives. Our ongoing effort to refine our inventory management system, coupled with our commitment to sustainable and effective asset management, were key to this progress. Looking ahead, our focus will remain on continuously enhancing our efficiencies, thereby ensuring our company's resilience and adaptable ability. Our strategies equip us to effectively control the future challenges and capitalize on opportunities in the evolving economical environment. This concludes our prepared remarks for today. Operator, we are now ready to take questions.
Operator: [Operator Instructions] Our first question comes from Ethan Yu with First Trust China.
Ethan Yu: I just heard you mention customer service. We have observed that in recent months, major e-commerce platforms have launched a series of policies such as 7-day no user returns, free shipping in remote areas, et cetera. What do you think of these new policies which are biased towards consumers? Will all this strategy have any impact on our performance?
Shanglue Xiao: This issue evolves the nature of our products and user consumption habits. First of all, we believe that to be a good platform, the selling point of your products cannot be for RMB 9.9 with free shipping. And user's consumption behavior cannot be based on imposed consumption. Yunji, especially -- Yunji's merchandise sales and private label products has always maintained a loose and a customer specific policy. However, our quality refund rate is very low compared to other platforms, which is inseparable from our sufficient user education. We believe that loose sales are important, but what ultimately attracts consumers to repurchase is unique product offering and cost effectiveness. Our average order value is enough to cover our customer management expenses. And we also have many loyal users in remote areas.
Operator: [Operator Instructions] As there are no further questions at this time, I would like to hand the conference back to the management for closing remarks.
Kaye Liu: Thank you for joining us today. Please do not hesitate to contact us if you have any further questions, and we look forward to talking with you next quarter. Bye.
Operator: This conference is now concluded. Thank you for attending. You may now disconnect.
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