Baozun Inc. (NASDAQ:BZUN) Q4 2019 Results Earnings Conference Call March 18, 2020 7:00 AM ET
Company Participants
Wendy Sun – Investor Relations Director
Vincent Qiu – Chairman of the Board of Directors, Chief Executive Officer
Robin Lu – Chief Financial Officer
Junhua Wu – Director, Chief Operating Officer
Conference Call Participants
Alicia Yap – Citi
Thomas Chong – Jefferies
Tina Long – Credit Suisse
Sally Chan – CLSA
John Choi – Daiwa
Tian Hou – TH Capital
Billy Leung – Haitong International
Joyce Ju – Bank of America
Operator
Ladies and gentlemen and thank you for standing by and welcome to Baozun’s fourth quarter and fiscal year 2019 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded.
I would now like to hand the conference over to first speaker today, Ms. Wendy Sun, IR Director. Thank you. Please go ahead.
Wendy Sun
Thank you operator. Hello everyone and thank you for joining us today. Baozun’s fourth quarter 2019 earnings release was distributed earlier today and is available on our IR website at ir.baozun.com as well as on Global Newswire services.
On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer, Mr. Junhua Wu, Chief Growth Officer and Mr. Robin Lu, Chief Financial Officer. Mr. Qiu will review business operations and company highlights, followed by Mr. Lu, who will discuss financial and guidance. They will all be available to answer your questions during the Q&A session that follows.
Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon based upon management’s current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company’s control, which may cause the company’s actual results, performance or achievements to differ materially from those in the forward-looking statements.
Further information regarding these and other risks, uncertainties or factors are included in the company’s filings with the U.S. SEC. The company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law. Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB.
It is now my pleasure to introduce our Chairman and Chief Executive Officer, Mr. Vincent Qiu. Vincent, please go ahead.
Vincent Qiu
Thank you Wendy and thank you all for joining us. I will like to start by expressing our Deepest concerns and well wishes all those whose life has been impacted by the ongoing Coronavirus outbreak and also take the opportunity to thank our employees for their hard work, tremendous resilience and the dedication shown during this difficult period. We have always been committed to maintaining high standards of corporate social responsibility and have prioritized the health and safety of our employees and we will continue to offer our support as the fight carries on.
Fortunately, for us and our brand partners, contingency plans were already in place with our IT infrastructure and the digitalization technologies already configured for seamless transition to remote working with minimal disruptions to our business during the peak of the outbreak in China. The Coronavirus outbreak has created industrywide headwinds stemming from softer consumer demands and the fulfillment shortages caused by the ongoing traffic restrictions, self-quarantine rules and the work from home directives.
In general, the impact across the retail industry is significant, particularly within discretionary categories such as apparel and footwear where demand is more significantly affected by consumers spending less time outdoors. We foresee the near term growth for the wider industry will be challenged. However, we also note that this might be an opportunity. If anything, the ongoing impact of the outbreak is highlighting just how important an online is for brands and e-commerce showing significant resilience compared with offline retail.
This growing need by brands to refine their digital and O2O strategies plays to our strength as a leading brand e-commerce solution provider. As a young, dynamic and adaptable company, we believe we are uniquely positioned to leverage our strong fundamentals and to capitalize on this emerging need over the long run. We believe that both digitalization and innovation will continue to underpin growth in the retail industry. As the long term drivers of China’s e-commerce growth remain unchanged, we are confident that we will generate long term sustainable value for our brand partners and the shareholders.
Now, I would give an overview of our performance in the fourth quarter. During the fourth quarter, we continued to capitalize on the growth momentum of China’s e-commerce industry. GMV grew by 48% and total net revenue rose 26% year-over-year. In the year’s most significant online event, the Singles Day shopping festival, we surpassed a significant milestone of RMB10 billion in order value and we are proud to say that we helped many of our brand partners rank first in terms of total order value within their respective verticals.
We continue to make significant progress on acquisition of new brand partners. We made net addition of eight brand partners for the quarter. This brings the total number of our brand partners to 231, compared with 185 at the end of 2018. The newly added brands are mainly in the apparel, electronics and food and health categories. In particular, we signed a Japanese entertainment electronics brand and a domestic home care product brand.
We achieved our 2019 goals, which is reflected by our standout 35% revenue annual growth rate which was the fastest growth we have posted over the last four years. We also posted record high increases in GMV and the net addition of new brands. I want to highlight the incremental GMV from stores open less than 12 months contributed over 10% of GMV during the year, more than double its contributions a year ago. While we are proud of this achievement throughout the year, we are cognizant of the need to continue optimizing the fundamental infrastructure we have put in place to further drive high quality growth and expand our operating margins. The industry continues to evolve rapidly and there is much work that remains to be done in this regard.
2019 was a transformative year of our company in terms of strategic reinvestments and the competitive positioning. We strengthened our market positioning through continued innovation and adopting of a more strategic, flexible and responsive approach to evolve the e-commerce industry. To-date, our retail operation support system or ROSS has launched several modules and solutions that focus on automation and intelligence which have generated very encouraging initial savings in man-hours.
The 2019 Singles Day event marked the first time that we deployed our hybrid cloud infrastructure, Baozun Cloud, to support high load transaction processing, which performed smoothly and efficiently throughout the entire event. We are encouraged by these achievements, especially since they reflect the continued execution of our strategy over the past few years to empower a revolution in e-commerce through innovative technologies.
While progress never follows a straight line, we are confident in the digitalization blueprint we have put together. Our focus for 2020 will be squarely on driving the seamless integration, digitalization and enhancing the intelligence of our services which we believe will drive great improvements in internal operational efficiency and the business flow management.
Beginning in the second half of 2019, we increased our capacity in terms of logistics for premium sectors and deployed system upgrades to our WMS and LMIS. We will further optimize resource allocation across our logistics network. During the 2019 Singles Day shopping festival, we launched an integrated pre-dispatch system in select cities that supports brand partners in delivering goods to consumers within a few hours, or in some cases, within one hour. Expedited delivery was available immediately after the Singles Day event kicked off at midnight.
These initiatives are in high demand from brand partners and the customers. Initial feedback gathered from reviews on social media channels indicate that they have also greatly enhanced the user experience. As e-commerce evolves, we believe value added services such as marketing tech and the integrated digital marketing will become increasingly important for boosting traffic and promoting better interactive user engagements. We have been closely following industry trends and remain to track on further expand our services to include a wider array of comprehensive digital marketing solutions.
These solutions include new initiatives such as live streaming, KOC and KOL, positioning to convert marketing power into sales results. In addition, our Mini programs are growing in popularity among our brand partners as a way to enhance user engagement and deploy smart retail strategies. We have achieved some initial breakthroughs that leverage the social networks and believe we are on the right track as we explore new opportunities in this emerging channel.
Above all, we believe our infrastructure enhancements and even mental contribution from new brand partners in 2019 has laid a solid foundation for our growth momentum to continue into 2020. However, we are not yet finished and we will continue expanding these initiatives to generate high-quality growth. In essence, I would say that we are only just beginning, given the enormous growth opportunities still ahead of us. We are now entering the next phase of quality growth where our focus will be strategic margin expansion.
We have a long and exciting journey ahead of us. 2020 will be a year in which we prioritize quality growth, accelerate brand portfolio optimization and drive greater operational efficiency through digitalization and productization. We believe the net effect of our efforts will result in higher quality growth and a gradual margin expansion. Though the pandemic will create short term headwinds and add financial uncertainties, we also believe that it creates business opportunities and we firmly believe that our strategic growth will yield more balanced and sustainable growth in addition to operating margin improvements for 2020.
I will now pass the call over to Robin to go over our financials for the quarter. Thank you.
Robin Lu
Thanks Vincent. Before providing more details about our financials, I would like to take some time to address our non-distribution model take rate which is defined as service revenue as a percentage of non-distribution GMV. As we know, this is one of key metrics used by the market to assess our performance. Even though internally we do not believe it’s an appropriate measure to use for benchmarking and we do not use this terminology or metric for internal measurement purpose either. By nature, take rate by category fluctuates significantly as each category tends to exhibit different patterns and serving model. I will say that category mix could be the key factor in shaping the blended take rate over a certain period of time.
During the fourth quarter, there were noteworthy structural differences by category in the growth rate. Electronics, especially [indiscernible] outperformed other sectors and was quite active during the Singles Day shopping festival, accounting for a larger proportion of our total GMV. Men’s and women’s clothing in general saw weaker growth. Luckily, within the apparel category, we are primarily exposed to sportswear which continues to perform well. Overall, the slowdown in non-sportswear apparel reduced its GMV component in the apparel category. In addition, we have a growing GMV component from the broader FMCG category, respectively food, health and the home which typically fell within the service fee model as well. As such, the dramatic change in category mix in the past year has actually led to a different blended take rate profile.
I want to also highlight that we achieved a solid positive free cash flow for full-year 2019. Our operating cash flow totaled over RMB300 million and achieved first ever positive free cash flow. We view this as a milestone in working capital management and as a validation of our high quality growth strategy. This is especially important as the turbulence created by macroeconomic uncertainty and the pandemic persists. We believe it is more essential than ever to accelerate the execution of our high quality growth initiative to build our business in a more sustainable way.
Lastly, a fire broke out at our third-party warehouse in Shanghai on October 29, 2019. Fortunately, no one was hurt in the accident. It was a one-off event that impacted our bottomline as the accrued an operating loss of RMB45.5 million for the quarter. Because the products stored at this third-party warehouse will generate slow moving goods, we do not anticipate any meaningful topline growth impact for 2020. This operating loss is below our previous estimate of RMB53 million as we were able to recover some of undamaged product when the site was reopened by local authorities in late February.
Now let’s go over the fourth quarter 2019 financial results in detail. We believe a year-over-year comparison is the best way to review our performance. All percentage change I am going to give will be on that basis. Once again, please note that all figures that I mentioned will be in RMB.
Total GMV during the quarter increased by 48% to RMB17.8 billion. The growth rates of business models rebounded from the previous quarter. Distribution GMV grew by 29% to RMB1.5 billion and on our non-distribution business once again outperformed with a GMV increase of 49% to RMB16.3 billion.
Total net revenues increased by 26% to RMB2.8 billion. Breaking this down, product sales revenue increased by 33% to RMB1.3 billion and services revenue increased by 22% to RMB1.5 million during the quarter. The increase was primarily attributable to robust growth during our Singles Day campaign as well as incremental contribution from new brands. In particular, product sales growth was also boosted by the contribution from the newly added entertainment electronics brand, which we launched in December. Service revenue was impacted slightly by the weaker performance in both men’s and women’s clothing.
Total cost and operating expenses were RMB2.6 billion compared with RMB2 billion in the same quarter last year. In particular, cost of products increased to RMB1.1 billion from RMB790 million last year, primarily due to higher costs associated with an increase in product sales revenue. Due to category mix change, our gross for product sales declined slightly to 18.2%, compared with 19% a year ago. Our blended gross margin totaled 62%, a decline of 2%, which was mainly due to an increase in proportion of product sales revenue.
Fulfillment expenses increased to RMB665 million from RMB512 million last year, mainly due to an increase in GMV from our distribution and consignment model and warehouse rental expenses, an increase in warehouse capacity to address additional growth opportunities. The increase was partially offset by improvements in efficiency. Our cost control initiatives continue to drive operating efficiency improvements and optimization of delivery resources. As a percentage of GMV, our fulfillment expense ratio improved to 3.7% from 4.3% a year ago which marked the fourth consecutive quarter that we will achieve greater operating leverage for fulfillment.
Sales and marketing expenses increased to RMB648 million from RMB 544 million last year. And as a percentage of GMV, our sales and the marketing expense ratio improved to 3.6% from 4.5% a year ago. The decrease in sales and marketing expenses as a percentage of GMV reflects an increase in leverage we are getting as our business grows to scale, especially in the Singles Day season and the effectiveness of our marketing activities leading up to Singles Day back in the third quarter.
Technology and content expenses increased to RMB109 million from RMB84 million a year ago. We continue to invest in innovation and productization in a very disciplined, focused and streamlined manner. During the fourth quarter of 2019, our investments in innovation and productization totaled RMB23 million compared with RMB21 million last year. Leveraging from expanding business scale, technology and the content expenses as a percentage of GMV declined slightly to 0.6% from 0.7% a year ago.
G&A expenses increased to RMB67 million from RMB43 million last year. In addition to increased spending in administrative, corporate strategy and business planning staff as the business scales, we also accrued a bad debt allowance of RMB9 million during the quarter for accounts receivable from one specific brand partner in the women’s clothing category which began business liquidation in 2019.
During the quarter, we incurred net other operating loss of RMB42 million, which was mainly due to the loss related to the third-party warehouse fire of RMB45.5 million that I mentioned earlier. All-in-all, income from operations decreased to RMB196 million from RMB230 million in the same quarter of last year and our operating margin declined to 7% from 10.4%.
On a non-GAAP basis, income from operations was RMB217 million, a decrease of 12% from RMB247 million last year. Non-GAAP operating margin was 7.8%, compared with 11.2% in the same quarter of last year. As a reminder, operating income and the margin during the quarter included RMB45.5 million impact from the fire.
Offsetting interest income, interest expense totaled RMB6.8 million compared with RMB3.5 million a year ago. The increase in interest expense was mainly due to the issuance of convertible bond in April 2019, which also embedded a debt accretion treatment, which is a non-cash item based on the accounting treatment associated with CB finances. Income tax expenses totaled RMB38 million and we had an effective tax rate of approximately 19%, compared with 13% last year on a non-GAAP basis. The increase in income tax was mainly due to higher effective tax rate as some tax incentive policies was applied to the same period last year.
In the fourth quarter, net income attributable to ordinary shareholders of Baozun totaled RMB141 million. Basic and diluted net income attributable to ordinary shareholders of Baozun per ADS were RMB2.42 and RMB2.36, respectively, compared with RMB3.29 and RMB 3.17, respectively, during the same period of last year. Non-GAAP net income attributable to ordinary shareholders of Baozun totaled RMB151 million. Basic and diluted non-GAAP net income attributable to ordinary shareholders of Baozun per ADS were RMB2.77 and RMB2.71, respectively, compared with RMB3.59 and RMB3.46, respectively, for the same period of last year.
As of December 31, 2019, we had RMB2 billion in cash and cash equivalent and short term investments compared with RMB514 million as of December 31, 2018. The significant improvement in cash was mainly attributable to strong positive operating cash flow for full-year 2019 as a result of working capital optimization as well as our CB financing back in April 2019.
Turning to guidance. We continue to closely monitor the ongoing pandemic across the globe and are carefully evaluating its impact on our business. Now since then, provided the macroeconomic environment does not deteriorate further, we anticipate that GMV during the fourth quarter 2020 will grow by at least 10%, compared with the same period last year. We expect total net revenues during the fourth quarter of 2020 to be between RMB1.4 billion and RMB1.45 billion, which represents a growth rate of 9% to 13%, compared with the same period of last year. Even though we see positive signs of the recovery of our business, there are many unknowns as to the duration and the severity of the pandemic. We have decided to temporarily suspend full year net revenue guidance until we have greater visibility.
This concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session. Thanks.
Question-and-Answer Session
Operator
[Operator Instructions]. Your first question comes from the line of Alicia Yap. Please ask your question.
Alicia Yap
Hi. Good evening management. Thanks for taking my questions and wishing all well and safe. I have a couple of questions. Number one is that, despite the impact from the virus, we actually think the 9% to 13% net revenue guidance is actually not too bad. And so could you give us a bit color in terms of the GMV given you actually have a high base last year? If I understand correctly, last year there was this handset brand that was dropped out of since 3Q. So if we are excluding this handset brand, what would be your 1Q GMV growth looks like? And then on your revenue guidance, could you give us some colors in terms of the breakdowns of your product revenue versus the service revenue growth? And what are the brand categories that actually have negatively affected more doing this outbreak period? And brand categories actually more resilient and see still the demands on track? Thank you.
Robin Lu
Okay. Alicia, it’s Robin. Yes, I am wearing the face mask so it maybe not very clear. But I will try to speak loudly. Yes, about the Q1 outlook and the guidance, I think the first question is about the category. Yes, we do see some negative impact on the men’s and women’s clothing because, as you know, the offline store has been closed and the people are still at home. So there is not much demand about this stuff. But fortunately, in the meantime, we see the sportswear is not bad. And also with the newly added brands, we add up in the second half of last year, it looks better for the GMV and also for the revenue, I think is pretty in line with the GMV growth. I think that’s the overall picture about Q1.
Alicia Yap
So there wasn’t any non-apples-to-apples comparison on the GMV growth rate?
Robin Lu
I think about the handset, as I remember the question, we operated two handsets in last Q1. And then this year, primarily we focused on the one handset but the growth of this handset is pretty strong since last Q4 and continuing growth in Q1. So I think primarily the handset is no big change from last Q1 to this Q1 in the GMV side.
Alicia Yap
I see. And then if I may, in terms of the margins outlook for 1Q, given the impact on revenue, could you give us some colors in terms of how we should think about for 1Q margin? Thank you.
Robin Lu
Yes. Our margin will be dropped because we have less revenue growth and we have some costs associated with a fixed part. So our margin will be dropped, but definitely, we are in the positive range. It’s not a negative margin.
Alicia Yap
Okay. Great. Thank you.
Robin Lu
Thank you.
Operator
[Operator Instructions]. Your next question comes from the line of Thomas Chong of Jefferies. Please ask your question.
Thomas Chong
Hi. Good evening. Thanks management for taking my questions. I have a question about the full year GMV and the revenue trend. It looks that there is a lack of visibility at the moment. But can management provide us some direction qualitatively in terms of the GMV growth rate? Should we expect an acceleration starting in Q2? And in terms of the margin trend, should we expect the margin to be somewhat like stabilizing in Q3 and margin expansion will happen in Q4? I notice that quantitative is tough at this time, but any qualitative color would be great. Thank you.
Robin Lu
Okay. Hi, it’s Robin again. I mean, it’s very hard to ask me to foresee the trend. Based on our internal trend and based on what we estimated in the recovery in March, we think we are still very positive about our GMV and revenue growth for this year. And we hope that Coronavirus outbreak can be disappeared very soon and we will get back to the regular growth trend.
About the margin, definitely because we have some elasticity about our business, I suppose there is not much deteriorating in the outbreak, definitely we will achieve the recovery of the margin. And also we think if there is no, if the things are getting even worse, our operating margin in this year could be in the midpoint between 7% and 8% which will be recovered from the last year. Thank you.
Thomas Chong
Thank you.
Operator
Your next question comes from the line of Tina Long of Credit Suisse. Please ask your question.
Tina Long
Hi. Thank you management for taking my question. My question is actually on the brand pipeline. We are having or will we plan to add in 2020? And also what kind of split between the distribution versus non-distribution? A and also, we noted that in the fourth quarter distribution model revenue actually outgrow that of the service model. So based on the brand pipeline we are having for 2020, how should we look at the revenue mix and also the gross margin? Thank you.
Robin Lu
Hi. I think I can give you some numbers, it’s Robin and then I think Junhua can answer you about the outlook about this year. Yes. We don’t or I should say, we are not intentionally to develop our distribution model and we have very careful selection process to decide which we can do the distribution. But back into history, I think we kept well balanced between the distribution and the non-distribution from both GMV and revenue balance.
And regarding the brand, I think in Q1, we add up some like a home furnishing, a very famous global home furnishing brand and also the domestic brand but in the house products for this. But unfortunately in Q1 we see the slow acquisition of the brand because we cannot go out to discuss with the client and the partner. So I think this one will affect the whole year’s new brand acquisition speed.
Junhua Wu
Yes. Now let me back to you regarding the pipeline question. So it looks to us a little bit cautiously optimistic in terms of the pipeline growth. So there are some kinds of positive signs from the COVID-19. So more and more brands, they have realized that getting online and getting digitalized their online business is getting more important. So we have been reached and touched more and more from a lot of brands, some are very strong brands. They want to switch their bases to Baozun and some undeveloped brands are going to just develop their online business with us. So we can foresee a very strong pipeline in the year 2020 and we are very optimistic about this coming up in the next quarter.
Tina Long
Thank you. How about the business model, like distribution versus non-distribution in terms of the new brand additions?
Junhua Wu
Just now as I said, we carefully select the distribution model. But we keep well balance in the future. I think you can take that as a about like 90% GMV coming from non-distribution and 10% GMV from distribution. It’s kind of like the principle we keep.
Tina Long
Okay. Got it. Thank you very much.
Junhua Wu
Thank you.
Operator
[Operator Instructions]. Your next question comes from the line of Natalie Wu of CICC. Please ask your question.
Unidentified Analyst
Hi management. Thanks for my question. It’s [indiscernible], on behalf of Natalie. As we see the outbreak is becoming a global issue, if the factory of overseas brands are shut down, what business impact and the financial impact will we have? And my second question is, in the prepared remarks, you mentioned that the company’s positive free cash flow has reached a record high. Would you please share more color on how you improved the free cash flow? For example, is it because we are having less capital expenditure than before? Or we are having more leverages on the balance sheet? And how should we expect the trend going forward? Thank you.
Vincent Qiu
Hi. Let me answer the first of the question and then Robin can do some follow answering of the questions. Up to now, we keep a very close communication with our client base. And so far, there is not a big worry and concern about the supply side. I think the part of reason is that most of the supply chain is right not in China and also Asia region, especially China. So we are seeing quite confident supply of the products and there is no big signal from the brand side telling us about the potential difficulties of the supplies in the near future. But anyway, we will be closely watching the situation and adjust our sales tactics along with that. Yes, so that’s about supply.
Robin Lu
Okay. Yes. Let me get the second question about the positive cash flow. Yes, we do have less capital expenditure in 2020, it is about like RMB50 million less. But our free cash flow is over RMB100 million, which means you know we have a very strong operating cash flow, positive operating cash flow which drive through the free cash flow positive. I mean that’s what we see for the whole year last year. For example, you know, I remember we had mentioned about how we can regulate the collecting process and also the automatic billing system and also we have a new set of rules inside the company to expedite the collectibles. So that really makes the result turn to the positive for the cash flow.
Unidentified Analyst
Thank you.
Operator
Your next question comes from the line of Sally Chan of CLSA. Please ask your question.
Sally Chan
Yes. Hello. Good evening management. Many thanks for taking my questions. I wish everyone good health during this period. I have two questions. Maybe I just go over the first one. First is actually on the monetization trend in 2020. I agree with management that the overall take rate is probably not meaningful because it is very heavily impacted by category mix and then brand mix, et cetera. But I am just wondering, say, if we look at this on a more granular level, say, on the per brand basis, for example when you negotiate contracts with new brands or renegotiate your renewal with existing brands, how do you see our brand partners value our new value-added services like the tools you just mentioned, like new delivery services, data, even cloud? Do you think, potentially, going forward, if we could enhance these kind of value-added services offerings, we could receive a better monetization or take rate from our brands? And then if so, how should we think about the timeline when we could start to see meaningful contribution from the monetization of these new tools? This is my first question.
Robin Lu
Okay. It’s Robin. Before I answer your question, I should give you more color about the take rate for the Q4. Maybe when you do the very quick math, you will see there are like 2% drop in the take rate, around 2% drop. And we have about 1.5% coming from the product mix change. As we mentioned, we have a 3C increase in Q4 GMV and another 0.5% coming almost evenly from less marketing spending and also less logistic service due to the slowdown of the men’s and women’s clothing. So that’s really like a full picture of the take rate change in Q4.
And also regarding this year’s take rate, we think we still have a very good potential to improve our take rate. And also about the monetization, for example, the revenue guidance we can give you, which is still in the growth, I think thanks to our logistics service, we can provide more service to the partners than the other competitors. And also for the new brands, we are gradually working with them for the new added service, including both logistics and digital marketing services, for example. And we do think we have great potential to improve for this year. Thank you.
Sally Chan
Thank you management. So I have another quick question actually is to follow-up on the sort of guidance for this year, given the impact from the outbreak because from my tracking, it seems that the January growth for our brands were quite healthy and then February we saw moderate but not that big decline in GMV growth for our key brands. And then it seems like for the March 8 promotions period, sales for some of our key brands actually rebounded very strongly. So I am just wondering if management could share how you have seen the recovery trend so far as people gradually get back to work and then supply side infrastructure like logistics also continue to recover, probably after February and March. Thank you.
Junhua Wu
Okay. Sally, this is Junhua Wu. Let me get back to you about the question on Q1. So in January, we did pretty well. So we dramatically beat our internal targets here. So the whole February was a disaster, as you know. The total kind of the COVID-19 stuff, so really just lowered down the demand chain and lowered down the communication efficiency and something like that.
And from the beginning of March, especially from a big campaign like Queen’s Day, you mentioned about March 8. So most of our key brands are recovering very well. So I can say that they are recovering about 80% of their normal when they back to the Y-o-Y in a same campaign like this. And we are foreseeing a cautiously optimistic about the GMV and the business as well growing in the coming quarters. That was before the virus has any kind of import impacts.
So now, just like Robin just mentioned, it’s very hard for us with a lot of unknown kind of the criteria based on import virus effect. So yes, we can say that most of our key brands are recovering very well. The March is doing pretty well, as we can see. And we are cautiously optimistic about the coming quarter. And the demand chain has recovered already about 80% to 100% and the supply, we have more inventory and more products coming online. So yes, everything is getting better now.
Sally Chan
Great. That’s good to hear. Thank you.
Operator
Your next question comes from the line of John Choi of Daiwa. Please ask your question.
John Choi
Hi. Thank you very much for taking my question. I had a couple of questions here. First of all, could you kind of talk about the latest development of the Mini programs? What the contribution to your overall business? It seems like that on Mini programs has been doing pretty well over the past year. And just quickly on a follow-up on the operating margin. I think, Robin, you mentioned hopefully you could be able to reach 7% to 8% this year. Can you kind of walk us through whether that will be driven by more on the faster topline growth in the second-half? Or pretty much more on the operating leverage on the operating expense side? I just want to have a brief sense on how you guys are going to able to drive that after things do normalize? Thank you.
Robin Lu
Hi John. It’s Robin. For the Mini program, yes, I think we made great progress especially in the Coronavirus outbreak because it’s the right tool to link between online and offline. Some of the partners come to us to ask us to provide service for their offline stores so that they can easily go online. But in the both GMV and revenue, I think comparing with total number of Baozun, the Mini program is still very immature and we don’t the pay much attention to the GMV and the revenue contribution. Instead, we just want to test this model so that we can figure out a way how we can ramp up our services to the brand partners and set up the brand e-commerce system in Mini program ecosystem. So that’s kind of like our main focus which is not focused on GMV and revenue, comparing with the total number.
So that’s the first question. And about operating profit margin, I think you are right. We of course drive of this one by improving our revenue resources from our existing and new brands and also we have a very tight cost control and efficiency improvement plan in our company, so that we can drive up the operating margin.
Operator
Your next question comes from the line of Tian Hou of TH Capital. Please ask your question.
Tian Hou
Thank you management. So my question is first, so this Coronavirus and before and after there are a lot of things changed. So from your customer side, like a brand side, I wonder have they, so when you communicate with them, do they have in terms of brand strategy, do they have any new thoughts about in the future how are they going to strategize or position their brands? In the consumer side, so as you mentioned at your remarks and to the apparel and in the handbags in this area is impacted the most. So I wonder what’s changed in the customer side? And so going forward, what do you see can be the trend? So one is the supply-side and one is the consumption side. Thank you.
Junhua Wu
Okay. This is Junhua Wu. So those are very good questions. So the first one is related to the brand side. So we communicate with a lot of key brand partners and they are being very positive to the digital, especially their online business. So there are several initiatives they are going to just approach. The first one is, they are strengthened, already are emphasized on the digitalizing their business. They realize that online and e-commerce are becoming more important, especially under this overall situation of the country. And that just means that they want to lay more emphasis and they are putting more strategic efforts into digitalizing their business.
The second part is in terms of the product inventory allocation. So most of our key brands are reallocating a lot of their offline, especially their exclusive offline products to online, because, as you can see that in the past several months, their offline business has been facing a lot of problems and challenges. So putting their offline resources to online is really helping the online growth. That’s the second part.
The third part is more about reallocating their brand marketing strategy and their marketing spending. So they realize that especially along with the development of the digital marketing, like a livestream, KOL and KOC, so more and more brands, they have realized that they want to just invest more on content management and enriching their online content development, provide more accurate content to the right consumers at the right time. I think they are more and more digital marketing spending will be reallocated to online. So that’s all three approaches from the brand side.
So from the consumer side, we haven’t seen a lot of behavior change from the consumer side. If you just view the whole apparel category dropping down a lot, because they are basically staying at home, so it doesn’t make any sense for more like women and men to purchase new apparels, because they are staying at home. So maybe that was just about or they are kind of under a big environment for now and we haven’t seen any kind of changes from the consumer part. So we are seeing when everything is getting better, consumers can just freely go to the street and back to their normal life and normal lifestyle. I think the category mix and all their consuming power will be recovered soon. Thank you.
Tian Hou
Thank you so much. Thank you.
Operator
[Operator Instructions]. Your next question comes from the line of Billy Leung of Haitong International. Please ask your question.
Billy Leung
Hi management. Thanks for taking my question. I just had, the question I want to ask is related to what Vincent mentioned during the prepared remarks. Vincent said, the 2020 focus will be on accelerated brand portfolio. I just wanted to know what that meant? Does that mean that we should expect more brand partners? Or brand partners would be larger? That’s my first question. And just a housekeeping question, can management share the amounts of GMV that was from existing or same store clients for quarter one guidance and quarter four? Thank you.
Vincent Qiu
Yes. It is in my prepared script. But I think Junhua is the better person to answer the question, please.
Junhua Wu
Yes. About the portfolio and larger brand potentially, so yes, we are foreseeing a very strong pipeline in the year 2020. And according to our existing enrolled brands, they are being more qualified. So this year, our strategy is very clear. We are chasing qualified GMV. So we are not really emphasized on the GMV growth or GMV amounts, but the quality of the GMV revenue and the profit what we are making from the brand partner. So as far as we can see in Q1, the brands we enrolled, including a very large brand in the home furnishing category, are very high quality brands in our portfolio. And in our strong pipeline, we have foreseen a lot of the same kind of a qualified brands coming up, yes.
Billy Leung
So just to confirm. When you say, high quality, does that mean, it’s a larger scale brand merchant? Sorry. Thank you.
Junhua Wu
So yes. What I mentioned about the qualified GMV brand, which means that we have a better take rate. We have a wider range of scope of work. We have more stickiness with the brand partnership. And we have a longer term of the contract period.
Robin Lu
Yes. About the high quality growth, I think that’s kind of like a different fit in a different scenario. In the topline, just as Junhua explained and in the costs internally, we have very strong cost reduction initiatives to create the efficiency and make our cost structure more healthy about it. So that’s kind of like different scenarios we are working on. And back to your last question, I think you asked about that same store sales growth, it is the 51% in the same store sales growth in Q4.
Billy Leung
Thank you. And what was the assumption for quarter one GMV? How much coming from same store sales growth?
Robin Lu
We don’t disclose the number yet and we will have more color in the next earnings call.
Billy Leung
Thank you. That was really helpful.
Robin Lu
Thank you.
Operator
Your next question comes from the line of Joyce Ju of Bank of America. Please ask your question.
Joyce Ju
Good evening Vincent, Junhua, Robin, Wendy. Thanks for taking my question. My question was also a follow-up to the previous question. Actually, I just want to clarify, because this year, especially the first half, our existing brand probably is going to suffer like demand shock. So shall we expect more of our growth actually contributed by new incremental brands? Or say we know we launched a very big home furnishing international brand this quarter, right? Should we expect primarily this year new brands will contribute bigger chunk of GMV compared to last year-end? Could you give us some qualitative color in terms of probably the take rate on margin profile of this new brand? And there is a small follow-up as I want to just get a broad sense. During the Coronavirus like period of time, we know basically all the brands or merchants kind of suffered a financial pressure. We know lot of platforms they are giving like subsidies or rebates to merchants. I am just wondering from our service provider perspective, are we going to experience any pressure in terms of expenses or services charge? Any qualitative colors would help. Thanks a lot.
Robin Lu
Yes. It’s Robin. Yes, about your first question, I think we do experience some kind of like a slowdown in the men’s and women’s apparel continuously in Q1, especially in February. But also we experienced the delay of the new store opening for the new brands. So in balance, we think it really depends on the specific brands who enjoy what growth rate in Q1 or the downturn in Q1. But in general, I would say our GMV will still grow at least 10%. And also that’s partially contributed by the new brands that we acquired in the last year, which is less than 12 months.
And the second question, roughly, yes, we do see some financial pressures in some of our brands, but not all. And at this moment, I think you know we didn’t experience anything about the term change or something because they rely more on the online sales to drive up their overall prices. And additionally, about service fee, which is accounts receivable at this moment, we see some debate of the payment. But we closely monitor the collection process. And up till now, we think that’s pretty normal, with the exception of some delayed payments by the partners. Thank you.
Joyce Ju
Thank you.
Operator
All right. Now I would like to hand the call back to Ms. Wendy Sun for the closing remarks.
Wendy Sun
Thank you operator. In closing, on behalf of the Baozun management team, we would like to thank you for your participation in today’s call. If you require any further information or are keen to visit us in China, let us know. Thank you for joining us today. This concludes the call.
Operator
Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now all disconnect.
Be the first to comment