Negative Points

• BEC product sales revenue decreased by 10% year-over-year to RMB541 million due to a strategic decision to scale back participation in low-margin, price-competitive categories like home furnishings, beauty, and appliances.

• BBM reported a non-GAAP operating loss of RMB33 million for the quarter, although it narrowed slightly from a loss of RMB35 million a year ago, due to increased investment in emerging brands like Hunter.

• The company faces a weak e-commerce industry backdrop and subdued consumption trends, as evidenced by NBS data in July 2026, which could pressure future growth.

• Sales and marketing expenses increased significantly by RMB239 million to RMB1.2 billion, driven by higher spending on creative content and marketing initiatives on platforms like Douyin and Xiaohongshu, which may impact profitability if not offset by revenue growth.

• The company's strategic pivot to apparel product sales requires a longer preparation period, with contributions to top and bottom lines not expected until 2027, indicating near-term uncertainty in this segment.

Q & A Highlights

Q: Regarding the revised 2028 annual non-GAAP operating income forecast, which increased substantially from RMB550 million to RMB700 million, what gives management the confidence to project this higher profitability, and what is the anticipated top-line growth that underpins this revised forecast? A: Vincent Qiu (Chairman and CEO) stated that the confidence comes from several factors. First, they are seeing a stronger trend for BBM (Brand Management) after years of strengthening its positioning and operations. Second, recent experiments with AI tools and other infrastructure developments have shown exciting results, and given the scale of the BEC business, the potential for efficiency gains from automation is huge. He noted that despite weak consumption, the combination of these factors and the potential to deploy AI capabilities across their broad client base gives them confidence in the new goal.

Q: We have seen more international brands exploring strategic alternatives for their China operations, including divestments. How does Baozun view this trend, and could it create a meaningful pipeline of opportunities for BBM? Would management become more aggressive in pursuing such opportunities? A: Vincent Qiu (Chairman and CEO) confirmed they are seeing more of these opportunities in the market, which was one of the reasons they entered the brand management space. He outlined four key aspects driving confidence in the updated 2028 goals: 1) AI efforts contributing a majority of the midterm contribution, 2) strong synergies between BEC and BBM, 3) BBM Organic growth (Gap, Hunter, Sweaty Betty) performing well, and 4) BBM new opportunities. He noted that while they are actively talking with different brands, their priority is making existing BBM brands better first, and new opportunities are not yet counted in the revised targets.

Q: As we see BBM top line 22% with double-digit same-store growth, how should we think about the latest trends for the third quarter when we have a relatively high base from last year? Also, could management provide an update on the annual BBM top-line growth guidance? A: Ken Huang (CFO of Baozun Brand Management) stated that BBM, especially Gap, continues to deliver double-digit growth with same-store sales in the 20s for Q2, and the trend is even stronger in Q3 to date. He attributed this to their MMC strategy: merchandising improvements with better product acceptance, successful brand ambassador campaigns (Chen Yi in Q2 and another in August), and channel expansion with over 50 new stores planned for 2026, including a first Macau store. He confirmed they are confident in achieving 20%-25% growth for the full year.

Q: In light of the weak macro conditions and muted consumption trends, have you observed any significant shifts in the spending budget of your brand partners or their expectations for the China market? Additionally, is there any noticeable divergence in sales growth between brands that have embraced AI-enhanced tools versus those slower to adopt them? A: Junhua Wu (Director and Chief Strategy Officer) said they have not seen significant shifts in brand partners' spending budgets, but partners are focusing on solidifying marketing allocations toward content-driven strategies and shifting inventory towards live-stream platforms like Douyin. Regarding AI, he noted their focus is more on driving operational efficiency rather than directly driving top-line growth. They have not leveraged AI extensively for sales growth yet, but rather for automation and efficiency-driven initiatives.

Q: As AI development looks rapid, many service providers are building their own AI systems. Does the company believe its differentiation versus other e-commerce agency service providers is widening or narrowing? What impact is AI having on industry concentration? A: Junhua Wu (Director and Chief Strategy Officer) emphasized that technology has been key to Baozun's success since its founding, and they maintain the highest IT resources in the sector. He stated that under the AI era, Baozun is taking leadership among competitors, leveraging AI-powered technology to increase operational efficiency and facilitate top-line growth. He believes they are strengthening and widening the distance between themselves and competitors, focusing on AI data, automation, AI knowledge bases, and consumer behavior analysis.

Q: Regarding Nike, we have observed some adjustments to its channel strategy. As Nike's core partner, have we observed any changes in consumer habits across channels recently, and how do we plan to capture the related opportunities? A: Junhua Wu (Director and Chief Strategy Officer) declined to comment on specific brand strategies but noted that Baozun has been a very strong DTC partner for brand partners since 2007. He stated that if any brands are shifting their strategy back to DTC or focusing more resources on driving DTC-based growth, Baozun is definitely a top choice given their strong advantage in serving and supporting DTC strategies.

Q: I have observed that Hunter has seen a significant increase in attention on some China social media recently. Have we noticed this trend, and could we share any additional details or update on the outlook for Hunter? A: Ken Huang (CFO of Baozun Brand Management) confirmed the increased investment in Hunter's brand equity, especially on Xiaohongshu. He outlined the strategy for H2: 1) continuing to open Hunter stores in high-profile shopping malls, 2) expanding the apparel category (with apparel sales contribution exceeding 30% in certain stores during Q2), 3) pursuing collaborations with local and international brands, and 4) actively looking for other category business opportunities as the IP owner to enhance brand equity and profit performance.

Q: The NBS data in July 2026 points to subdued consumption. Does the company observe any trends in sales trends across different platforms and different categories? A: Junhua Wu (Director and Chief Strategy Officer) stated they haven't seen a big change in sales trends among platforms. Shelf-based e-commerce is becoming very stable, especially after 618, with expectations of a strong Double Eleven. Live-stream platforms like Douyin are still growing. By category, they continue to see strong growth in premium luxury, sports and outdoor, fashion, and health and caring sectors.

Q: Could you provide more details on the BEC business performance, particularly regarding the decision to scale back product sales and the outlook for the apparel product sales business? A: Junhua Wu (Director and Chief Strategy Officer) explained that BEC made a strategic decision to scale back participation in certain product sales categories with intense price competition and lower margins, particularly during the 618 campaign, which was most evident in standardized categories like home and furnishing, beauty and cosmetics, and appliances. This resulted in a 10% year-over-year decline in

For the complete transcript of the earnings call, please refer to the full earnings call transcript .