Baozun's Q2 2025 Earnings Call: Contradictions in AI Strategy, Brand Management, and Efficiency Goals

The above is the analysis of the conflicting points in this earnings call

Date of Call: None provided

Financials Results

• Revenue: RMB 2.6B, up 6.8% YOY
• Gross Margin: 28.4% blended product gross margin, up 310 bps YOY

Guidance:

• BEC expects accelerated profit generation in H2 with a strong 11.11 season.
• Brands and Baozun planning higher inventory and paid marketing for Double 11.
• BBM targets ~40 new store openings in 2025, focusing direct stores in Tier-1 cities and asset-light local partnerships elsewhere.
• BBM aims for GAAP breakeven in Q4.
• Continued expansion for Gap and Hunter across online and offline channels.
• Management remains confident in achieving full-year operating objectives.

Business Commentary:

* Revenue Growth and Profitability Expansion: - Baozun reported a total revenue growth of 7% for the second quarter of 2025, with an adjusted operating income expansion to CNY59 million, up from RMB10 million in the same period of the previous year. - The growth was driven by Baozun eCommerce (BEC) revenue increasing by 3% and brand management revenue growing by 35.4%, indicating strong performance in both segments.

• BEC Profitability Improvement:
• BEC's revenue grew by 3%, with adjusted operating profits rising 56% year over year to CNY94 million.

• This improvement was attributed to BEC’s disciplined execution and adapting to evolving brand partner needs.

• BBM Revenue Surge and Efficiency Gains:

• Brand management revenue (BBM) surged by 35.4%, with gross profits growing by 34.5% to RMB208 million.

• The increase was driven by strong sales growth for the Gap brand, efficient inventory management, and strategic marketing initiatives.

• E-commerce Services and Platform Diversity:

• E-commerce revenue grew by 3.4% to RMB2,200 million, driven by revenue growth in digital marketing and IT solutions.

• Growth was supported by revenue from both Tmall and JD platforms, with Tmall experiencing significantly higher GMV growth compared to JD.

• AI and Technology Integration:

• Baozun is leveraging AI to enhance operational efficiency, particularly for content creation and digital asset management.
• Despite not yet focusing on AI for revenue generation, Baozun is committed to using AI to improve internal processes and content creation.

Sentiment Analysis:

• Total revenue rose 6.8% YOY to RMB2.6B; adjusted non-GAAP income from operations improved to RMB59M vs RMB10M last year. BEC adjusted operating profit up 56% YOY. BBM revenue grew ~35% YOY with stable gross margin. Management: “we remain confident… to achieving our full year operating business objectives” and targets “GAAP breakeven in Q4.”

Q&A:

• Question from Alicia Yap (Citigroup): Platform mix (Tmall vs non-Tmall), impact of instant retail, and BBM momentum/ profitability timeline?
  Response: Tmall and JD led 6.18 GMV (Tmall ~2–3x JD); instant retail is in testing across FMCG/beauty/alcohol/appliances; BBM expects momentum to continue with more stores and marketing, and targets GAAP breakeven in Q4.

• Question from Jiawei Yin (CITC): Have platform initiatives reduced brand operating costs and boosted traffic? BBM brand acquisition plans and criteria?
  Response: Platforms’ JVP rebate programs benefit brands and Baozun; traffic is being reallocated toward higher-quality users by category. BBM will add brands (often from existing BEC clients) with strong potential, leveraging Gap/Hunter systems, supply chain, merchandising, and channels.

• Question from Frank Tao (CNBI): Progress on BEC efficiency and H2 growth; benefits from being an early RedNote–Tmall partner?
  Response: BEC optimized costs/operations and is now leaning into top-line growth; H2 (incl. 11.11) expected to be strong. Early RedNote partner status increases exposure and client wins, supporting incremental revenue.

• Follow-up from Frank Tao (CNBI): Collaboration approach with the rumored yoga brand?
  Response: Baozun is converting a long-time e-commerce client into a BBM brand, leveraging Gap/Hunter design, supply chain, systems, and go-to-market playbook in a high-potential category.

• Question from Chris Chou (Huatai Securities): Progress and focus of AI applications; early view on Double 11?
  Response: AI is focused on internal efficiency and content generation rather than revenue driving; Double 11 mechanics are not yet known, but brands are planning more inventory and higher marketing budgets based on 6.18 learnings.