Baozun's Q2 2025 Earnings Call: Contradictions on BBM Profitability Timelines, AI Application Focus, and Platform Performance

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

Date of Call: August 28, 2025

Financials Results

• Revenue: CNY 2.6B, up 6.8% YOY
• Gross Margin: 28.4%, up 310 bps YOY (group product-sales blended)

Guidance:

• Management expects BEC to accelerate profit generation in 2H, with stronger Double 11 versus last year.
• Platforms (Tmall/JD) partnering on deeper targeting; confidence in H2 demand and paid media support.
• BBM remains confident in full-year objectives; targets Q4 2025 breakeven.
• Gap China to continue footprint expansion; FY2025 plan for ~40 new store openings (asset-light focus).
• Hunter to build on profitable new stores and broaden categories.
• Continued operational discipline; stronger seasonal activations in Q3/Q4.

Business Commentary:

* Revenue Growth and Earnings Expansion: - Baozun reported total revenue growth of 7%, with adjusted operating income expanding to CNY 59 million, marking a significant improvement from CNY 10 million in the same period last year. - The growth was driven by the resilience of Baozun's business model, demonstrating meaningful profitability expansion alongside top-line growth.

• BEC Performance Improvement:
• BEC's revenue grew by 3%, while adjusted operating profits rose 56% year-over-year to CNY 94 million, the highest second-quarter level in 4 years.

• This profitability improvement was attributed to BEC's agility in adapting to evolving market dynamics and focusing on efficiency gains.

• BBM Growth and Profitability Enhancement:

• BBM reported a revenue growth of 35% year-over-year, with BBM's gross profits increasing by 34.5% to CNY 208 million.

• This was driven by strong performance of the Gap brand, merchandising strategies, and improved inventory management, leading to a narrowing of the operating loss.

• AI and Technology Integration:

• Baozun is leveraging AI to drive efficiency by developing internal tools for managing digital assets and content creation, particularly for the consumer-facing part of its operations.

• This focus on AI is aimed at enhancing internal efficiency rather than driving revenue, as AI technologies are not yet mature enough to replace human expertise in merchandising and marketing.

• Instant Retail Shopping and Competitive Landscape:

• Baozun is participating in instant retail shopping initiatives with platforms like Tmall and JD, with Tmall's GMV growth being 2 to 3 times higher than JD during the 618 campaign.
• Although instant retail shopping is gaining popularity, Baozun is still assessing its impact on its business and will continue to monitor its potential for future development.

Sentiment Analysis:

• Total revenue rose 6.8% YOY to CNY 2.6B; adjusted non-GAAP operating income reached CNY 59M vs CNY 10M last year. BEC adjusted operating profit increased 56% YOY to CNY 94M. BBM revenue grew 35% YOY with gross margin ~52% and improving losses; management targets BBM breakeven in Q4 and expects a stronger Double 11. Group product-sales gross margin expanded 310 bps YOY to 28.4%.

Q&A:

• Question from Alicia Yap (Citigroup): Can you quantify platform contributions (Tmall vs non-Tmall) and comment on the impact of instant retail on operations?
  Response: Tmall outperformed JD during 618 (roughly 2–3x JD GMV growth); instant retail is being piloted in FMCG/beauty/alcohol/appliances with no material impact yet.

• Question from Alicia Yap (Citigroup): Will BBM’s momentum continue and when do you expect profitability?
  Response: BBM plans continued store expansion and marketing in 2H and targets breakeven in Q4 2025.

• Question from Unidentified Analyst (CITIC): Have platform benefits lowered brand operating costs and increased traffic allocation to brands?
  Response: Platforms’ JBP rebates and higher-quality traffic help brands; Baozun aggregates client volumes to secure rebates, with pricing/traffic dynamics varying by category.

• Question from Unidentified Analyst (CITIC): Will BBM pursue more brand acquisitions, and how will Gap/Hunter experience be leveraged?
  Response: Strategy is to build a multi-brand portfolio, often upgrading existing e-comm clients to brand management; select brands with growth/profit potential and onboard using Gap/Hunter systems and supply chain.

• Question from Ye Tao (CMBI): Progress on BEC efficiency and outlook for H2 top-line acceleration?
  Response: After H1 efficiency work, BEC is refocusing on growth and expects a promising H2 with a stronger Double 11.

• Question from Ye Tao (CMBI): How does being an initial RedNote–Tmall partner benefit Baozun?
  Response: Early Red partner status boosts exposure and client pipeline, supporting higher revenue from RedNote-driven initiatives.

• Question from Ye Tao (CMBI): Can you comment on the rumored yoga brand onboarding?
  Response: Confirmed agreement to manage a yoga brand previously run by Baozun e-comm; will leverage existing design, supply chain, and systems; category has large potential.

• Question from Chris Zhao (Guotai Securities): What is the status of AI adoption—revenue lift or cost efficiencies?
  Response: AI is focused on internal content production to improve efficiency and reduce cost; not yet a direct revenue driver.

• Question from Chris Zhao (Guotai Securities): Early read and plans for Double 11?
  Response: Mechanics are not yet disclosed, but brands are allocating more inventory and marketing; management is optimistic.