VIPS

Ladies and gentlemen, good day everyone, welcome to Vipshop Holdings Limited's first quarter 2026 earnings conference call. At this time, I would like to turn the call to Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.

Thank you, operator. Hello, everyone, and thank you for joining Vipshop's first quarter 2026 earnings conference call. With us today are Eric Shen, our Co-founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statements in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made.

Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop shareholders, and non-GAAP net income per ADS are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliation of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning and good evening, everyone. Welcome and thank you for joining our first quarter 2026 earnings conference call. Our first quarter performance reflected a significant calendar-driven shift caused by the later Chinese New Year. This led to a successful holiday surge in activity that effectively pulled forward demand, resulting in a softer March. What's important to highlight is the sustained health of our customer base. Our holiday results were outstanding, driven by customers who actively sought out our seasonal collection and value promotions. The strength of that demand, especially in apparel, confirms that we remain a top priority for their spending and gives us real confidence in their long-term resilience. Our custom metrics this quarter further prove that resilience. Total active customers show the positive momentum led by our SVIP members, who grew by 9% year-over-year, with paid members accounting for 55% of our online spending.

We remain focused on the quality of our growth as we move further into the year. We are making steady progress in how we optimize merchandising portfolio, engage with customers, and integrate AI to reshift our off-price retail model. Since realigning our team last year, we are seeing the benefits of the faster, more fluid approach to merchandising. By staying focused on customer relevance and deepening category expertise, we have been able to move from market insight to product on shelf more quickly to ensure our deep discount brand inventory hits when demand peaks. We are also driven better cross-category engagement as we create our selection around the broad needs of our customers and develop more effective analytics and marketing tools for brand partners. We are helping shoppers easily discover products across apparel, childcare, and home categories.

Following our last update, we have transitioned our Made-for-Vipshop line into the new phase of growth by raising the bar for quality, style, and value. At the same time, we have tightened our planning with brand partners' seasonal calendars to stay in sync with real-time fashion trends. This approach ensures our lineup is always created and on-trend. Looking ahead, we will continue to evolve the exclusive offering into the primary driver of customer mindshare and brand loyalty. Building on our opportunistic buying strategy, we have successfully sped up our buying cycle. Over the past few months, our teams have locked in a high value of exclusive low-priced inventory that is now flowing through the platform. This has enhanced the treasure hunt experience for our customers. We are seeing strong daily habits from our high-value shoppers, who are returning more frequently to discover our latest arrivals.

This differentiated merchandising approach directly feeds into the strength of our SVIP program. By offering exclusive access to private sales and unique inventory, we are driving both member acquisitions and loyalty. A great example is our recent event with a global athletic brand, where a curated selection delivered a surge in new SVIP sign-ups, particularly among young male shoppers, and sales value many times above the baseline. In line with the push of high-value engagement, we have shifted towards a more targeted acquisitions model using refined targeting that identifies members with the highest long-term value. By replacing generic benefits with a tiered service system, we are directly rewarding higher spending with exclusive product access, deepened discount, one-stop customer support, and value-added benefits. This will further optimize conversions and individual spend. These integrated efforts ensure the SVIP program remains our primary engine for sustainable revenues and earnings growth.

As the pace of the change in retail accelerate, we were excited to embrace the broad opportunities AI offers. Our initial journey focused on putting the customer first, enhancing experiences through virtual try-ons, smarter search, and the recommendations, and automate customer support. We also leveraged AIGC to reach potential customers more effectively with automated content. Having proven this use case, we are now shifting our focus towards scaling that capabilities for greater operational impact. For example, we are using generative AI to scale personalized marketing. By combining our operational expertise with real-time customer feedback, our AI marketing agent effectively generates tailored creative across video, photo, and text forms. This has already driven a clear lift in our customer acquisition efficiency. Beyond the marketing, AI is increasingly empowering our brand partners with advanced business analytics, deeper customer cohort insights, and optimized merchandising strategy.

By anchoring our strategy in the off-price model and leveraging best-in-class technology, we have identified more effective ways to serve our customers, from dynamic merchandising to the smart supply chain. This allows us to continue earnings customer loyalties through every interaction. We remain committed to investing in our people and our platform. We are confident that by continuously optimizing our operational strategies, we will drive steady profitable growth for the long term. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Thanks, Eric, and hello, everyone. Our latest results landed within our guided range, reflecting a dynamic quarter that was heavily influenced by late Chinese New Year. The holiday period triggered a concentrated surge in demand for winter and early spring apparel categories, where our merchandise strength resonates well with a broader base of consumers. By successfully capturing these peak season opportunities, we proved the effectiveness of our coordinated efforts across merchandising, customer engagement, and operations. This operations synergy directly fed into our bottom line. Margins remain healthy and stable, underpinned by a highly favorable category mix and our continued operational discipline. As Eric outlined, we maintained focused strategic investment in our key growth drivers, expanding differentiated merchandise offerings, deepening SVIP's engagement, and scaling AI integration across our operations.

At the same time, we continue to manage our broader resource pool with strict prudence, dynamically shifting spend to our most productive activities. This balanced approach ensures we sustain solid baseline profitability by prioritizing high-quality, profitable revenue today. Simultaneously, it allows us to systematically strengthen our foundations for the long term, even as we navigate an uncertain macroeconomic backdrop. Turning to shareholder returns, we remain firmly on track to deliver on our 2026 commitment of returning no less than 75% of full-year 2025 non-GAAP net income to shareholders. In April, we complete our annual dividend, distributing approximately $300 million. For the quarters ahead, we look forward to executing the remaining balance of our shareholder return program. Our free cash flow outlook is robust. We have the full financial capacity to meet our full-year allocation targets. Moving to our detailed quarterly financial highlights.

Before I get started, I would like to clarify that all financial numbers presented below are in RMB, and all the percentage changes are year-over-year change, unless otherwise noted. Total net revenues for the first quarter of 2026 increased by 1.2% year-over-year to RMB 26.6 billion from RMB 26.3 billion in the prior year period. Gross profit increased by 6.8% year-over-year to RMB 6.5 billion from RMB 6.1 billion in the prior year period. Gross margin increased to 24.4% from 23.2% in the prior year period. Total operating expenses were RMB 4.2 billion, compared with RMB 4.0 billion in the prior year period. As a percentage of total net revenues, total operating expenses were 15.7%, compared with 15.3% in the prior year period. Fulfillment expenses were RMB 2.0 billion, compared with RMB 1.9 billion in the prior year period.

As a percentage of total net revenues, fulfillment expenses were 7.7%, compared with 7.2% in the prior year period. Marketing expenses decreased by 1.8% year-over-year to RMB 719.3 million from RMB 732.1 million in the prior year period. As a percentage of total net revenues, marketing expenses decreased to 2.7% from 2.8% in the prior year period. Technology and content expenses decreased by 0.2% year-over-year to RMB 448.2 million, while RMB 449.1 million in the prior year period. As a percentage of total net revenues, technology and content expenses was 1.7%, which stays slight as compared with that in the prior year period. General and administrative expenses were RMB 950.5 million, compared with RMB 950.8 million in the prior year period. As a percentage of total net revenues, general and administrative expenses were 3.6%, which stayed flat as compared with that in the prior year period.

Income from operations increased by 9.7% year-over-year to RMB 2.5 billion from RMB 2.3 billion in the prior year period. Operating margin increased to 9.4% from 8.7% in the prior year period. Non-GAAP income from operations increased by 3.5% year-over-year to RMB 2.7 billion from RMB 2.6 billion in the prior year period. Non-GAAP operating margin increased to 10.2% from 10.0% in the prior year period. Net income attributable to Vipshop shareholders increased by 13.6% year-over-year to RMB 2.2 billion from RMB 1.9 billion in the prior year period. Net margin attributable to Vipshop shareholders increased to 8.3% from 7.4% in the prior year period. Net income attributable to Vipshop shareholders per diluted ADS increased to RMB 4.48 from RMB 3.72 in the prior year period. Non-GAAP net income attributable to Vipshop shareholders was RMB 2.31 billion, compared with RMB 2.31 billion in the prior year period.

Non-GAAP net margin attributable to Vipshop's shareholders was 8.7%, compared with 8.8% in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 4.68 from RMB 4.43 in the prior year period. As of March 31st, 2026, we had cash and cash equivalents and restricted cash of RMB 28.3 billion and short-term investments of RMB 2.7 billion. Looking forward to the second quarter of 2026, we expect our total net revenues to be between RMB 24.5 billion and RMB 25.8 billion, representing a year-over-year decrease of approximately 5%-0%. Please note that this forecast reflects our current and the preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

Thank you. We'll now take the first question today. This is from Thomas Chong from Jefferies. Please go ahead.

[Foreign language]

Let me translate into English. Thanks management for taking my question. My first question is about the monthly GMV trend. Given that we have seen some softness in industry parcel volume in the past few weeks or even last month. How is our monthly GMV so far? My second question is relating to 618. How should we think about the events this year versus last year? On top of that, how is the consumer sentiment these days that we should think about the outlook for the second half? Thank you.

[Foreign language]

Okay. We actually started the year on a very strong note. We have seen holiday surge during the January to February period, when consumers are actually concentrate their buying activities, and that effectively pulled forward demand. Following the holiday period, we saw a very apparent moderation of sales in March. As we enter the second quarter, the April data does not turn out very well. It's not improving from March. Into May to date, still very challenging. Actually, we saw a slight pickup in consumer activity. As we have been through half of the quarter, it seems that we have relatively low visibility on consumer sentiment and activity. How the rest of the quarter will turn out still depends on the month-long industry promotion, which we also don't have very big expectations.

We think it's more prudent for us to give a conservative guidance and reset our second quarter expectations. Turning to our outlook for the full year, we think we still have opportunities in the second half. We believe as consumer sentiment may be improving marginally, we should be able to capture opportunities in discretionary spending, especially apparel. We look forward to making the best effort to maintain steady operational performance for the second half. For the full year, I will continue to believe that we will maintain steady outlook.

Thank you.

Thank you. We will now take the next question. This is from Vicky Wu from CICC. Please go ahead.

[Foreign language]

I will translate by myself. Thanks management for taking my question. I would like to ask for some updates regarding Shanshan Outlets. First, would you walk us through Shanshan's first quarter performance?

Second, we've noticed that the Vipshop commercial REIT is about to be launched. How should we assess its subsequent impact on the financial statements? Thank you.

Well, thanks for your question. Actually, Shanshan Outlets business is quite strong in the first quarter, and the GMV grows around 30% year-over-year. Thanks for your question regarding the REIT. I think some of the investors may be aware that Vipshop commercial REIT obtained official approval from the CSRC and the Shanghai Stock Exchange in late April, and complete the pricing process on May 19th. There are two underlying assets, Shanshan Outlets in Zhengzhou and Harbin. Both material outlets operate for around 10 years. Both outlets hold leading position in their regional markets. Zhengzhou outlet is the highest grossing outlet in Henan province, while the Harbin outlet ranks first in Heilongjiang province. The commercial REITs issued feature more flexible policy regarding the fund usage and expansion mechanism.

Actually, in addition to these three outlets already used as underlying assets for the REIT, we also hold another 18 outlets projects demonstrating strong potential for future expansion. We will conduct further evaluation based on our strategy and market conditions. For the accounting treatment for this Zhengzhou and Harbin, we subscribed for 49% of the total shares in the commercial REIT. In simple terms, we will lose control and we will deconsolidate the investment from our financials and recognize the related investment again accordingly. More specifically, on a GAAP basis, we will book a one-time investment gain of around RMB 5.3 billion in the second quarter, an increase of RMB 1.7 billion income tax expenses. Cash flow wise, we will see a significant increase in net cash inflow of RMB 1.7 billion in the second quarter. Thanks.

Thank you. We will now take the next question. This is from Alicia Yap from Citigroup. Please go ahead.

Hi, [Foreign language]

Thanks management for taking my questions. I wanted to follow up. I think management earlier mentioned that seems like you guys saw April is a negative growth for your platform, maybe May that also so far month to date is also seems to be negative. I think last week we have the China retail sales data is a total apparel sales is actually grew 3.6% in April. Just wanted to see where is the disconnect. Is it a lot of these spending been shifting to offline? Or is it there are some of the market share, our market shares are losing to other online platform? Related to that is also on the Shanshan Outlets. I think management mentioned the platform grew like 30+%. I also wanted to know is this because of the consumer behavior that you observe started to shift more to the offline shopping? Or is it because Shan Shan actually have certain merchandise that Vipshop online doesn't have? Thank you.

[Foreign language]

The NBS data, the apparel sales, the growth of 3.6% you have mentioned, actually refers to both online and offline. Based on our observation, actually online we have seen a very notable decline, and we are actually quite in line with the industry trend. Offline, we do see very strong growth. We believe it could be the difference of consumer activity with online and offline shopping. When they do online shopping, they tend to return a lot, so that would make the sales and after revenue data are more compressed. With offline, our consumers do shift.

Part of their spending increasingly to outlet channels. It is actually the same with merchants, with brand partners. They have been shifting a little bit more resources to offline outlet channels as well. We think it's still partially holiday driven. Going forward, we have to see whether the momentum can be sustained. In addition, the offline outlet, the outperformance, is actually benefiting from a higher concentration of certain categories, especially sportswear and outdoor products. That makes their sales performance exceptionally strong because consumers tend to shop into these categories as just fitting in with their lifestyle. It's actually the same thing with the online category performance. Even in April and May, when we do see a broader weakness in apparel categories, sportswear and outdoor products continue to outperform.

I think the real weakness is actually going into more discretionary apparel categories like womenswear and menswear, which are pretty much fashion driven. I think we still need some time to see whether the discretionary spending will turn out better than expected going forward.

Thank you.

Thank you. We will now take the next question. This is from Ronald Keung from Goldman Sachs. Please go ahead.

[Foreign language]

Thank you management for taking my question. First one I ask about the GMV gap, with revenue, due to Shan Shan or maybe the return rate have changed. Second is given that the margin for May trends have been quite soft, should we take this and read this into the second half given the base in third quarter last year is not a low one which therefore the base normal. So how should we take up the recent trends and translating to our expectations into the second half. Thank you

[Foreign language]

In terms of our full year outlook, even when we face near-term pressure from March to May to date, we think it's still within our control. It's just from -5% to 0%. That's the range we are confident to maintain. The recent softness is related to a number of factors, weather condition, seasonal transition to spring and the summer apparel. Of course, there is a bit of uncertainties on consumer sentiment and behavior, et cetera. We may need more time to see whether the trend will be improving going forward. For the full year, we think our full-year target is still achievable, and by continuously optimizing our operational strategies, we should be able to maintain at least a steady business performance. Thank you.

Thank you. Due to time constraints, that concludes today's Q&A session. At this time, I will turn the conference back to Jessie for any closing remarks.

Thank you for taking the time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, I would like to turn the call to, Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed.

Thank you, operator. Hello, everyone, and thank you for joining Vipshop's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are Eric Shen, our Co-Founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statement in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop's shareholders, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen.

Good morning, and good evening, everyone. Welcome, and thank you for joining our fourth quarter and full year 2025 earnings conference call. This year has been defined by strategic realignment, operating resilience, and a firm commitment to high-quality growth in a dynamic market. While we entered 2025 facing a multi-consumer environment, I'm pleased to report that the agility of our off-price retail model has allowed us to stabilize our top-line performance and continue to deliver robust profitability for the full year. Our fourth quarter results came in slightly below our expectations. This was primarily due to a deceleration in December sales as customer activity slowed. We attributed it to the weak winter apparel demand alongside delayed holiday shopping due to a later spring festival. While we saw short-term pressure this quarter, our long-term road map remains unchanged. We continue to make solid progress that reinforces our flywheels from merchandising, customer engagement, to operations. In 2025, we implemented a strategic reorganization of our merchandising and customer engagement team to enhance agility and long-term competitiveness by enabling faster decision-making and breaking down internal silo. We have unlocked a strong foundation for long-term growth. Throughout the year, our merchandising strategy centered on 3 pillars: enhancing customer relevance, building differentiation, and deepening category expertise. Advancing these capabilities has been fundamentally allowed us to consistently and effectively align high-value brand supply with evolving customer demand. We are building a stronger, more connected portfolio of branded products. Last year, our merchandising team further deepened our supply network. This enabled us to acquire more quality deep discount inventory, driving sales growth steadily across our most valuable brands. Leveraging data-driven insights, we are proactively shaping a resilient assortment that wins in growth categories while keeping our supply chains responsive to shifts in customer needs. We are seeing an encouraging early signal of cross-sell from apparel into related categories like mother and baby, childcare, and lifestyle. We will remain focused on refining these synergies to better serve our customers' diverse needs. Our Made for VIP line has become a key driver of our differentiation, with sales in these exclusive categories growing by over 40% to account for 5% of online apparel sales in 2025. Having successfully built these foundations of scale, we are now in the position to evolve our approach for the next stage of growth. We are streamlining our exclusive products to build a clear identity and drive mind share when customers see an exclusive tech, which should instantly recognize a promise of high value and reliability. This is how we transfer the line into competitive differentiations, reliable courage, on-trend selection, and exceptional value. Our optimistic buying proactive is another key differentiator, allowing us to select a portfolio of high-demand items from top global and domestic partners. This delivers a compelling value proposition based on quality, price, and style. Combined with dynamic fresh sales and treasure hunt experience, it drives wild customer apparel, full excitement, and encourages repeat visits. We are moving faster to lock in more exclusive low-priced inventory to attract high-value shoppers and deepen the discovery drive of our platform. To enhance customer experience, one team now manages the entire journey from initial brand and acquisitions to value-driven growth and lifelong engagement. We have enhanced our capabilities to target and engage user efficiency, which serves as the core foundation of our full life cycle customer strategy. Early progress is promising, and we are focused on the sustainable runway ahead to build a more seamless cross-category experience that maximizes lifetime value. The Super VIP program remains the cornerstone of our growth. Active SVIP members sustained double-digit growth for the fourth quarter. For the full year 2025, active SVIPs grew by 11% to 9.8 million, contributing 52% of our online spending. Through exclusive upgrades such as providing sales and family benefits, SVIPs consistently demonstrate significantly higher retention and repeat purchase than those of regular customers. Their sustained loyalty and spending power provide a reliable revenue stream and increase our apparel to brand partners, seeking high-quality customer access. Turning to the operations. We have enhanced our capabilities to better think merchandise with customer intent, delivering measurable results. We implemented multi-objective optimization in our searching engine, directly improving conversion rate. We also prioritize diversity and freshness in our recommendation engine, which has enriched discovery and drive high browsing frequency and return visits. Look ahead, we are exploring generative search and recommendations to enable more dynamic, interactive, and integrate discovery experience. Lastly, we have made great strides in deploying AI across our business to drive tangible value with advanced AI applications in searching and recommendations, customer service, and marketing. We have enhanced the customer experience and empowering our brand partners, laying a strong foundation for deeper company-wide integration. Notably, our AI-powered customer service effectively automates routine interactions, improving the overall speed and relevance of customer support. The system now manages the majority of product inquiries and generate personalized recommendations with automated resolutions reach approaching 90%. AI-generated content is now widely used in marketing, driving efficiency and effectiveness, taking our own campaign, for example, by leveraging AIGC to automate creatives and placements. We have reduced production costs while optimize customer acquisition efficiency. Furthermore, we have used AIGC to generally summarize our customer reviews and product portfolio, helping brand partners boost their sales effectiveness. With its full-scale launch, our AI virtual try-on feature has proven to be an effective driven customer engagement. Initial data confirm its impact on loyalty, showing that engaged customer has a high rate of repeat visits. Our next phase is fundamentally integration of AI, moving beyond stand-alone workflows to embed it within our core operations, making it primary driver of growth and business-wide efficiency. As we're looking back on 2025, we have become a more agile, customer-central and technology-driven organizations. We have enhanced our leadership in the off-price sector as an indispensable gateway for brand navigation, China shifting consumption landscape, as value shopping become a structural trend. We are uniquely positioned to capture high-value customers and expand our share of wallet through merchandising and supply chain reliability. While the macro environment remains dynamic, our focused strategy and strength execution giving us great confidence in delivering sustainable profitability growth in 2026 and beyond. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results.

Thanks, Eric, and hello, everyone. We concluded 2025 with resilient performance underpinned by solid profitability in a dynamic market. This financial strength stems from our disciplined approach to investing, ensuring the every dollar we deploy advance our core business and builds lasting momentum. Over the past year, we focused on enabling the business with agility, ensuring our investments in merchandising, consumer engagement, and operational upgrades, as well as AI enhancements, directly strengthen our business core. This discipline has translated into quality earnings and is building the foundation for durable competitive advantage. As Eric emphasized, we have seen tangible progress which has repositioned us for sustained momentum. Our focus remains on stewarding our capital to support its business priorities, ensuring we have both the flexibility and the financial foundation to execute our long-term growth strategy. Turning to capital returns. I'm pleased to confirm that we delivered on our 2025 commitment, returning a total of USD 944 million to shareholders through dividends and share repurchase. For 2026, we are maintaining this momentum. Consistent with our prior year's policy, we intend to distribute no less than 75% of our full year 2025 non-GAAP net income attributable to Vipshop's shareholders. This will be executed through an increased annual dividend of approximately USD 300 million as well as the continuation of our share repurchase program. These actions reflect our confidence in the company's cash-generating capability and our steadfast commitment to shareholder value creation. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below in renminbi and all the percentage change are year-over-year change, unless otherwise noted. Total net revenues for the fourth quarter of 2025 were RMB 32.5 billion compared with RMB 33.2 billion in the prior year period. Gross profit was RMB 7.4 billion compared with RMB 7.6 billion in the prior year period. Gross margin was 22.9% compared with 23.0% in the prior year period. Total operating expenses decreased by 3.7% year-over-year to RMB 4.9 billion from RMB 5.1 billion in the prior year period. As a percentage of total net revenues, total operating expenses decreased to 15.0% from 15.2% in the prior year period. Fulfillment expenses decreased by 1.0% year-over-year to RMB 2.4 billion from RMB 2.5 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.5% compared with 7.4% in the prior year period. Marketing expenses decreased by 6.1% year-over-year to RMB 873.7 million from RMB 903.3 million in the prior year period. As a percentage of total net revenues, Marketing expenses decreased to 2.7% from 2.8% in the prior year period. Technology and content expenses decreased by 9.3% year-over-year to RMB 425.5 million from RMB 469.2 million in the prior year period. As a percentage of total net revenues, technology and content expenses decreased to 1.3% from 1.4% in the prior year period. General and administrative expenses decreased by 5.2% year-over-year to RMB 1.1 billion from RMB 1.2 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses decreased to 3.5% from 3.6% in the prior year period. Income from operations increased by 1.7% year-over-year to RMB 2.90 billion from RMB 2.85 billion in the prior year period. Operating margin increased to 8.9% from 8.6% in the prior year period. Non-GAAP income from operations was RMB 3.2 billion compared with RMB 3.4 billion in the prior year period. Non-GAAP operating margin was 10.0% compared with 10.2% in the prior year period. Net income attributable to Vipshop's shareholders increased by 5.8% year-over-year to RMB 2.6 billion from RMB 2.4 billion in the prior year period. Net margin attributable to Vipshop shareholders increased to 8.0% from 7.4% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS increased to RMB 5.12 from RMB 4.69 in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders was RMB 2.9 billion compared with RMB 3.0 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders was 8.8% compared with 9.0% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS was RMB 5.66 compared with RMB 5.70 in the prior year period. As of December 31, 2025, we had cash and cash equivalents and restricted cash of RMB 24.1 billion and short-term investments of RMB 5.8 billion. Now I will briefly walk through the highlights of our full year results. Total net revenues were RMB 105.9 billion compared with RMB 108.4 billion in the prior year. Gross profit was RMB 24.5 billion compared with RMB 25.5 billion in the prior year. Gross margin was 23.1% compared with 23.5% in the prior year. Income from operations was RMB 8.1 billion compared with RMB 9.2 billion in the prior year. Operating margin was 7.7% compared with 8.5% in the prior year. Non-GAAP income from operations was RMB 9.9 billion compared with RMB 10.7 billion in the prior year. Non-GAAP operating margin was 9.3% compared with 9.9% in the prior year. Net income attributable to Vipshop shareholders was RMB 7.2 billion compared with RMB 7.7 billion in the prior year. Net margin attributable to Vipshop's shareholders was 6.8% compared with 7.1% in the prior year. Net income attributable to Vipshop shareholders per diluted ADS was RMB 14.15 compared with RMB 14.35 in the prior year. Non-GAAP net income attributable to Vipshop's shareholders was RMB 8.7 billion compared with RMB 9.0 billion in the prior year. Non-GAAP net margin attributable to Vipshop's shareholders was 8.3%, which remained stable as compared with that in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 17.08 compared with RMB 16.75 in the prior year. Looking forward to the first quarter of 2026, we expect our total net revenues to be between RMB 26.3 billion and RMB 27.6 billion, representing a year-over-year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A.

[Operator Instructions] We will now take the first question coming from the line of Ronald Keung from Goldman Sachs.

[Foreign Language]

Ronald, would you please translate your question into English please? So maybe I'll just translate the question first and then let Eric respond to the question. [Interpreted] So, the first question is about the quarter-to-date business performance, whether the seasonality, especially late spring festival has impacted the business performance and have -- have we seen any recovery in the business? Based on the guidance, it seems like we are accelerating revenue growth a little bit. The second question is about the margin outlook for 2026 because we have seen that margins for 2025 seems to be under a little bit pressure in terms of GP margin and NP margin, whether we have new investments for 2026? And how do we think about gross margin cost and expenses and NP margin, whether we can stabilize our margin profile.

[Foreign Language]

[Interpreted] So, on the first question regarding the Q1 guidance, let's take a look at the Q4 first. I think our online sales actually took a hit in Q4, especially in December. It was way too warm in China in most regions for people to buy winter clothes. And since Chinese New Year is late this year, nobody was actually in a rush to shop for the holiday. Because of that, apparel didn't nearly as well as our other categories. But as we head into the first quarter, Q1, actually, we have seen consumer activity has clearly picked up, largely driven by New Year shopping. And if we look at January and February combined, actually, we do see a nice recovery in our core business. So, this has kept us firm on track with our guidance of 0% to 5% top line growth, and we are confident that we can deliver that growth and for Q1 and for the rest of the year. Second on margins, I think our business philosophy has been very consistent. We remain focused on high-quality growth at sustainable profitable growth for the business, especially in a dynamic macro environment today. So, we expect margins will be stable, and we will make every effort to outperform in terms of margins for 2026 and beyond.

[Operator Instructions] Our next question comes from the line of Alicia Yap from Citigroup.

[Foreign Language] I have 2 questions. First is that related to the user growth. I think management previously commented that we are hopeful to see the user growth momentum to sustain. So just wondering if management could share with us what is your expectation for the user growth for 2026? And then regarding the demand, how are you seeing the demand for the apparel versus the non-apparel growth? And second question is related to AI. Just wondering, does management believe the overstocked business model that we have for Vipshop, would that be actually more resilient against this Agentic commerce? And with that, will VIP actually invest more resources into growing the offline business such as the Shan Shan Outlet?

[Foreign Language]

[Interpreted] So on the first question about customer growth. Customer growth is definitely our top priority. That's actually the foundation for sales growth and ultimately profitability. In Q4, we had thought we should have maintained the customer growth momentum. But due to expected slowdown in consumer activity, actually, customer growth is a little bit under pressure. We expect customer to regrow for 2026. And we ideally, we should see customer growth is actually faster than sales growth to offset the impact of a slightly rising return rate. So we are definitely going to make every effort to bring customer back to growth track in 2026. On the second question regarding category preferences, consumers are still, generally speaking, still cautious and selective and value conscious, but they continue to shop across different categories, including discretionary categories. They just need strong reasons to do so. So that's why we focus so much on providing the best value across the shopping carts, including apparel and non-apparel categories. And we are making changes in both categories, especially in standard categories to drive repeat business for our most valuable customers, including SVIP and high-value customers to increase their cross-category purchases for family shopping. Lastly, on AI. definitely, AI is fundamentally transforming many industries, including the e-commerce industry. And for an off-price retailer like Vipshop, we are definitely adapting to this trend to remain competitive. We believe fundamentally, our business model relies on merchandising on how well we can secure quality deep discount inventory, how well we can provide a best value for customers. We think as long as we make a difference in merchandising and supply chain reliability, we will not be left behind. Of course, the online business is a hypercompetitive business. That's why we look for -- we are constantly looking for opportunities offline, especially with the outlet business, which proves to be a very good business model in terms of stable revenue streams and profitability. So we are actually expanding our presence for Shan Shan outlets which are doing great in terms of sales and profit contribution. And we expect a mirrored pace of expansion into more cities and regions and geographies. We expect to see continued strong growth in terms of sales, revenue and profit from Shan Shan business. And we expect with a strong offline presence, we will be we will be able to offset any potential challenges from AI.

There are no further questions at this time. At this time, I would like to turn the conference back to Jessie for any closing remarks.

Thank you for taking time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]