GUANGZHOU, China, May 13, 2015 /PRNewswire/ -- Vipshop Holdings
Limited (NYSE: VIPS), a leading online discount retailer for brands
in China ("Vipshop" or the
"Company"), today issued the following statement in response to
recent allegations made by a few short sellers. Vipshop believes
these allegations are unfounded and contain numerous errors,
unsupported speculation, and a general misunderstanding of the
Company's business model. The Company has made its board of
directors and its independent auditors aware of the reports, and
will continue to review and address the allegations as appropriate,
but today the Company would like to clarify certain key errors
contained in the allegations.
Accusations regarding Accounting:
i) Revenue Recognition:
The allegations question the Company's method of revenue
recognition and allege that the Company relied upon an incorrect
application of gross revenue basis reporting. As disclosed
and elaborated in the Company's annual report on Form 20-F for the
fiscal year of 2014 (the "2014 Form 20-F"), the Company
appropriately records its revenue on a gross basis where the
ownerships, risks and rewards of these inventories have been fully
transferred to the Company after it takes ownership upon deliveries
to its warehouses, any loss related to damages to these inventories
after the Company receives them from vendors are absorbed by the
Company, and it reports these inventories on the Company's balance
sheets as its assets.
ii) Inventory Accounting
The allegations state that the Company improperly commingled
inventory-held-on-consignment with purchased inventory, thereby
increasing its reported ending inventory and decreasing its
cost-of-sales. The conclusion is based on the short seller's own
erroneous assumptions. The Company's inventory is reported at the
lower of cost or market, and the Company's cost of inventory is
determined using the "weighted-average cost" method.
The Company believes this approach is appropriate given
the nature of its business and its arrangements with its
vendors. During the periods reported, the Company has full
ownership on inventories that are recorded on the balance
sheet.
iii) Other Receivables
The allegations contend that the Company recorded significantly
increased levels of "Other Receivables" which potentially reflect
abusive related-party transactions ("RPTs"). This allegation is
also unsupported. The breakdown of "Other Receivables" has been
clearly disclosed in note 5 to the Company's consolidated financial
statements for the year ended December 31,
2014 included in the 2014 Form 20-F, and the increase was
mainly due to the increase of deposits and VAT receivables. In
addition, as disclosed in note 4 to the Company's consolidated
financial statements for the year ended December 31, 2014, other trade receivables in the
amount of US$18.3 million relates to
lending to some of the Company's suppliers who are not related
parties.
iv) Capital Expenditures
The allegations assert that the Company exaggerated and
accelerated its capital expenditures ("CAPEX") to industry-leading
levels, despite having significant excess capacity. As reported in
the Company's public disclosures, the Company's CAPEX amounted to
US$12.4 million, US$22.2 million, and US$256.0 million in the years ended December 31, 2012, 2013 and 2014, respectively.
In 2014, the Company's CAPEX increased significantly largely
because of the Company's expansion of its warehouses and other
logistical infrastructure, the details of which have been disclosed
in the Company's 2014 Form 20-F. This expansion is aimed to lower
costs associated with logistics and property leasing in the long
term.
v) Cash Flow
The allegations assert that the Company's cash flow from
operations is driven not by earnings, but by significant growth in
both accounts payables and accrued expenses. This conclusion is
also incorrect. As disclosed in its 2014 Form 20-F, the Company's
net cash from operating activities amounted to US$505.7 million in 2014, which was primarily
attributable to a net income of US$122.8
million, adjusted for non-cash expenses in an aggregate
amount of US$382.9 million consisting
primarily of share-based compensation expenses, inventory
write-downs, amortization of intangible assets and changes in
operating assets and liabilities.
Other Accusations:
Held-to-Maturity Investments
Additionally, the allegations question the Company's
Held-to-Maturity ("HTM") investments, including the rates of
interest earned thereon, and suggest that they could constitute
low-interest loans offered to the Company's founders. These
allegations are false. The Company invests in debt securities which
are made with third party banks and entered into at market rates.
The Company classifies these investments as HTM. None of these HTM
investments were extended to the Company's founders or other
related parties.
i) Lefeng and Ovation
The allegations assert that the Company grossly overpaid for
stakes in Lefeng and its parent company, Ovation, and that these
transactions may not have been conducted at arms-length. The
Company believes the valuations of the Lefeng and Ovation
investments were reasonable based on prevailing market conditions
and both investments were negotiated at arms-length. The
acquisitions of Lefeng and Ovation were strategic moves that were
intended to strengthen the Company's market share in the large and
fast growing cosmetics sector and help expand its reach to female
customers.
ii) Logistics Companies
In addition, there were false allegations regarding the
Company's investments into regional logistics companies. This
allegation is subjective and is based on inaccurate financial
figures. In 2014, the Company made minority investments in several
regional logistic companies. Strategically, these investments
reflect the Company's effort to expand its nationwide delivery
capabilities.
Accusations regarding Corporate Governance:
The allegations also challenge the independence of the Company's
board and its audit firm. This allegation is unfounded. As
required by U.S. securities laws and the NYSE listing requirements,
the board of directors of the Company performs annual assessments
of director independence, and the independent directors identified
in the Company's 2014 annual report on Form 20-F were determined to
have met the independence requirements set forth in applicable laws
and listing rules.
As disclosed in the 2014 Form 20-F, the Company has a majority
independent board of directors as required by U.S. securities laws
and the NYSE listing requirements. The Company has implemented its
disclosure procedures and corporate governance protocols in
compliance with public company standards and applicable legal
requirements and will continue to meet corporate governance
standards under applicable SEC and NYSE rules and legal
requirements.
About Vipshop Holdings Limited
Vipshop Holdings Limited is a leading online discount retailer
for brands in China. Vipshop
offers high quality and popular branded products to consumers
throughout China at a significant
discount to retail prices. Since it was founded in August 2008, the Company has rapidly built a
sizeable and growing base of customers and brand partners. For more
information, please visit www.vip.com.
Safe Harbor Statement
This announcement contains forward-looking statements. These
statements are made under the "safe harbor" provisions of the U.S.
Private Securities Litigation Reform Act of 1995. These
forward-looking statements can be identified by terminology such as
"will," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates" and similar statements. Among other things,
the business outlook and quotations from management in this
announcement, as well as Vipshop's strategic and operational plans,
contain forward-looking statements. Vipshop may also make written
or oral forward-looking statements in its periodic reports to the
U.S. Securities and Exchange Commission (the "SEC"), in its annual
report to shareholders, in press releases and other written
materials and in oral statements made by its officers, directors or
employees to third parties. Statements that are not historical
facts, including statements about Vipshop's beliefs and
expectations, are forward-looking statements. Forward-looking
statements involve inherent risks and uncertainties. A number of
factors could cause actual results to differ materially from those
contained in any forward-looking statement, including but not
limited to the following: Vipshop's goals and strategies; Vipshop's
future business development, results of operations and financial
condition; the expected growth of the online discount retail market
in China; Vipshop's ability to
attract customers and brand partners and further enhance its brand
recognition; Vipshop's expectations regarding demand for and market
acceptance of flash sales products and services; competition in the
discount retail industry; fluctuations in general economic and
business conditions in China and
assumptions underlying or related to any of the foregoing. Further
information regarding these and other risks is included in
Vipshop's filings with the SEC. All information provided in this
press release and in the attachments is as of the date of this
press release, and Vipshop does not undertake any obligation to
update any forward-looking statement, except as required under
applicable law.
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SOURCE Vipshop Holdings Limited