Good morning, ladies and gentlemen and thank you for standing by for Baozun's Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question-and-answer session. As a reminder, today's conference call is being recorded.

I'll now turn the meeting over to your host for today's call, Ms. Wendy Sun, Senior Director of Corporate Development and Investor Relations of Baozun. Please proceed, Wendy..

Thank you, operator. Hello, everyone and thank you for joining us today. Our fourth quarter and full year 2022 earnings release was distributed earlier and is available on our IR website at ir.baozun.com as well as on Globe Newswire services.

We have also posted a PowerPoint presentation that accompanies our comments to the same IR website, where they are available for download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Mr. Arthur Yu, Chief Financial Officer; and Ms. Sandrine Zerbib, President of Baozun Brand Management. Mr.

Qiu will review the business strategy and company highlights, followed by Mr. Yu, who will discuss financials and share more regarding the business development of Baozun e-commerce. We will then pass the call to Ms. Sandrine to drive about Baozun's Brand Management. They will all be available to answer your questions during the Q&A session that follows.

Before we begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the U.S. Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by some measures such as will, expect, anticipate, future, intent, plan, delays, estimate, confident, potential, ongoing target looking forward or other similar expressions.

These forward-looking statements are based upon management's current expectations and current market and operation conditions are related to events that involve known or unknown risks, uncertainties and other factors of nature difficult to predict and man of nature beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statement.

Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. SEC any announcement notice or other documents published on the website of Hong Kong Stock Exchange.

All information provided in this presentation is just of the date and it's based on the assumptions that the company believes to be reasonable as of today. The company does not undertake any obligation to update any forward-looking statements except as required under applicable law.

Finally, please note that unless otherwise stated, all figures mentioned during this conference call are in RMB with appropriate rounding. It is now my pleasure to introduce our Chairman and Chief Executive Officer. Mr. Vincent Qiu. Vincent, please go ahead..

Thank you, Wendy. Hello, everyone and thank you all for your time. The top environment persisted in the fourth quarter making the entire 2022 a challenging year. Specially ending the COVID zero policy resulted in a significant upgrade of COVID cases in late 2022, where led to a nationwide disruption in supply chain and logistics.

Along with the worst ever consumption sentiment. We missed a general decline in sales across different categories, channels and cities, reflecting the lower consumer spending, our revenue declined approximately 20% year-over-year in the fourth quarter.

However, we're glad that despite the weaker top line, we achieved the higher operating profit and the recorded positive cash flow for the fourth quarter. We were able to achieve this on the such a difficult and unpredictable environment by making sure operations were interrupted, relying on our battle tested technology and regional service centers.

In addition, our reform of employee compensation and the incentive programs also generated higher productivity. As a result, we were able to improve the quality of our earnings. In this COVID, in the past three years had a dramatic impact our people daily life. Seems like long COVID it also has a long-term impact on consumer competence.

Well, we observed a modest rise in China's retail industry this February, we believe a full recovery in consumer sentiment will take time.

In spite of this difficult environments, it is encouraging to see that many of our brand partners have remained committed to invest in China for the long-term, especially with regards to technology, digitalization and local marketing to serve Chinese consumers in local relevant ways.

Looking forward, we see a rapid merging of online and offline e-commerce, however which is represent a huge opportunity. We believe it is our expertise in technology for the service of brand options operations, that fundamentally defines whole Baozun business.

As shown on the Slide number three, adhering to our vision of technology empowers the future success, our technology and operating platform service as a unified and solid foundation that powers our broaden the scope of service and the markets.

Baozun now has three major business lines, while the e-commerce BEC, Baozun Brand Management BBM and Baozun International BZI.

Baozun e-commerce or BEC remains our core business in recent years -- in addition to leading the way and helping brand partners accelerate their digital transformation, we continue to improve our value added services, upgrade BECs integrated operating platforms and the middle office systems for better accountability, efficiency and flexibility.

We also diversed our category mix made complimentary business acquisitions and invested in our people. I would like to highlight one person in particular, Arthur Yu, who was instrumental in every aspect of this advancements to make our e-commerce business more resilient and balanced.

Naturally as we expand our scope and markets I'm thankful to Arthur for accepting additional role of President of BEC in addition to his role as CFO. For additional BEC highlights and objectives I will let Arthur discuss later in the call. Baozun Brand Management or BBM is our focus for growth and profitability over the next three years and beyond.

Consumers now prefer brands powered by China-for-China products and a communication. Offering China tailor made updates and iterations. Clearly, in addition to e-commerce and Digital Business Solutions, brands need a brand new management powered by technology and digitalization.

As you may recall, on February the 1 of this year, we completed the acquisition of Gap Shanghai, Gap's operations in Mainland, Hong Kong and Macau, China are now a part of Baozun Brand Management, led by Sandrine Zerbib, our President of BBM and Wing Xiao, the newly appointed CEO of Gap Greater China.

With a core team of functional experts who understand both China consumers and local market dynamics, we have confidence in our China-for-China strategy and the digitalization initiatives for Gap Greater China. For BBM highlights and objectives, I will let Sandrine discuss later in the call.

Baozun International or BZI is a longer term opportunity that we will patiently invest in and explore. We have a natural affinity to replicate our China e-commerce success. We work with brand partners to co-develop glocalization.

Glocalization is a term combining global and local and we refer to our philosophy is a while we pursue global opportunities, where we rely on local expertise and resources. Where necessary, we will form local strategic alliances. We're initiated in some trials in Southeast Asia and Europe.

As a sneak peak in Southeast Asia we have already established the region's headquarters in Singapore and operations in six markets in the region. With our technology IT infrastructure and data advantage, brands that wish to expand into Southeast Asia are excited to engage with us.

This February 2023, we made an important interest investment along with proceeds in Branded Lifestyle Asia limited. It is a leading premium fashion retailer with a strong brand portfolio that includes products and Roots and a proven track record in South Korea and Taiwan.

Fung Group, a global leader in the consumer goods supply chain is a majority shareholder. We have also entered into strategic cooperation agreement to become the preferred strategic service provider for the e-commerce operations in Asia, outside of the PRC.

Baozun and the Fung Group are setting up a strategic technology committee to jointly develop an enterprise wide technology strategy covering proposals for ERP technologies, systems and platforms suitable for digital transformation. We're excited about overseas opportunities.

Although, we don't aim to immediately generate meaningful revenue from Baozun International in the next three years, I'm adopting an entrepreneurial mindset for international expansion. I will personally share the development of Baozun International in technology routine approach.

As we expand our scope, we now have increased our addressable market and the revenue sources. Clearly, BEC represents our existing China e-commerce revenue stream while BBM and the BZI are incremental opportunities providing tangible growth path over the next five years.

With greater business diversification and explendid leadership, we're confident in our roadmap. Let me now pass the call over to Arthur. .

Okay, thank you, Vincent and hello, everyone. It's a great pleasure to communicate with you for the first time as the Group CFO and the President of Baozun e-commerce. I will do a quick review of the financials of the fourth quarter and full year of 2022 following by a business updates on Baozun e-commerce. Now please turn to Slide number 4.

Despite the weak consumption sentiments, our total GMV showed resilience and was nearly flat on a year-over-year basis. Benefiting from a diversified category mix. FMCG outperformed with high double-digit growth well applying contracts is the most.

Our net revenues declined by 20% to RMB2.6 billion of which products sales declined by 37% and service revenue decreased by 8% compared with the same period of last year. Let's turn to Slide number 5 for a breakdown of revenue. We continue to prioritize the service model, especially focusing on value added service in digital marketing and IT services.

Well reducing low quality product sales during the quarter. Our digital marketing and IT solutions decreased by 7% mainly due to brand partners reduced the marketing budget.

Warehousing and the fulfillment service revenue declined by 13% of which 13% was due to the disposal of Baobida the delivery business representing a 3% reduction in an apple to apple comparison business.

In addition, our service revenue from apparel and accessories despite a lower GMV in category continues to grow during the quarter, reflecting higher take rate for deeper service penetration. In total revenue from service declined by 8% year-over-year.

Our total product sales declined by 37% during the quarter, reflecting the weak consumption sentiments towards appliance category and our continuous efforts in optimization of life profitable product sales from electronics. Please turn to Slide number 6.

In this quarter, our cost of products decreased by 38% to RMB643 million, mainly due to lower product sales. One highlight is the gross margin for product sales improved by 155 bps to 16.7%. Our overall gross margin improved by 770 bps to 74.8% driven by a combination of higher service revenue mix and improving gross margin of product sales.

Now turning to Slide number 7. Our non-GAAP income from operations was RMB183 million during the quarter, more than doubled than a year ago. Non-GAAP operating profit margin was 7.2%, compared with 2.2% a year ago.

During the same quarter of last year, there was a one off G&A of RMB44 million related to our move into the new headquarters and the loss of RMB30 million from Baobida. Excluding such impact, our non-GAAP operating profit still grow 43% year-over-year.

Non-GAAP net income was RMB168 million this quarter, compared with RMB89 million in the same period of last year. Once again, we have prepared waterfall diagrams depicting our analysis of how our top-line and bottom-line evolved year-over-year.

As a reminder, the latest analysis is unaudited and should solely be used as supporting numbers to aid discussion. First on Slide number 8, this waterfall diagram shows our net revenues walk from Q4 2021 to Q4 2022. In red, you can see that the biggest item impacting our revenue this quarter was product sales as we just talked about.

Revenue from DM and IT services has shown resilience and the warehouse and logistics revenue, excluding the disposable of Baobida declined by 3%. Excluding the impact of such disposal, the apple to apple revenue declined by 17% of which service revenues declined by 4%.

Now please turn to Slide number 9 for the indicative walk of non-GAAP operating profit. In light of the weaker consumption sentiment, we have implemented several cost optimization initiatives, including centralizing our operating capabilities, rationalizing incentives and consolidating office footprint since the beginning of 2022.

More than 1,600 of our customer service staff are now located in regional service centers. By utilizing S-ANY [ph] modules across regional service centers with lower cost increase service flexibility and agility to pay to cope with COVID induced turbulence. For full year 2022, we generated over RMB30 million in savings from regional service center.

Now that major cost saving initiative is to the introduction of Baozun Business Ownership BBO compensation framework, which provides higher performance incentives linking to improvement in productivity, quality and sustainability. We achieved another RMB50 million cost saving from BBO initiative in 2022.

This quarter, we are seeing profitability leverage, especially with the strong seasonality of China e-commerce in the fourth quarter, and the leverage applies to almost all categories and all service models.

I believe the chart is self-explanatory, and just one to highlight that this portal of Baobida which generated a profit saving of RMB30 million, and product sales bottom line deteriorated by RMB12 million. Due to weak top line as well as higher product costs related to default and imperfect products due to higher return rate.

Now turn to Slide number 10 about our cash flow. As of December 31, 2022, our cash, cash equivalents, restricted cash and short-term investment totaled RMB3.1 billion.

In light of the micro uncertainties, we continue to improve the working capital efficiency and our initiatives to further advance our back-end processes to improve inventory management and billing and collection activities have proven to be effective. During the quarter our total operating cash flow grow by 17% to RMB622 million.

Please turn to Slide number 11, for a quick full year summary. We ended 2022 on a solid note, with total GMV of RMB84 billion, an increase of 19% year-over-year. Our non-GAAP operating profit is RMB256 million an increase of 14% year-over-year.

Annual operating cash flow reached RMB367 million, a new record since our inception, and our balance sheet also remained solid with RMB3.1 billion in total cash. In summary, this meant a challenging year, our business model delivered positive non-GAAP operating profits and cash flow. I want to quickly mention that came in our new group structure.

We will begin reporting segments financials in quarter one 2023 to better reflect our business activities. Along this thought, we will stop reporting costly GMV metrics. I said metric has become like indicative of our actual group performance. I'd like to take this opportunity to share some progress we made in the Baozun e-commerce during last year.

Right at the beginning of 2022, we stressed that our overall goal is high quality sustainable business apparel. To achieve this goal, we continuously made efforts for all the services to be more customer centric. Diversify our business models through innovation and continuously optimize our cost structure.

Let me share some specific items on Slide number 12. Our omnichannel end to end value added services are highly recognized by customers. By the end of the year, we have 42% of our branded partners increase the weight of an omni-channel business. We further enhanced our service penetration with value added service accounting half of our revenue stream.

By end of 2022, we have a total of over 400 brand partners and some of these brands engage with us firstly in value added service of technology and digital marketing. Our regional service center, RSC continues to expand, reducing costs and increasing efficiency, while improving the service quality.

We launched BOCDOP to deepen the commercialization of technology and explore new market opportunities. Our logistics and warehouse division further enhanced strategic cooperation with Cainiao.

We established Baozun carbon neutrality whitepaper, clarifying the dual carbon goal and releasing sustainable development responsibilities in multiple dimensions. On November 1, 2022, we officially become a deal primary latest company on the main board of the Hong Kong Stock Exchange, and NASDAQ Global Select Market.

And lastly, in 2022, we win the best employer brands award for the seventh consecutive year. It exemplifies our business development has always been in harmony with social responsibility. Our business philosophy is to put the customer first and create value for them.

Throughout the year, we continue to help our brand partner with initiatives for innovative user engagement and to find on customer journeys. This innovation includes fund generation campaigns, AI based shots video creation tools, game based interactive social marketing, and business intelligence dashboards to improve decision-making effectiveness.

For instance, in last year's Double 11, our efforts enabled one of our brand partners, a leading international sportswear brand, not only ranked number one brand in GMV generation, but also number one in traffic. Number one in live streaming, along with number one in membership acquisition.

This is a demonstration of how we empower our brand partners and also our commitment to facilitate our brand partner’s success. This commitment also applies to our new journeys in Baozun Brand Management. So let me now turn the call over to Sandrine to elaborate more on BBM..

Thank you, Vincent and Arthur and thank you all for joining us today. It is my great pleasure to speak with you. As we have previously stated Baozun Brand Management is a strategic addition that naturally flows from existing core e-commerce service business.

BBM Baozun Brand Management is a holistic, all rounded partner for global brands to further unlock their business potential in China. Our technologies and insights enable us to forge a sustainable symbiotic relationship between physical retail and online commerce.

We aim to deliver the best in class seamless omni-channel experience by integrating the digital and the physical at scale and succeed where few have done so in retail. Please turn to Slide number 13, Baozun Brand Management.

Today's digital transformation, in fact every aspect of business in general and of brand business in particular, from integration of online and offline stores, increasing share of marketing budgets to digital marketing and the accelerating use of big data and AI in brands product creation cycle and customer relationship.

Baozun is exceptionally position to leverage its leading technology portfolio and insight cumulated in the past 15 years, serving top leading global brands. BBM approaches brand management holistically from online to offline from supply chain to marketing, go-to-market and distribution. We aim to grow portfolio of brands under BBM.

We are positioning in the mid-end and premium consumer lifestyle brands segments and we target brands with strong potential in China and Asia and strong digital presence. Now, let me provide you with a high level summary of our first 50-days post-acquisition of Gap, the first brand that has entered the BBM portfolio.

Gap is an advantages starting point for us in this line of business.

In our business arrangements with Gap with secured complete control of the supply chain, which would Gap scale will enable us to accelerate the establishment of a modern technology driven, flexible and responsive supply chain that will be leveraged for the entire brand management portfolio.

Likewise, we have started already to work on our technologies to turn them into state-of-the-art systems to manage retail across all channels. And last but not least, Gap is a formidable chance for us to rapidly strengthen the talent pool for brand management, new line of business.

Our first 50 days have confirmed the diagnosis we had made before the acquisition, and the focus on product and margin, gross margin we were planning for is fully confirmed by our first observations. Eventually, execution is everything.

In addition to mobilizing the best experts at Baozun to fully leverage Baozun's resources, we have partnered to identify key resources to contribute to the execution of our plans and we are building the necessary echo system to rapidly increase our consistencies in the management of Gap Greater China.

As you know apparel retailing is a seasonal and cyclical business. And therefore the changes we're making will take at least several quarters to bring measurable result.

Product commitments and purchases for the first half of 2023 were made before our acquisition of Gap Greater China, and we're only able to meaningfully impact products from winter '23. Having said that, we've been very active.

With weighing at the helm, we've been able to quickly identify and hire excellent top level experts, including local designer, supply chain specialists, and a proven financial officer for Gap.

These are the experts along with HR and production specialists that will propel forward our focus on China for China products and communication and optimize Gap Greater China supply chain to be closer to market needs, improving cost expand gross profit and ultimately achieve net profit.

We also quickly a limited higher priced product capital in collaboration with one of China's rising stars in peak session. In this release, we started at a significantly higher price point, which is four times Gap typical price point. And yet, we were able to sell half of the inventory in a couple of weeks at zero discount.

On the first day of release, the highest priced item had sold out within one hour. And our team movements ranking climbed from rank lower than 30 to number 8. This test offered an excellent opportunity to practice our integrated marketing. And we're glad to have won the attention of a younger audience.

This is something that we were able to ideate and execute at blazing speeds and that proves the validity of our strategy and plans. We have also been able to fully leverage China post zero COVID recovery and to enjoy 22% growth in retail traffic over 500 basis points retail gross margin improvement in the last 10 weeks.

While we're still very early in the Gap transformation, we believe our ability to quickly establish a strong local team and successfully test new launches validate that our analysis for the Gap acquisition was right. We are confident that Gap is now on the right track.

Things are closing of the Gap Shanghai acquisition many other brands have come to us to discuss about China-for-China strategy and our technology driven approach. These are the brands genuinely wish to explore possible cooperation with BBM which further strengthens our confidence that BBM will meaningfully expand our total addressable market.

It has become obvious that our brand management offering can add more to our value proposition and differentiates us from traditional service providers. With all these things said I shall now hand over the call back to Arthur. Thank you..

Thank you, Sandrine. Overall, our effectiveness in maintaining operations and supporting our partner’s success during that period of micro uncertainty, once again proved that durability and the strength of Baozun's business model.

Throughout 2022, we prioritize high quality business development and anticipate value added service and continued to improve cost optimization and working capital efficiency. All the efforts started to bear fruit in terms of higher gross margins, lower operating expenses and better cash flow.

We are confident that our technology driven capabilities [indiscernible] to pursue incremental growth opportunity in BBM and both the International. Meanwhile, for both the e-commerce, we will put customer first and increased value added service penetration to drive quality revenue and earnings growth.

In light of our consumption recovery in China or BEC, we are confident that our top line in 2023 will return to growth. And our non-GAAP operating profits will expand by double-digits year-over-year. For BBM our top priority is to stabilize that China top-line, while narrowing in a float in 2023.

For Baozun International, we do not yet expect significant contribution to revenue and operating profits in 2023. But it is a strategic initiative for longer term growth. In 2023, we project the Baozun Inc. total revenue will grow about 25% year-over-year.

And as BEC's operating profits and cash flow should be able to cover investments required in BBM and Baozun International. We focus Baozun Group will achieve positive operating profits and cash flow in 2023. That concludes our prepared remarks. Thank you. Operator, we are now ready to begin the Q&A session..

[Operator Instructions] Our first question comes from the line of Alicia Yap from Citi. Please ask your question, Alicia..

Hi, thank you. Good evening management. Thanks for taking my questions. I have two questions.

First, can management elaborate a little bit the latest consumption sentiment over the past few months especially on the discretionary category? I'm also more interested in regarding to the domestic brands versus the international brands, specifically on the international sports brand? Have you seen a decent rebound from the international brands? And then second question is related to the overall e-commerce space.

Given this a number of e-commerce platforms continue to further diversify their sales promotion to smaller or more frequent kinds of the billion-dollar type of subsidy rather than concentrating the sales effort into two promotional period like the June 18th and Singles Day.

So, how will that affect Baozun's sales seasonality for your domestic business this year? Do you think the brands partners are ready for some of these shifts? Thank you.

Thank you, Alicia. This is Arthur. Let me address your three question intern. So, the first one, so, basically we have seen a recovery of the consumer confidence level, but this is slower than our expectation.

And particularly, we have seen some categories, which related to travel do we implement a while, so for example, the outdoor and also the apparel we only have seen that starts to recover. We also seen the consumers become more conservative and sensitive on price.

So for example, the affordable luxury and also the mass market pricing has grown pretty well. We also seen a mix of performance wage, the execution of the brands themselves become really important. And so it's critical for a brand to know their own strategy on products on channel strategy and also how to implement the strategy. So that's the first one.

So second one related to the international brands and local brands. So it's actually a mixed picture, we have seen some international brands doing very well. We're also seen some domestic brands doing really well.

I think the key is not about whether it's the international brands or domestic brands, it's about why the brands can adapt a suitable strategy, i.e., China-for-China strategy, which includes the product selection.

How they utilize the omni channel, on e-commerce we have in China today, and also why the brands can utilizing the IT and also data they accumulate to give them the insight to really drive the top-line sales.

So that's actually represents an opportunity for Baozun, where our value added service now has accounted for more than 50% of total revenue we generate. So that's where we add value to the brand. And in terms of the focus and also how it impacts Baozun, I think it's actually represents a good opportunity for Baozun.

So for example, we have seen the international brands, their senior management haven't been in China for a long time. They really would like to know, in this post-COVID situation, how are they going to deploy a Salesforce strategy for China. That's where Baozun can come in to give them a lot of advice.

So for example, if they need a tailor made solution to basically improve the efficiency, we can give them to advise how to do it. And also we can introduce our Baozun technology tools and system to them. If they are interested in how to drive up the return of investment, our digital marketing offer, will help them to achieve that.

And if they would like to adapt the online much offline type of operation, Baozun logistics, we’ll be able to help them to achieve that. So overall, I think the current situation actually offers a good chunk for Baozun to grow our service especially the value added service..

Thank you for your question. We’ll take next question from Violet Yi from China Renaissance. Please ask your question, Violet..

Good evening. And thanks management for taking my question. So I got a question on the development of non-Tmall channel. So do you see any changes in the competitive landscape in the non-Tmall channel and any breakthroughs or strategies that you could share? And maybe a quick update on the take rate trends? Thanks..

Yes, this is Arthur again. Thank you for the question. I think non-Tmall channel has become more competitive, given the different platform has stopped to fight for the traffic. And what we have seen is many new brand partners has chosen a omni-channel strategy, which means outside of the Tmall, how they chose the channel becomes very important.

And from Baozun's perspective, we think each channel has their own character. The most important thing is to deploy the right product to the channel by understanding the customer base of each channel.

So that's how we currently helped a lot of the brands we partner with to design and to implement a suitable strategy for this omnichannel on the e-commerce. In terms of the take rate, I think it will depends on the different category.

I think the take rate trend has become more competitive, but at the same time, if we can focus the right results on the right channel, we will be able to optimize that end result..

Next question comes from Andre Chang from J.P. Morgan. Please ask your question Andre. .

Thank you for taking my question. I have a two question actually related to the BBM business. So firstly is, as Andre mentioned we will do a lot of consolidation consultation and introducing the best talent and resources from Baozun.

Can you elaborate more volatile what are the areas that do probably we will do the, I know we think that the most improvement can be done and also to -- for us to understand the pace right now will the changes will happen for front loaded in the first half this year, i.e.

leading to more financial pressure for the group in the first half or it will take time to show this kind of like consolidation and the financial impact maybe throughout this year into later part of this year? And secondly, is that I think beyond Gap, we are going to introduce more brands right and started to have a portfolio.

Can we talk more about this approach? What are the potential, say synergy and how we are going to manage the portfolio? And what kind of the scale we expect this to grow in the longer term? Thank you..

Okay. So let me go one by one. I start with your first question, which is about if I understand it correctly, is about how we plan to leverage the resources that Baozun? And on this very clearly, and it's already in action with Gap. We see primarily technology, logistics and e-commerce, e-commerce operation.

As resources were Baozun is experts and can speed up and accelerate the recovery of Gap in Greater China. To take a very concrete example, I think I mentioned earlier that we are working at full speed to bring actually the portfolio of technologies of Baozun and to develop them to also be usable for a retail, physical retail operation.

And for certain aspects of the supply chain. So this is really where we focus the integration, it's not integration, it's wrong word. Sorry. The leveraging of Baozun resources.

I mean, obviously when it comes to back office resources, Gap has its own back office, but it also fortunate to have a big company backing their operations for instance, for legal finance. That's for your first question.

So then your second question is about the time and I think from the very beginning and I restated again today that obviously in this kind of business purchases are made well in advance, particularly before we took over because we now plan to really put in place a factor supply chain, but it was not the case before, which means that most of 2023 is already purchased and that the impact we can have on products is fairly limited for 2023 and will be much more measurable at the very end of '23 and from '24.

That's for the impact on products that obviously the impact on products has a direct impact on growth and gross margin. Having said this, there are still some low hanging fruit that we are working on as early as now.

And as we had announced when we made the acquisition, we plan to reduce the loss very significantly this year to continue to further reduce the loss next year and to reach a breakeven point in '25. This is the sample we have planned for and that is confirmed today. So this is to address your first lot of questions which were more about Gap.

Then about the other brands, where now we are in discussion with a number of other brands, which are potentially a bit different in terms of positioning from Gap in the sense that a lot of the brands we are in discussion with are more premium without being luxury and purchase a little bit higher positioning than Gap.

However, these are brands where we see a lot of synergies.

That's also why for the time being we focus more on apparel, footwear accessory brands, because again, everything we're doing in terms of logistics, e-commerce operation and technology, particularly with regards to supply chain, as well as leveraging the resources we have recruited for the recovery of Gap Greater China are going to be usable for other brands when we remain in this area in this segment of business.

This is my answer to your question, Andre. Thank you. .

Our next question comes from the line of Sophia Tan from Credit Suisse. Please ask your question, Sophia..

Hi, management. Thanks for taking my question. I have one question on behalf of Ashley, in terms of the Gap business outlook for 2023.

Can management please share some color on the financial and operational metrics that is better to look at if we'd like to track performance of Gap? And how do we think about the financial impact of both topline and bottom line for this year? Thank you..

And so -- okay go ahead Arthur, that’s perfect. Okay, go ahead. .

So for the financial, I will make some comments and then maybe Sandrine can add some colors from the operation perspective. As we mentioned earlier, so basically turning around Gap Greater China is a medium to long term efforts. So basically, we are looking at a five-year journey to turn this around.

So basically for the five years, we expect our top-line CAGR to grow more than double-digits. And we expect to breakeven from both profits and also cash flow perspective by 2025. And in 2023, as we just mentioned, a lot of the decision in terms of the products and the channel strategy has already been made.

Therefore, our aim for 2023 is to stabilize from a financial perspective and also to narrow down the losses of the Gap Greater China in 2023. So -- but the good thing is from the profits and cash flow of all the e-commerce business, we are more than enough to cover the investments, we need for Gap Greater China.

So overall as a group level our profits for this year will be positive and our cash flow for the group level will also be positive.

Sandrine, would you like to add anything?.

Well, I think you said pretty much everything but indeed, today's maybe a stabilization, however, we still are going to grow the top line this year to a certain extent. And already we see some positive signs on the gross margin. Gross margin, from the very first day we told you is a key aspects of recovery.

And we already start seeing some positive signs. But overall talking about the metrics, obviously, it's about the top line, the growth of the top line, it's about the gross margin, it's about the profit, the positive cash flow and the efficiency of our operation.

So this is the matrix by where we actually assess the progress we're making on this business. And for the time being, we are on track, that as after stress its the mid to long-term journey..

Next is a follow-up question from the line of Violet Yi from China Renaissance. Please ask your question, Violet. .

Yes, thanks management for taking my question again. So my question is, since you're upgrading your business line, BD.

Now also BBM and BDI, how should we view your business profile both in the short-term scope and also in your larger view, say three to five years?.

Thanks for the question. So from a business perspective, we have positioned the overall group into the three business line. So basically, for each of the business line, we will focus on a different thing.

For BECs, our goal always to put the customer first, and to provide the value added service, which is the whole business where we will remain focused and we believe given our expertise and experience in this area and given the e-commerce overall dynamics in China, we still have a huge potential to keep growing in the top line and bottom line for this business unit.

For BBM, our goal, as we mentioned earlier, is to utilizing the experience and technology and digital we accumulated over the last 15 years in China to transform the factories of China to make that business a growing a business units overall for the group. So that's our kind of the second wave of growth opportunity.

And also the turnaround of Gap Greater China will give us the foundation to build a successful brand management business unit. And by having the capability in terms of the IT system, the structure, the processes and also the talent. And thirdly to Baozun International, it's a long term investment.

So, our view is to make sure that we can utilize the capability and the experience we have accumulated in China, but to adapt that locally for the international market, we selected, i.e., the Southeast Asia and Europe.

But as a long-term investment and for 2023, we are not expect that will give us a strong contribution to either top line or bottom line. So that's the overall profile for the three units..

Thank you very much. I'm showing no further questions. I'll turn the conference back to management team for closing remarks..

Thank you, operator. in closing on behalf of the Baozun management team, we like to thank you for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you all for joining today. That’s concludes the call. .

Thank you. That concludes today’s conference call. Thank you for participating, you may now disconnect..