Baozun Inc. ($BZUN)

Good morning, ladies and gentlemen, and thank you for standing by for Baozun's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's conference call is being recorded. I will 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 2025 earnings release was distributed earlier before this call and is available on our IR website at ir.baozun.com as well as on PR Newswire services. We have also posted a PowerPoint presentation that accompanies our comments to the same IR website, where they are available for your download. On the call today from Baozun, we have Mr. Vincent Qiu, Chairman and Chief Executive Officer; Ms. Catherine Zhu, Chief Financial Officer; Mr. Junhua Wu, Director and Chief Strategy Officer of Baozun Group; and Mr. Ken Huang, Chief Executive Officer of Baozun Brand Management. Mr. Qiu will first share our business strategy and company highlights. Ms. Zhu then will discuss our financials outlook, followed by Mr. Wu and Mr. Huang, who will share more about our e-commerce and Brand Management segment, respectively. 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 Act of 1933 as amended, the U.S. Securities Exchange Act of 1934 as amended and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon management's current expectations and current market and operating conditions and relate to events that involve known or unknown risks, uncertainties and other factors, all of which are difficult to predict and many of which are beyond the company's control, which may cause the company's actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties or factors is included in the company's filings with the U.S. Exchange Commission and its announcement notice or other documents published on the website of the Stock Exchange of Hong Kong Limited. All information provided in this call is as of the date hereof and is based upon assumptions that the company believes to be reasonable as of this date, and 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. In addition, we may elect to use adjusted in place of non general accepted accounting principles or non-GAAP in order to reduce overall confusion that may arise from our discussion about financials related to the GAP brand. You may now turn to Slide 2 for the executive highlights for the quarter. 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 for joining us. I'm pleased that Baozun delivered a strong fourth quarter, closing 2025 on a high note and successfully completing our 3-year strategic transformation. Over the past 3 years, we have rebuilt our company with focus and intention, driving consistent sequential momentum throughout 2025. In the fourth quarter, our revenue increased 6% to RMB 3.2 billion, while non-GAAP operating profits grew 91% to RMB 198 million. This was not just about short-term recovery. It was about fundamentally improving the quality and potential of our business. BEC has become a sustainable cash engine. Through sharper execution and continued cost rigor, BEC is now more agile and consistently profitable. We have moved from pursuing scale to focusing on value, prioritizing margin expansion and reliable cash generation and most importantly, built alignment with BBM. BBM meanwhile, has reached a defining inflection point. After 3 years of repositioning and localization, our brand management platform achieved its first quarterly breakeven in fourth quarter '25. This milestone validates the sustainability of our model. Importantly, scale is beginning to translate into tangible operating leverage, marking the transition from a turnaround to profitable growth. Our financial profile has strengthened alongside operational progress. Margins have expanded, profitability has improved meaningfully and our balance sheet remains solid. In addition, our operating cash flow more than tripled to RMB 420 million in 2025. These results validate that our business is not only growing, it is growing with better structure and healthier economics. In summary, 2025 marks the successful completion of the initial phase of our transformation. As we enter into 2026, our focus shifts decisively from rebuilding to scaling. Our priority now is to amplify the progress to accelerate in the next 3 years. We will do this by expanding BEC's margin, building scale and operating leverage in BBM and deepening the strategic synergies between BEC and BBM. Our ambition is clear to drive the group's non-GAAP operating profit growth to RMB 550 million by 2028. With a stronger organization, a proven strategy and a highly focused execution culture, we are entering this next phase with confidence and momentum. Now I will hand over the call to our team for a deeper dive into our financials and the business performance.

Thanks, Vincent, and hello, everyone. Now let me provide a more detailed overview of financial results for the fourth quarter and full year of 2025. Please turn to Slide #3. Baozun Group's total net revenues for the fourth quarter of 2025 increased by 6% year-over-year to RMB 3.2 billion. Of this total, e-commerce revenue grew by 2.5% to RMB 2.6 billion, while brand management revenue rose by 24% to RMB 664 million. Breaking down e-commerce revenue by business model, services revenue increased 3.1% year-over-year to RMB 2 billion. This increase was driven by revenue growth in digital marketing and IT solutions as well as strong performance in the luxury category within our online store operation services. BEC product sales revenue increased modestly by 0.5% year-over-year to RMB 574.5 million, mainly driven by growth in Health and Nutrition category, which was partially offset by lower sales in appliance category as we continue to optimize category mix to prioritize profitability. BBM product sales totaled RMB 663.7 million, representing a 24% year-over-year growth. This growth was mainly driven by the strong performance of the Gap brand. Please turn to Slide #4. From a profitability perspective, our blended gross margin for product sales at the group level was 36.5%, an expansion of 640 basis points year-over-year. Gross profit increased by 35.9% year-over-year to RMB 451.5 million for the quarter. Breaking this down by our key business lines. Gross margin for e-commerce product sales expanded to 18.4%, reflecting a 760 basis point improvement compared to 10.8% a year ago. This margin expansion was primarily driven by product mix optimization. Gross margin for BBM improved to 52.1%, up from 50.4% a year ago, reflecting the adeptness of its merchandising and marketing initiatives. Now please turn to Slide #5 for a walk-through of our OpEx. Sales and marketing expenses increased by RMB 181 million to RMB 1.2 billion. This included an increase of RMB 136.9 million for BEC, which was mainly due to higher spending on creative content and marketing initiatives on Douyin and Rednote, in line with the growth in digital marketing revenue. BBM sales and marketing expenses increased by RMB 49.6 million, which was mainly driven by expansion of offline stores and marketing activities during the quarter. Fulfillment costs for the quarter was reduced by 11.1% to RMB 683.4 million, reflecting our ongoing efforts in cost optimization. Technology and content expenses decreased by 20.2% to RMB 116.9 million as we continue to enhance tech monetization efficiency. G&A expenses decreased slightly by 2% to RMB 187.9 million due to the company's continued efforts to implement cost control and efficiency improvement initiatives. Turning to bottom line items. Please refer to Slide #6. During the quarter, our non-GAAP income from operations was RMB 197.7 million, an increase of 91.4% from RMB 103.3 million in the same period of last year. BEC's adjusted non-GAAP income from operations was RMB 195.9 million, representing 43% year-over-year increase compared with a year ago. BBM reported a non-GAAP operating income of RMB 1.8 million, a solid milestone as we achieved the very first breakeven quarter for the segment. Let us turn to a quick full year summary. The group's total revenue was RMB 9.9 billion, an increase of 6% year-over-year of which e-commerce net revenues were RMB 8.3 billion, an increase of 2% year-over-year, while BBM net revenues were RMB 1.8 billion, an increase of 25% year-over-year. Our adjusted operating income totaled RMB 126 million, a significant improvement compared with RMB 11 million in fiscal year 2024. As of December 31, 2025, our cash, cash equivalents, restricted cash and short-term investments totaled RMB 2.8 billion. We continue to improve working capital efficiency through back-end process optimization across inventory management, billing and cash collection. As a result, our annual operating cash flow reached RMB 420 million, representing a 315% year-over-year increase. Let me also briefly address a GAAP item recorded during the quarter. We recognized an investment impairment loss of RMB 230 million, primarily related to previous debt investments in the e-commerce sector as well as impairment provisions for certain equity investments. While these investments have strategic rationale at the time, today's macroeconomic environment, combined with our sharpened focus on developing our brand management business make it prudent to recognize these impairments. These adjustments reflect our commitment to maintaining a focused and resilient business portfolio. Importantly, our remaining investments remain healthy, and we are confident in their long-term potential. Let me now pass the call over to Junhua to update you on BEC, our e-commerce business.

Thank you, Catherine, and hello, everyone. I'm pleased to share we've closed 2025 with significant momentum. In the fourth quarter, we delivered 2% revenue growth and a 43% increase in non-GAAP operating profit, capping a year of progression from stabilization to accelerated performance. Throughout the year, we focused on driving sustainable, profitable growth while making strategic investments in high opportunity areas. Now let me quickly walk through some of our operational highlights in the e-commerce segment for the first quarter of 2025. Please turn to Slide #7, highlighting the continued quality improvement of our distribution model. During the quarter, BEC product sales gross profit increased 70.9% despite a largely flat top line. Notably, BEC's gross margin rose to 18.4%, setting a new record since our inception. This improvement was mainly driven by ongoing optimization of our category mix with strong growth from the Health and Nutrition and Beauty and Cosmetics categories. In addition, our efforts to expand into nonstandard categories and beginning to show results. Apparel delivered a strong contribution across sales, gross margin and profitability during the quarter. Turning to Slide #8. Our services revenue grew 3% year-over-year in the fourth quarter, led primarily by strong performance of DM and IT solutions, which increased 19%. We gained market share in key categories such as luxury, sports and outdoor. Our omnichannel capability remains one of Baozun's core advantages and a focus of developing on going forward. During the quarter, we received 41 awards in Tmall ecosystem, including the prestigious 2025 Tmall Ecosystem Excellence in Service Award. On Douyin, we were once again certified as a Douyin e-commerce diamond service partner, the platform's highest tier of accreditation. Together, these recognitions affirm our sustained leadership and execution strength across major platforms. We also continue to focus on strengthening our bottom line. Across the organization, we're implementing a series of lean initiatives designed to streamline processes, reduce costs and enhance efficiency. Furthermore, we are expanding the use of artificial intelligence tools across a wide range of employees and business scenarios to enhance productivity. These efforts have significantly improved our profitability with BEC's non-GAAP operating income increased 43% year-over-year to RMB 196 million in the fourth quarter of 2025. Overall, we are pleased with our performance in the final quarter of the strategic transformation, a period that solidified our shift toward a sustainable and profitable operations. Moving forward, we will continue to deepen client engagement and stickiness, innovate our service models and enhance operational efficiency. For 2026, our priorities are clear: deliver the numbers, deliver the strategy and deliver the talent. Delivering the numbers means maintaining our focus on profitable growth and ensuring that our operational progress continues to translate into strong financial performance. On strategy, we're advancing 3 key initiatives. First, we will expand our apparel distribution business, leveraging the synergy between BEC and BBM to unlock the new growth opportunities and strengthen our brand ecosystem. Second, we will further enhance our digital marketing and traffic acquisition capabilities, helping brand partners capture demand more efficiently across an increasingly complex omnichannel landscape. Third, we will deepen technology empowerment, accelerating the deployment of AI and digital tools to improve operational efficiency and elevate our service capabilities. Finally, delivering the talent remains essential. We will continue strengthening our leadership bench and reinforcing a strong execution culture. With the right people and capabilities in place, we are well positioned to scale the business and deliver sustainable growth in the years ahead. Now I'll pass to Ken for an update on BBM.

Thank you, Tim, and hello, everyone. Please turn to Slide #9 for BBM's performance in the fourth quarter of 2025. The fourth quarter marks a defining milestone for BBM as we delivered our first breakeven quarter. This result reflects our structural improvements across merchandising, marketing, store productivity and networking expansion. In Q4, BBM revenue grew by 24% year-over-year to RMB 664 million, supported by a double-digit same-store sales growth and continued contributions from new store openings. Gross margin improved by 170 basis points from a year ago to 52.1%, leading to a 28% increase in gross profit. Moreover, inventory turnover efficiency improved, reducing our inventory turnover days by 16% to 114 days. Merchandising was the core growth driver for the quarter. We entered the winter season with a well-balanced assortment architecture, reinforcing GAP's iconic categories, sweatshirts, denim and knitwear while sharpening segmentation across channels and consumer groups. Our partnership with the Forbidden City has maintained a strong sell-through in Q4. More recently, we launched a new IP collaboration with the Peking Opera, showcasing our ability to blend the Chinese culture storytelling with GAP's global DNA in a commercially effective manner. Since introducing Cheng Yi as our brand ambassador on September 15, we have collaborated closely to create authentic, engaging content that connects with our audience. We also launched seasonal products and limited styling collections aligned with the key moments in the retail calendar. This ambassador-driven initiatives have boosted social buzz, leading to higher consumer engagement, increased brand visibility and a strong brand voice. Offline expansion continues to be a strategic priority for us. In the fourth quarter, we opened 7 new stores for a total of 29 new gift stores in 2025, bringing our total store count to 164 by the year-end. Our new stores continue to outperform older locations, driven by better site selection and enhanced visual merchandising. For instance, our new image stores at Dongguan Min International Trade City and Shanghai Century Link Mall have delivered strong results. The improving store experience and outfit-based presentation have driven a double-digit gain in sales productivity. These early performance indicators are highly encouraging and reinforce our confidence in our store expansion strategy. As a result, we are accelerating our store opening efforts to build on this momentum and currently plan to open 50 stores in 2026 through a hybrid model that combines direct and partnership stores, in line with our asset-light approach. With these initiatives in place, we are confident in sustaining double-digit year-over-year revenue growth and achieving operating breakeven for GAP on an annual basis in 2026. Turning to Hunter. The brand continued to strengthen its premium positioning in Q4. Elevated store presentation and curated lifestyle storytelling are resonating with urban consumers seeking both function and fashion. In the fourth quarter, we launched 5 new Hunter locations and entered our national footprint into a high potential Tier 2 cities, including Nanjing, Qingdao, Shenyang and Taiyuan. We concluded 2025 with a portfolio of 177 stores under the BBM umbrella. This expanded physical network sets a solid foundation to enhance supply chain efficiency in the future. In summary, Q4 2025 represents a structural inflection point for BBM. We achieved our first breakeven quarter. This validates our strategy, strengthens partner trust and sets the stage for long-term double-digit growth. The direction is clear. BBM is well positioned to become an increasingly meaningful growth engine for Baozun Group. 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 Chris Cao with Huatai Securities.

I have 3 questions. The first one is about the AI, and with the rapid evolution of AI technology, would the management share that -- what is the current status of our workflow transformation using AI agents? And have we observed any measurable gains in efficiency? The second question is about the AI to our mid- to long-term impact. This is -- what is our perspective on the mid- to long-term impact and opportunities that AI agents present for our e-commerce business and the brand management business? And my third question is about our business outlook to the mid- to long term. And I have noticed that in our report, we say that in 2028, we will reach RMB 550 million on operating profit. So would the management share what is the key driver behind this business outlook?

Okay. This is Junhua. So let me address your first 2 questions regarding AI implementation in Baozun. So the first one is about the AI agent. So we have already leveraged a lot of AI agent technology from the beginning of last year. So most focused on our bottom line. In terms of the like the digital assets creating and uploading products digital assets onto different platforms, saving a lot of operating people in terms of doing repeatable kind of works. We have already leveraged a lot of AI agents. So AI agent technology is more focused on driving our efficiency internally more focused on the bottom line. In terms of the top line, we haven't having any very clear definition about the scenario in business case about how do we leveraging AI technology, increasing our top line. About the AI agent, there is an agentic platform and technology is very new in this industry. So we realize that in terms of the agentic kind of the technology right now is more focused on the GEO, Generative Search Engine Optimization. So there is amount -- your DAU amount, the shopper apps, is close to approximately about 850 million. And among them, the DAU of 300 million is on AI and all those apps in terms of the large-scale model and AI agent apps. So this is transforming the consumer behavior and reallocate the traffic structure. So we are closely focused on the trend of different big platforms and attracting all those changes of the traffic allocation, and we can share you more in the future quarters. The third one is regarding the business outlook.

Yes. We just talked about the 2028 operating profit goal that will goes to RMB 550 million is our planned target. The main driver for this is that we are firstly, it's our strategy. We are turning the e-commerce business into a BEC plus BBM plus synergy model. You can see firstly, BBM is improving its profitability, especially Gap is getting more and more profitable in the coming years. In the meantime because we leverage the experience in this kind of apparel industry from BBM, we then add more brands into BEC with a franchise model. This also expand our margin greatly. Combined by this both BBMs growth and also margin expansion of BEC is so we can see this result in 2028. But it's not the end of acceleration. I think in the coming years, even beyond 2028, we can see a more, clear sign of this improvement of our profitability. Thank you.

Next question comes from Alicia Yap with Citi.

My first question is about the latest macro sentiment and would management share some color about latest macros Chinese New Year demand and the March 8 promotional performance. And what is your expectation for 2026?. And my second question is about AI. How do you see generative AI and other advanced AI technology, changing consumer behavior and the e-commerce landscape? Would you elaborate on Baozun's strategy for integrating AI into your operations and service offerings? Are you developing your AI tools or partnering with leading AI firms? My last question is about Gap China. What is the growth expectation for Gap China this year? What is your long-term vision for the Gap business in China? And what do you see as the key growth drivers for the brand over the next 3 to 5 years?

Okay. Thank you. This is Junhua. Let me address the first two questions. The first one I will elaborate from the BEC perspective, and Ken Huang can just feedback some new sentiment, kind of the forecast, aligned with the third question from the BBM perspective. Yes, we did have a very strong finish on the Chinese New Year campaign and the Queen's Day campaign on March 3. This is definitely very strong. We had a late Chinese New Year this year. From the online digital e-commerce growing, that was very promising. We see the momentum of each category growing a lot. The platforms are still compensating a lot of kind of coupons to the end consumers to increase the overall GMV growth. The efficiency of the traffic quality is increasing. Yes, we believe that we had a very good strong start, and the future quarters will be very promising from the BEC perspective and the second one is also related to the AI in terms of the GEO and how does GEO really changing the consumer behaviors. Just like I mentioned that GEO is changing the consumer behavior. It's changing from the DAU of 850 DAU shoppers from different apps to 300 million from different kind of apps like Doubao, Yuanbao, and Tiangong. Those kind of the generated kind of AI large-scale model. Consumers started to asking questions, you know, to for their daily life, during their daily life, and those kind of the GEO can smoothly push a lot of information along with some kind of the reference with the brand-oriented right information, such as a shopping link or such as a very emotional linkage from the brand's perspective with the content, with short video clips or with a very comprehensive information. We can foresee that the change of consumer behavior is, you know, slightly changed from the instant shopping category to different categories. In terms of the instant shopping category, the AI agent is becoming very promising. You can easily order a bubble tea, for example, from the AI GEO systems. But from different categories, it's still not in the business scenario. We are closely tracking all those technologies, operations and make sure that we can share more in the future quarters. In terms of the bottom line, we definitely put a lot of effort in the AI agents to increase our efficiency, especially those repeatable kinds of systems. Those proprietary AI tools, we're not a partner with any other leading AI firms for now. We still use some kind of via public services with our in-house engineering team to do a lot of Baozun customizations for our leading brand partners. Thank you.

This is Ken. For the first question about the CNY consumer segment. For Gap, we also see high increase in February and January in both months. The increased rate year-to-year is over 30% for Gap. So we can forgive actually, we continued our 20% to 30% increased rate in the last quarter and this quarter. For the third question, the growth expectation for Gap. First, I think for 2026, we will still continue to keep the growth rates. In 2025, our growth rate is more than 20%. So we will keep this around 20% increase in 2026 by both same-store increase and new openings. We plan to open more than 50 stores, and we will also expand our e-commerce sales scale. For the long-term vision of Gap business, in 2027 and 2028, we plan to accelerate our growth rate from 20% to 30% so we'll be 25% to 30% in the next 2 years in the top line. And we were also trying to improve our operating profit from breakeven to 150 basis points increase per year. And the main growth driver for Gap in the next 3 years, I think we're coming from 3 areas. One is the same-store sales increase driven by our product improvements, our visual merchandising, our store new images, which will in the end to improve our in-store traffic and commercial rates. And the second is the scale expansion, both offline and online. For example, offline, we also plan to open re-enter some markets such as Hong Kong and Macau. And the third one is the supply chain efficiency. With the scale increase, we expect to gain our efficiency in our cost management and also in the expenses. That's all. Thank you.

Here is Vincent. We have some more things to say about the AI because AI application right now is one of the core strategy of the Baozun Corporate. Our goal is quite clear. We want to make the AI utilization and also application as the best practices for both e-commerce and also apparel industry. We will be the best practiced AI for these two areas. So not only for the sales side to utilize AI, but also the supply side for BBM and also, of course, for the efficiency improvement. So it's quite important for us. And we are confident we'll be in a leading position in utilizing AI capabilities. Yes. Thank you.

Our next question comes from Jiawei Yin with CITIC Securities.

I have 2 questions. The first is that we have seen many industry changes such as the compliance of e-commerce tax, the levy of traffic tax and the restriction of competition in the courier industry, which are generally beneficial to the sales of branded goods and are also accommodated by a narrowing growth gap between platforms. How does Baozun view the impact of such evolution on operational preference and strategies? And what's the brand's response to this change? And my second question is, has there been any change to Baozun's development strategy for the BBM business in 2026? And how will Baozun balance scale and profit? What are your expectation for the growth pace and the long-term vision of each brand?

Okay. So this is Junhua. Let me address the first question. Those policies really don't affect our detailed operations and day-to-day, because the government has signed up the direction about setting up a different sliding scale in terms of different kind of the policies. None of them has really changed the allocation of the marketing fee of our existing brand partner. Because after the pandemic, all our brand partners are being very careful and very cautious about spending money, especially into the marketing spending, allocation, and the others. We want to help the brand partner to leverage all those money wisely and to drive a higher ROI as before. In terms of that, we're really within the range of all those policies. In terms of the cutthroat competition in the courier industry, Baozun is taking the lead of providing logistics and courier services. We have already leveraged a lot of kind of the pricing efficiency and the cost efficiency for so many years. That doesn't really just affect our day-to-day operations. In terms of the brand repositioning between different platforms, indeed the brands are either diversifying via different kind of the strategy for different brand, because for some kind of the leading live stream brand to focus on GMV growth or treat those platform as a content creation platform and let those traffic exceeded to all those traditional transaction platforms is different strategies for different kind of categories. So most -- some kinds of the categories of the brands, they choose to drive GMV from both categories, both platforms. Some of the brands, they treat the live stream platform as a content creation center and let them exceed it, all those content, building the emotional linkage to the traditional kind of the transactional platforms. We are helping all those different brands in different categories to diversify their strategy across in different platforms. There's no unified strategy in general in terms of that question. Thank you.

Here's Vincent. I will talk about the BBM strategy. I think the strategy is quite consistent with the past years. The only change is about the level of our confidence. We think we are much more confident right now than before that the transformation is already there, we can see the results. We build a 3 years model. And we believe in the coming 3 years, BBM will grow. We will enter into acceleration phase. So we are quite excited about that. And talking about, especially for Gap, the biggest brands, we will see a very good trend and also the improvement for the capability is also promising. For the premium brand like Hunter and others, I think we -- the most important thing for us is to build the capability on merchandising and also marketing. They will be also growing quite fast, but building capability is more important. Talking about the BD of the new brands, yes, I think we are -- now a lot of more brands come to us, they are trying to work with us. It's a good sign. And right now, not only BBM can work with the brands in a very deep relationship and also BEC also have the capability to do more franchise business with brands. So in this case, that's why we think the coming 3 years will be an acceleration phase. Thank you for that.

Our next question comes from Peishan Wang with HSBC.

I have 2 questions. The first one is on the growth outlook for 2026. And what are the key upside and downside risks you see based on your expectations? And the second question is how should we think about the capital allocation plan given the AI investment and other investment priorities this year? And can management share our stores how you think about shareholder return going forward?

Sorry, the first one is about the overlook of the business growth in the future 3 years or 2026?

2026 for the group outlook.

The group outlook. Okay.

Yes. Maybe I try to say something, maybe Catherine, you can say more about that because it's expectation. Yes. I think firstly, we are trying to make a positive year in terms of net income to ordinary shareholders. Wendy?

Yes...

Yes, it is quite exciting goal to achieve because that means we have more to contribute to our shareholders and investors. To achieve that, of course, we need to make all the aspects of our operation better than before. Our margin expansion needs to be improved as well. So in this case, we're not only to treat our customer or employee better and also give more return to our investment -- investors. In terms of numbers, can we share anything or no?

Yes. Okay. Thank you for your question. I think the management are quite confident and for the coming 2026, we think it's quite promising because we are doing a lot of initiatives, not only including like the BEC part and also brand management segment. So regarding the revenue, we are expecting a certain number of increase and like BEC segment. If we split into 2 segments, BEC, we are expecting single-digit increase. For BBM part, we are expecting like a very good number to come. And regarding the non-GAAP operating profits, we are also expecting like double the number compared with the 2025. And so we are expecting this -- we are doing all kinds of initiatives like as I mentioned in the call. I think the management are quite confident about that.

And also Vincent here again. Talking about the AI right now, although it is still an initial phase for the industry to adopt the results, the development of the AI, but we are seeing this change very fast. So for us, we need to keep us very active and agile to keep our pace up to this development. So for us, along with the investment into IT and the internal process improvement every year, we put resources there. . And this year -- starting from this year, we have more initiatives from the corporate level. We have several very interesting and important initiatives. But doesn't require a lot of investments. So I think talent will be more important than investments. So that's why we are so confident that we will be the best practice for not only e-commerce but also apparel industry in China will be the -- we're quite committed to be the most advanced utilization of AI capabilities.

The next question is from [ Shuwen Guo ] with CMBI.

My question is regarding your development strategy for overseas business. And can management share with us the update regarding your overseas strategies? And can management share with that your development plan regarding about the International business?

Yes. Let me first address some about the international business. Right now, for the priority of course, BBM and BEC are contributing the major share of our business and also growth. These two are very important. We talk -- that's why we talked more about these two sections. For BZI, I think recently we have a very solid progress, but still it's a minor contribution to the whole company and the growth. We are quite solid in outside the business, outside of China. Hunter is already in Southeast Asia making progress. We have several major e-commerce projects improving and to be profitable in the region as well. We have opportunities in Korea and also South Korea and also several very big projects is going on in Hong Kong and Taiwan. We are seeing this improving with a promising future, and we are confident that the growth of the international business will be solid, but we are not expecting a big contribution from our International business yet in the coming 2 years.

BBM new brands.

Yes. I think you just talked about the new brands of BBM as well. Right now, I think we are in a very good situation because we are having quite big base of our brands from BEC. So when there's opportunity emerges in the market, we'll be the first one to have the opportunity to work with them. Recently, we see a lot, yes. They trust us and we have such a solid track record for BBM in the coming -- in the past 2 years. So people just want to work with us. But for us, I think we know what we need to have. So at least we will not have a lot more brands in the future. But definitely, during -- in the coming 3 years, I think we will have new brands, carefully selected, better profitable brands to add to our portfolio.

Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Wendy Sun for closing comments. Over to you.

Thank you, operator. On behalf of the Baozun management team, I would like to thank you again for your participation in today's call. If you require any further information, feel free to reach out to us. Thank you for joining us again. This concludes the call. Thank you.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.