The company’s core e-commerce profits grew faster than its revenue, while its Gap China unit showed sales momentum and value as a strategic testing ground

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Baozun Inc. (NASDAQ:BZUN) (9991.HK) reported sharply improved profitability in the second quarter, as stronger earnings from its core e-commerce business and continued growth at its brand-management unit prompted the company to raise its long-term profit target.

The company’s revenue rose 7.5% year-on-year to 2.74 billion yuan ($404 million) for the three months through June, while its non-GAAP operating profit climbed to 74.3 million yuan from 6.1 million yuan a year earlier.

The improvement was led by Baozun’s traditional e-commerce business, as the unit’s adjusted operating profit for the quarter more than doubled to 107.1 million yuan from 41.1 million yuan year-on-year, its strongest second-quarter result since 2022. Its e-commerce revenue rose by a more modest 4.6% to 2.3 billion yuan.

Baozun said the gap between profit and revenue growth reflects efforts to scale back its lower-margin distribution business and focus more on higher-value services and products.

Meanwhile, its newer brand management business became a more important growth contributor, as revenue from the unit rose 21.9% to 485.6 million yuan, led largely by its Gap China operation.

Baozun took over Gap’s Greater China business after agreeing to acquire it in 2022, expanding beyond its core e-commerce services for brand partners to directly managing merchandise, inventory, stores and marketing.

Gap China’s omni-channel same-store sales grew in the 20% range for a second consecutive quarter in the three months to June. That compares with 6.7% growth in Chinese clothing retail sales in the first half of 2026, suggesting Gap’s recent momentum has outperformed the broader market.

Gap China’s profitability has also improved. It recorded its first quarterly non-GAAP operating profit in the fourth quarter of 2025 and remained profitable on the same basis in the first quarter of 2026. Management has also set a target of full-year operating breakeven for 2026, signaling confidence in the brand’s longer-term operating trajectory.

Baozun said it is increasingly using Gap as a testing ground for tools and operating methods that could also benefit its core e-commerce business. The company says the two businesses can reinforce each other, with e-commerce capabilities supporting brand operations and lessons from direct brand management feeding back into services for other clients.

Management also says early AI and automation pilots are improving productivity. Baozun recently raised its 2028 annual non-GAAP operating-profit target by more than 27%, from 550 million yuan to at least 700 million yuan, citing better e-commerce margins, greater operating leverage in brand management and deeper cooperation between the two units.

Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.