The flash-sale e-retailer has posted average sales growth of 71% over the past 10 quarters and has been profitable for four years.

(Bloomberg Gadfly)—As the sun was preparing to greet the day in Guangzhou, and just as U.S. investors enjoyed the last hours of a three-day weekend, China‘s forgotten e-commerce player quietly announced results that beat analyst estimates.

Online-only Vipshop Holdings Ltd., which is traded in New York, lacks the massive girth of Alibaba Group Holding Ltd. or the star power of JD.com Inc., but it does have better return on equity and price-earnings ratios. It’s also getting a closer look from investors seeking alternative ways to bet on China’s growing consumer market while avoiding frothy valuations.

Vipshop is No. 6 in the Internet Retailer 2016 China 500 with an estimated $6.86 billion in online sales in 2015, according to Top500Guide.com data. For the fourth quarter and full year 2016, Vipshop posted double-digit gains in sales, number of active customers and order volume.

Vip.com has managed to turn the decidedly unchic business of flash discount sales into a high-class luxurious experience, adding in brand cachet and solid delivery. Its homepage is all you need to see to understand why: Western female models adorned with Gucci sunglasses and Versace clothing.

While JD.com (No. 1 in the China 500) and Alibaba are both pushing into fashion retailing, Vipshop’s early mover advantage in flash sales has helped it build some critical mass, not only among shoppers but among brands looking to clear inventory while lacking the offline outlets commonly available in Western markets.

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The result has been an average 71% sales growth for Vipshop over the past 10 quarters and continuous profitability for the past four years.

At the same time as it faces solid competition from JD.com, and Alibaba looks to offline channels (including a recent tie-up with Shanghai Bailian Group Co.), the market for clearance sales may have a ceiling. Sanford C. Bernstein, for example, estimates that the addressable market for flash sales is around 25% of the total e-commerce pie, and thus predicts that this will be the last year in which Vipshop can outpace industry growth.

Now the dilemma for investors is whether an inevitable slowdown will markedly affect returns, or if a management focus on sacrificing pace for margins will be enough to buoy earnings. As the adage goes, past returns are no guarantee of future performance.

For the fourth quarter ended Dec. 31, Vipshop reports:

  • Revenue increased 36.5% to 18.98 billion yuan ($2.73 billion) from 13.90 billion yuan in Q4 2015.
  • Active customers, which are those who have purchased at least once during the period, increased 38.9% to 27.5 million from 19.8 million.
  • Total orders increased 26.3% to 82.0 million from 64.9 million.
  • Net income jumped 51.7% to 767.8 million yuan ($110.6 million) from 506.2 million yuan.

For 2016, Vipshop reports:

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  • Revenue increased by 40.8% to 56.59 billion yuan ($8.15 billion) from 40.20 billion yuan the prior year.
  • Active customers, which are those who have purchased at least once during the period, increased by 42.3% to 52.1 million from 36.6 million
  • Total orders increased 39.7% to 269.8 million from 193.1 million.
  • Net income rose 28.3% to 2.04 billion yuan ($293.4 million) from 1.59 billion yuan.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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