NEW YORK (TheStreet) -- Shares of Jumei International Holding (JMEI) are down 6.73% to $20.74 today on heavy trading volume after reporting 2014 third quarter earnings results yesterday that "worried investors" and revealed a "broken" business model, according to Barron's.
The online Chinese discount beauty products seller reported third quarter total gross merchandise value (GMV) grew by only 31.4% from a year ago to $273 million, the slowest year-on-year growth on record, Barron's said.
The company also reported gross profit margin decreased to 22% from 25.9% a year ago.
"Investors are worried that as an online discounter, Jumei can't control its sourcing and inevitably sells counterfeit products. As a result, Jumei has decided to rapidly shift the sale of all beauty products from its third-party marketplace to direct sales. But this affects Jumei's near-term results," Shuli Ren of Barron's said.
According to HSBC analyst Chi Tsang, this strategic shift "reduced the supply of products being offered," which negatively affected GMV, Ren added.
More than 2.03 million shares had changed hands compared to the average of 714,526 in morning trading on Thursday.