Online retailer JD.com’s shares fall on quarterly profit miss

JD.com, China’s second largest e-commerce company, saw its US-listed shares drop after reporting lower-than-expected quarterly profit on Friday, as the company’s margins were squeezed by competition during its top earnings season.

Beijing-based JD.com’s Nasdaq-traded shares were down almost 7 per cent in pre-market trading.

Despite posting better-than-expected revenue in the fourth quarter, the company reported a net loss of 909.2 million yuan (US$143.2 million) that was worse than analysts’ estimate of a 463 million yuan loss for the three months ended December 31.

China’s saturated urban e-commerce market continues to create intense competitive pressure between JD.com and rival Alibaba Group Holding.

“Although we believe JD.com will survive in the severe competition of the e-commerce space in China, backed by its alliance with Tencent, we think it will be difficult for the firm to pass market leader Alibaba,” said Chelsea Tam, an analyst at Morningstar Equity Research in a note ahead of the earnings.

New York-listed Alibaba owns the South China Morning Post.

JD.com owns an extensive logistics network and is popular for fast delivery and retail sales, while Alibaba is light on assets and draws a large part of its sales from Taobao Marketplace.

Fourth-quarter revenue for JD.com was up 38.7 per cent year on year to 110.2 billion yuan, above analysts’ estimate of 108.5 billion yuan according to Thomson Reuters I/B/E/S.

Full-year revenue rose 40.3 per cent to 362.3 billion yuan, compared to 260.1 billion yuan in 2016.

JD.com posted a loss of 0.64 yuan per American depository share, compared with a loss of 1.26 yuan a year earlier.

Marketing costs for the fourth quarter squeezed JD.com’s margins, rising 35 per cent to 4.7 billion yuan, revealing the steep cost of competitive advertising during China’s Singles’ Day shopping festival in November.