China’s JD.com sees sales growth slow despite topping estimates
The Beijing-based e-commerce giant posted its fifth consecutive quarter of slower growth in an increasingly crowded domestic market
JD.com reported its slowest quarterly revenue growth since listing, indicating China’s second-largest e-commerce company is feeling the heat from mounting competition in an increasingly saturated domestic market.
The Beijing-based company’s revenue for the three months to March, while ahead of analysts’ average forecast, marked a fifth quarter of slower growth for the online retailer, at a time when Chinese e-commerce services providers – including rival Alibaba Group Holding – are grappling with a crowded market.
Both JD.com and Alibaba have been investing heavily in new business in an effort to tap fresh markets, but this has hurt their margins, as indicated by their latest financial results.
JD.com posted 101.1 billion yuan (US$15.9 billion) in revenue for the first quarter, versus analysts’ average estimate of 98.9 billion yuan.
That was up 33 per cent from a year ago, its slowest growth on record. At its peak in 2015, JD.com was clocking quarterly increases of around 60 per cent.
The retailer said it expected revenues to rise in the second quarter, driven by its flagship sale event “618”.
It posted a net gain of 1.04 yuan per American depositary share, versus 0.17 yuan a year earlier, even as margins were squeezed by investments in new business lines such as overseas expansion, cloud computing and logistics projects.
Last week, Alibaba also reported slim margins owing to a similar spending spree in new businesses.
JD.com has opened unstaffed stores, spun off its logistics unit and invested billions of dollars in other markets like Indonesia and Vietnam – similar to initiatives by Alibaba, parent company of the South China Morning Post.
Nasdaq-listed JD.com’s finance unit is seeking to raise around 12 billion yuan in a deal that would value it at over US$20 billion, Reuters has reported. A slew of Chinese financial technology firms, including Alibaba’s Ant Financial Services Group, are also looking to raise capital.
JD.com said annual active customers for the first quarter rose to 301.8 million, up 27.6 per cent from a year earlier.
It expected second-quarter revenue between 120 and 124 billion yuan, up 29-33 per cent, in line with analyst estimates of a 30.8 per cent increase.
Sales are seasonally low for the country’s e-commerce firms in the March quarter, but are expected to pick up in the June quarter around JD.com’s flagship “618” sale event, China’s second-largest online shopping event after Singles’ Day.
JD.com shares have dropped almost 12 per cent since the company flagged in its fourth-quarter results that strengthened investments were weighing on the bottom line.