(Bloomberg) — JD.com Inc. reported a 7% increase in revenue after cutting prices and increasing consumer benefits to combat fierce market competition and the Chinese recession.
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The Beijing-based retailer said its sales rose to about 260.1 billion yuan ($36 billion) in the March quarter, compared with analysts’ average projection of about 258.4 billion of yuan. This revenue growth accelerated from 3.6% in the previous quarter. Net profit increased 13.9% to 7.1 billion yuan.
The JD.com results are seen as a leading indicator of Chinese consumption, which has struggled to recover since the country lifted nearly three years of Covid restrictions. Although CEO Sandy Xu predicted that Beijing’s policies would bolster consumer confidence, retail sales growth fell in March and industrial production fell short of forecasts, in warning signs for the economy’s recovery this year.
In recent months, the company has resorted to a wave of discounts and other perks to fend off stiff competition in China from Alibaba Group Holding Ltd., as well as emerging companies such as PDD Holdings Inc. and offered its front-line team 1 billion yuan in subsidies and rewards to video content creators on its platform. The company even displayed a digital avatar of its billionaire co-founder Richard Liu, hoping his name would boost sales ahead of the June 18 festival, China’s second biggest online shopping event.
JD also stepped up efforts to expand internationally as domestic consumer sentiment remained sluggish – including evaluating and then rejecting an offer to buy British electronics retailer Currys Plc. It praised its efforts in artificial intelligence with its own proprietary big language model, while following Alibaba with aggressive price reductions for cloud computing services.
What Bloomberg Intelligence says
JD.com’s Q1 retail operating margin likely fell year over year for the second quarter in a row. The revenue gain may have been accompanied by cost increases arising from new perks for merchants and users such as free delivery services, as well as higher employee wages amid intense rivalry from Alibaba, Douyin and other retailers. The company likely incurred more expenses after offering free delivery services to a broader spectrum of third-party merchants and lowering the minimum value of on-demand orders eligible for this incentive. JD.com’s new free returns service in the first quarter may also have increased costs.
– Catherine Lim, analyst
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As with other Chinese technology companies, JD has stepped up its share buyback program. It plans to repurchase up to $3 billion in shares by March 2027. The company’s repurchases increased sixfold in the first quarter, increasing the likelihood of further repurchases this year. , estimates Bloomberg Intelligence.
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