Equities

JD.com Revenue Up 7% to $36B, Boosts Staff Pay to Spur Sales

JD.com's revenue rises 7% to $36 billion, outpacing rivals with strategic discounts and technological investments amid China's consumption challenges.

By Bill Bullington

5/16, 06:44 EDT
Alibaba Group Holding Limited
JD.com, Inc.
Pinduoduo Inc.
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Key Takeaway

  • JD.com Inc. reported a 7% revenue increase to $36 billion in the March quarter, outpacing analyst expectations and previous quarter growth.
  • Strategic initiatives, including significant discounts and doubling front-line staff salaries, aim to combat fierce competition and stimulate consumer spending.
  • Despite challenges, JD.com is investing in AI and exploring international expansion while planning a $3 billion share repurchase through March 2027.

Revenue Growth Amid Challenges

JD.com Inc., a leading Beijing-based retailer, reported a 7% increase in revenue to approximately 260.1 billion yuan ($36 billion) for the March quarter, surpassing the average analyst projection of about 258.4 billion yuan. This growth marks an acceleration from the 3.6% increase observed in the previous quarter. Additionally, the company's net income rose by 13.9% to 7.1 billion yuan. These financial results come at a time when Chinese consumption has shown signs of struggle, following the country's decision to lift nearly three years of Covid restrictions. Despite these challenges, JD.com's performance is considered a key indicator of the resilience and potential recovery of Chinese consumer confidence.

Strategic Moves in a Competitive Landscape

In response to fierce competition from rivals such as Alibaba Group Holding Ltd., PDD Holdings Inc., and ByteDance Ltd., JD.com has implemented several strategic initiatives to attract and retain customers. These measures include a significant discount spree, doubling salaries for some front-line staff, and offering 1 billion yuan in subsidies and rewards to video content creators on its platform. Ahead of the June 18 festival, one of China's largest online shopping events, the company also introduced a digital avatar of its billionaire co-founder Richard Liu to boost sales. These efforts are part of JD.com's broader strategy to navigate through the competitive e-commerce landscape in China and stimulate consumer spending.

International Expansion and Technological Investments

Amid sluggish domestic consumer sentiment, JD.com has explored opportunities for international expansion and technological innovation. Although the company considered and then decided against acquiring British electronics retailer Currys Plc., it continues to pursue growth beyond China's borders. JD.com has also invested in artificial intelligence, developing its own proprietary large language model, and has followed Alibaba in implementing aggressive price reductions for its cloud computing services. These initiatives reflect JD.com's commitment to leveraging technology and exploring new markets to drive future growth.

Financial Strategy and Analyst Insights

JD.com has actively engaged in share repurchase programs, planning to buy back up to $3 billion worth of shares through March 2027. The company's repurchases increased sixfold in the first quarter, indicating a strong likelihood of further buybacks this year. According to Bloomberg Intelligence analyst Catherine Lim, JD.com's retail-operating margin may have experienced a year-on-year decline for the second consecutive quarter, as revenue gains possibly trailed cost increases associated with new perks for merchants and users, higher staff salaries, and intensified competition. The introduction of free delivery services to a broader range of third-party merchants and a new free-returns service may have also contributed to increased expenses.

Street Views

  • Catherine Lim, Bloomberg Intelligence (Neutral on JD.com):

    "JD.com’s 1Q retail-operating margin probably fell year on year for the second straight quarter. Revenue gain may have trailed cost hikes from new perks to merchants and users, such as free delivery services, as well as higher staff salaries amid intense rivalry from Alibaba, Douyin and other retailers. The firm likely incurred more expenses after offering free delivery services to a wider spectrum of third-party merchants and lowering the minimum value of on-demand orders which are entitled to this incentive. JD.com’s new free-returns service in 1Q may have also raised costs."

Management Quotes

  • Sandy Xu, CEO of JD.com:

    "Beijing’s policies would shore up consumer confidence."