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By
Reuters
Published
May 13, 2019
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China's JD reports slowest revenue growth on record in first quarter

By
Reuters
Published
May 13, 2019

Chinese e-commerce firm JD.com’s revenues grew at their slowest pace on record in the first quarter as China’s tech giants start to tap out their existing user bases, though its 21% expansion marginally beat analysts’ forecasts.


JD.com


China’s leading internet companies are trying to find fresh areas of growth after saturating the market for their core products and services, which has led to a hit on profitability as they invest in new sectors.

JD.com, which operates chiefly as an online marketplace, most notably for consumer electronics, first achieved positive net income in early 2017, about three years after it listed. However, it has struggled to maintain profitability.

Martin Bao, who tracks China’s tech sector at ICBC International, said the company has exhausted its core base of shoppers in first-tier Chinese cities and has to find new customers in rural China.

JD differentiates itself from rivals in China by operating an in-house logistics team and warehousing unit and carrying its own inventory.

In contrast, rival Alibaba Group Holding Ltd outsources its logistics to third-party companies, though it owns stakes in many of them. Unlike JD, it makes money primarily via advertising, rather than commissions on sales.

JD.com is undergoing a period of restructuring, with several high-level staff leaving the company in recent months. Current and former employees told Reuters that JD launched layoffs at all levels at the company, and that morale was low.

In an earnings call on Friday, executives said the staff cuts had been “overinterpreted” and denied that there had been “massive layoffs.”

Meanwhile, a University of Minnesota student recently filed a civil lawsuit against JD.com chief executive officer Richard Liu, alleging he raped her. Liu, through his lawyers, has maintained his innocence.

Liu holds 78% voting rights on JD.com’s board, and board directors cannot achieve a quorum without him present at meetings.

Liu’s concentration of power, coupled with the high-level staff departures, has left some investors concerned about a possible leadership void at JD.com.

On Wednesday, JD.com’s ownership structure and staff exits became a trending topic on Chinese social media site Weibo.

JD.com also said on Friday it would renew its strategic partnership with social media giant Tencent Holdings Ltd for three more years, starting in late May.

The deal embeds a link to its e-commerce site in Tencent’s chat app WeChat.

It also said it has secured financing for its healthcare subsidiary JD Health with investors including CICC Capital and CPEChina Fund. Post financing, the unit is now valued at $7 billion.

For the current quarter, JD expects to secure revenues of between 145 billion yuan and 150 billion yuan, the mid-point of which is above an average analysts’ forecast of 145.69 billion yuan, according to IBES data from Refinitiv.

Net income attributed to ordinary shareholders rose to 7.3 billion yuan in the first quarter, up from 1.5 billion yuan a year before. The company posted revenue of 121.1 billion yuan, narrowly beating analysts’ estimate of 120.1 billion yuan.

© Thomson Reuters 2021 All rights reserved.

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