(Newswire.net — March 19, 2020) —
Amid the uncertainty that has accompanied this year’s coronavirus epidemic, JD.com’s substantial quarterly earnings have instilled some much-needed hope in the markets. Share prices for the Chinese e-commerce giant rose when it released its earnings report before market opening on Monday morning, reporting fourth quarter revenue growth of 26.6 percent from the previous year and annual growth of 24.9 percent. The company attributes this top-line growth to a successful promotional season and the reinvestment strategies previously announced, which focus on low prices, enhancing user engagement, and logistics services in lower-tier regions.
JD.com CFO to Retire
CEO and Chairman Liu Qiangdong announced during the earnings call that JD.com CFO Sidney Huang would be retiring in September of 2020. During his tenure of six and a half years, Huang saw the company through its IPO debut in the United States and helped it achieve revenue growth of over 700 percent.
Of Huang, Liu said that “his professional expertise, integrity, humility, and fairness have all earned him respect from [Liu] and from others throughout the company since he joined [them] in 2013.”
Sandy Xu will be Huang’s successor. Xu is currently senior vice president of JD.com and chief financial officer of JD Retail. The transition process will begin in June, and Huang will continue to serve as a senior consultant to the company following his retirement.
Customer Growth Trended Upwards in Q4
Since September 2019, the company saw a net 28 million additional customers, the biggest quarterly net addition that JD has seen in three years. The company reached 362 million active customers total in the past 12 months. Its mobile DAU (daily active user) grew at the fastest rate in eight quarters, amounting to 38 percent.
A consistent trend that JD has seen over the past two quarters is growth in lower-tier regions across China. The untapped potential of these smaller cities outside of Beijing and Shanghai is evidenced by customer base growth; similar to Q3, the fourth quarter saw over 70 percent of its new customers coming from these lower-tier cities. JD has been actively working on improving its logistical services in these areas, as well as employing innovative marketing strategies and diversifying product offerings to further capitalize on the trend.
General merchandise revenue also saw accelerated growth in Q4, coming in at 38 percent – the highest growth rate for the past four quarters. This was led by such categories as food and beverage, fresh produce, cosmetics, healthcare, and home products.
Net Revenue Grew Quarterly and Annually
Annually, net revenues increased for the company to $83 billion, a growth of $17 billion year over year. JD ascribes this growth to its commitment to continually improve its customer experience and ensure its differentiation from competitors. An example of this is evident in the cultivation of customer shopping behavior in FMCG (fast-moving consumer goods). A traditionally offline-focused category, this strategy was acknowledged as a key factor in JD’s general merchandise revenue growth of 34 percent.
Net service revenues for JD were up over 44 percent and contributed 11.5 percent to the total revenue for 2019. The company also reported net service revenues to have grown by 44 percent year over year in Q4, contributing 12.3 percent to overall revenue.
The company attributes this growth to its well-placed investments in advertising and leveraging its supply chain and technological capabilities to improve third-party logistics. Wang Zhenhui, CEO of JD Logistics, said that JD has made continual improvements to its six major logistic networks nationwide, leveraging them with warehousing, deliveries, and transaction flows in an attempt to shorten the chain between merchant and consumer as much as possible.
Substantial and Effective Coronavirus Response
Liu began the earnings call unconventionally with a summary of the company’s swift response to the COVID-19 epidemic that erupted in China shortly before the Chinese New Year. Tech companies like JD, Alibaba, and Tencent have been instrumental in providing aid to fight the epidemic, whether through financial contributions, monetary donations, or logistical and technological solutions.
The company immediately donated a large supply of medical materials to hospitals and charity organizations in Wuhan, the center of the epidemic, and has continued to contribute more relief supplies varying from medical masks to fresh fruit.
Working with the Hubei province government, JD utilized its logistics knowledge to build a supply chain management platform that has helped manage the delivery of necessary emergency supplies from across the country. It has also made available its advanced technologies such as big data, AI, and IoT to the Hubei government, which have been used in dozens of capacities for emergency and epidemic prevention solutions.
JD Health released an app that provides free 24-hour medical consultations. Its users experiencing symptoms such as cough, fever, fatigue, and diarrhea can speak directly with a physician at no charge, and the app has since expanded to include support for all diseases and a psychological hotline.
JD has taken protective measures for its employees, immediately providing masks and other protective equipment to its frontline staff following the outbreak. The company has also provided its merchants with supportive policies such as subsidies, fee reductions, waivers, and other benefits to help lessen the effects of the epidemic.
In Spite of Epidemic, Prognosis Is Good for Q1
Although several Chinese companies have reported their first quarterly results since the outbreak began, many are being cautious about making predictions of how they will fare in the new year, withholding estimates on revenue and profit for the first quarter of 2020. Alibaba has stated that its revenue will be “negatively impacted” as an effect of the outbreak, and consumer shopping habits have shifted significantly, causing more unpredictability.
In spite of this, JD anticipates an increase in revenue of at least 10 percent in the first quarter year over year. Its self-operated, proprietary supply chain and logistics network allowed it to resume operations quickly after the Chinese New Year, avoiding the shortages in product and delays that other similar companies have faced.
JD saw a decline in sales of large-ticket durable goods and discretionary products, but demand for categories such as groceries, fresh produce, health care, and household necessities increased significantly since the start of the epidemic. Small kitchen appliances have done well as more people begin to cook at home instead of eating out, and positive growth is expected in the electronics category due to computer and laptop sales increasing as people work and attend school from home.
The move to e-commerce has not only created an influx of new active users on JD’s platform but also caused an increase in old and inactive customers returning. JD intends to leverage its marketing and operations with the new and reinvigorated users to ensure that they continue to utilize and engage with the platform after the outbreak has ended.
The company has also noted that its strong footing in the wake of the epidemic demonstrated the competitive advantage of its business model, allowing its merchants to realize the advantages of collaboration with JD. “We sincerely hope that the epidemic will be over soon. But, regardless of circumstances, we will always seek to improve the service experience for our customers and create value for our partners,” said Liu.