JD profits soar as Q1 beats expectations
JD.com on Friday reported that first quarter net revenue rose 20.9% year over year to RMB121.1 billion ($18 billion). Net product revenue rose to RMB108.7 billion, according to a company press release, up from RMB91.5 billion in the year-ago quarter. Services revenue, driven in part by advertising, rose to RMB12.4 billion from RMB8.6 billion a year ago. The performance beat Refinitiv analysts' expectation for RMB120.11 billion as cited by Reuters.
The e-commerce giant's annual active customer accounts rose in number to 310.5 million in the twelve months ended March 31, from 305.3 million in the twelve months ended Dec. 31, 2018. Quarterly active customer accounts in the first quarter expanded by 15% year over year. As of March 31, the Chinese e-commerce platform had over 220,000 merchants on its online marketplace, according to the release.
Net income rose to RMB7.2 billion from RMB1.5 billion a year ago, the company said. Operating margin of JD Retail in the quarter, before unallocated items, expanded by 0.6 of a percentage point year over year. Overall, costs rose by 19.7% to RMB102.9 billion, but the company managed to boost non-GAAP operating margin to 1.6%.
JD is holding its own in China and announced that it is expanding its tie-up with Walmart and other outside retailers there and renewing its partnership with Chinese tech giant Tencent. During the first quarter, JD also expanded its fulfillment capacity: As of March 31, the company operated more than 550 warehouses, "covering an aggregate gross floor area of over 12 million square meters in China," the company said.
As of April 30, JD.com's omnichannel joint venture, Dada-JD Daojia, had partnered with more than 270 Walmart stores, more than 700 Yonghui grocery stores, more than 180 Carrefour stores and more than 1,000 CR Vanguard stores, "among numerous other leading supermarket brands," to provide integrated omnichannel shopping through Dada's crowd-sourcing delivery network. The venture also helped more than 300 offline retailers digitalize their operations, the company said.
On May 10, the company renewed its strategic cooperation agreement with Tencent for three more years, which will continue to provide JD key access points through Tencent's Weixin. The companies will "continue to cooperate in a number of areas including communications, advertising and membership services, among others," which will enhance JD's customer experience, help it expand its user base and further expand its presence on mobile, according to the release. The traffic support, advertising and other services will cost over $800 million over three years, and JD will issue Tencent Class A ordinary shares for a total consideration of over $250 million at prevailing market prices at various pre-determined points during that time.
But, perhaps in light of its focus on profitability, the company is shuttering its Australia operations after little over a year, according to a report from the Australian Financial Review.
Like Amazon, the company is seeing its ad business boost results. Logistics improvements, including a build out of fulfillment capacity, helped margins, executives said on a conference call Friday morning. They also said the company will be investing its growing profits back into the customer experience in order to meet the quickly changing consumer dynamics in China.
"The first quarter saw solid top line growth with record breaking profitability, further demonstrating the superiority of JD.com's business model as compared to traditional retail formats," JD CFO Sidney Huang said in a statement. "JD's commitment to providing the best value to consumers while increasing economies of scale over time was again reflected in the improving margins in our core JD Retail business. We will remain focused on customer experience and technology innovation to support our long-term profitable growth."