Chinese e-commerce giant JD.com has doubled its profits in the second quarter of 2024, a significant achievement at a time when companies in the sector in China are struggling to attract increasingly cautious consumers due to the economic slowdown.
According to the company’s report, JD.com reported adjusted earnings per share of 8.19 yuan ($1.13), up from 4.15 yuan in the same period in 2023. Revenue rose 1.2% year-on-year to 291.4 billion yuan ($40.1 billion), beating analysts’ forecasts.
JD.com CEO Sandy Xu attributed these positive results to “growing economies of scale and efficiency in product procurement.” The company has managed to improve its profitability despite an environment marked by intense competition, where online retailers, such as JD.com, are forced to offer competitive prices to attract consumers.
Following the results, JD.com’s American depositary receipts (ADRs) rose 4.5% in early trading, contrasting with the declines experienced by rival Alibaba, whose earnings missed market expectations. However, despite this recovery, JD.com’s ADRs remain in negative territory for the year.
JD.com has been locked in an expanding price war with competitors such as Pinduoduo and Alibaba. In a weak economic environment, consumers have restrained their spending, leading major players in the sector to implement aggressive discounting strategies to maintain their market share. Despite this, JD.com achieved a 92% increase in net profit, reaching 12.6 billion yuan (1.7 billion U.S. dollars), thanks to greater operational efficiency and cost optimization.
The company’s main revenue driver, JD Retail, which includes the e-commerce businesses JD Health and JD Industrials, generated 257 billion yuan in the second quarter, up 1.5% from a year earlier. During the 618 sales event held in June, JD.com set records in transaction and order volume, although specific figures were not disclosed. The company noted that 500 million customers participated in the promotions, with more than 150,000 small and medium-sized businesses achieving 50% growth in sales.
Alibaba grows 4% but misses estimates in June quarter
The economic outlook in China has been mixed in recent months. While overall retail sales growth slowed from 3.7% in May to 2% in June, e-commerce showed greater resilience, growing nearly 10% in the first half of the year and reaching 7.1 trillion yuan. Part of this growth was driven by a government-organized home appliance exchange program designed to stimulate post-pandemic economic recovery.
JD.com has pledged more than 6.5 billion yuan to the program, much of which has been used to subsidize consumers trading in their home appliances and electronics. More than 30 million items are expected to be traded through JD.com’s platform this year, according to Lei Sun, an executive at the company’s home appliances unit, underscoring the importance of this segment for the company.
In terms of logistics operations, JD Logistics reported revenue of 44.2 billion yuan in the quarter, up 7.7% year-on-year. This segment, which covers both internal and external logistics operations, remains a key part of JD.com’s growth strategy, ensuring efficient delivery across its network.
On the other hand, revenue from the New Business group, which includes on-demand delivery platform Dada, JD Property and overseas operations, fell by nearly 35%, reflecting the challenges the company faces in these areas. Although JD.com continues to seek to diversify its revenue streams, competition in these emerging markets has made sustained growth in these divisions difficult.
Source: https://reporteasia.com/negocios/2024/08/15/jd-com-crecimiento-competencia-feroz/
