A sign of Chinese e-commerce company JD.com is seen at the CES (Consumer Electronics Show) Asia 2016 in Shanghai, China, 12 May 2016. Portal/Aly Song/File Photo Acquire License Rights
Nov 15 (Portal) – Chinese e-commerce company JD.com reported a rise in third-quarter profit on Wednesday as supply chain problems eased, but revenue fell short of analysts’ estimates.
U.S.-listed shares of JD.com rose 5.6% to around $28 in premarket trading. The group is also listed in Hong Kong (9618.HK).
The company has faced challenges in China’s rapidly changing e-commerce landscape, such as the emergence of livestream players and short-video social networking service providers such as Douyin, China’s TikTok, and Xiaohongshu.
JD.com has fewer influential live streamers than its competitors, such as Austin Li, who streams exclusively on Alibaba Group’s platform (9988.HK).
Additionally, consumer sentiment in China is weak amid a slowing economy and high unemployment.
JD.com said CEO Xu Ran will take on the role of chief executive of JD Retail, the company’s retail business.
Beijing-based independent industry analyst Liu Xingliang said the company’s core strategy is to focus on the lower market, third-party retailers and instant retail business.
“Her new appointment ensures that these strategies can be implemented effectively,” Liu said.
Xu told analysts in a call after Wednesday’s earnings report that the company’s retail strategy would remain unchanged.
Third-party data provider Syntun shows that cumulative gross merchandise volume (GMV) on major traditional e-commerce platforms – including Alibaba’s Tmall, JD.com and PDD Holdings’ Pinduoduo – while China’s Dollar) was the biggest shopping festival, Singles Day, which ended on Saturday at midnight. This represented a decrease of 1% compared to the previous year.
“Consumers are making purchasing decisions more rationally,” Xu said. “They place more value on price and quality.”
Jeffrey Towson, a partner at TechMoat Consulting, said JD.com has a long history of fighting and winning price wars. The current low price strategy is all about going “back to basics”, i.e. low prices, more products and good service.
“The biggest unknown for JD is the impact of social media and video on e-commerce. Think Douyin,” Towson said, referring to the short-video social networking service provider.
The company’s shares traded around $60 earlier this year but closed at $26.71 on Tuesday. In October, several banks and brokers, including Citi, Daiwa and Jefferies, lowered their price targets and revenue growth forecasts for the company.
JD.com reported third-quarter net sales of 247.7 billion yuan ($34.19 billion), missing analysts’ average estimate of 249.26 billion yuan, based on LSEG data.
Net profit attributable to shareholders was 7.94 billion yuan, up 33% from 5.96 billion yuan a year ago.
($1 = 7.2446 Chinese Yuan Renminbi)
Reporting by Arsheeya Bajwa and Akash Sriram in Bengaluru, Sophie Yu in Beijing; Editing by Varun HK, Kim Coghill and Jane Merriman
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