China’s e-commerce giant JD.com posts slowest quarterly growth on record
Chinese technology companies including JD.com are facifrom China’s Covid lockdowns and subsequent economic impact as well as the country’s tighter regulatory environment for technology businesses, CNBC reports.
In the second quarter, JD.com surpassed all expectations, but showed the slowest year-on-year revenue growth on record, becoming the latest victim of the economic downturn in China caused by Covid.
The company got a boost thanks to the increased profitability of its core retail and logistics division, which was facilitated by the annual “618” shopping festival, which takes place in China in June.
During the April to June quarter, China saw a resurgence of Covid-19 that led to lockdowns of major cities across the country, including the financial powerhouse of Shanghai, as authorities tried to contain the worst outbreak of the virus since the initial spread in 2020.
This month, e-commerce rival Alibaba reported flat June quarter revenue for the first time while gaming and social media giant Tencent reported its first revenue decline on record.
Tencent and Alibaba have been cutting spending and reducing headcount as revenue slows in order to grow earnings in the coming quarters, with similar focus shown from JD.com too.
JD.com reduced marketing and general and administrative expenses for the quarter versus the same time last year. The Beijing-headquartered firm also narrowed losses in its new business segment and saw its logistics unit swing to an operating profit in the quarter versus the second quarter of 2021.
As Sandy Xu, chief financial officer of JD.com, said in a press release, the company’s emphasis on financial discipline and operational efficiency has allowed them to return to shareholders in the form of share repurchases as well as a special cash dividend issued during the quarter. They will continue to focus on generating strong shareholder returns while maintaining commitment to investing for the long term.
JD.com’s retail segment makes up the most of its revenue. The division brought in 241.5 billion yuan in revenue in the second quarter, a near 4% year-on-year rise. Operating profit for the retail business rose 36% year-on-year to 8.17 billion yuan.
That was helped by the 618 shopping festival in China. It takes place for roughly two weeks in June and China’s e-commerce giants offer huge discounts across a number of goods. JD.com reported in June that total transaction volume across its platform during the promotional period totaled 379.3 billion yuan. This does not translate directly into revenue but it does bring users to JD’s shopping app.
JD differs from Alibaba in that it owns more of its own inventory. It has also focused heavily on logistics and warehousing capabilities that allows it to get products to users on the same day or next day.
JD’s logistics division saw a 20% year-on-year revenue rise in the second quarter to 31.2 billion yuan.