JD.com Finally Finds Profit in E-Commerce
(Beijing) — JD.com Inc. reported its first-ever quarterly profit on Monday as the e-commerce retailer’s promotional costs eased while revenue continued to surge after years of business-building in its pursuit of national leader Alibaba Group Holding Ltd.
JD.com shares rose 5.4% in premarket trading in New York, as investors welcomed the long-awaited development. If the gains hold, the stock could reach an all-time high in the Monday trading session in New York, passing its previous high of $37.95 in 2015.
The company posted a net profit of 355.7 million yuan ($51.8 million), compared with a loss of 867.3 million yuan a year earlier.
A key element in its move to the profit column came from marketing costs that grew at a sharply slower rate than its overall revenue, as the company consolidated its market position after years of aggressive promotion. Revenue grew 41% to 76.2 billion yuan, while marketing expenses — the company’s largest single cost — grew at a much-slower 28% to 2.7 billion yuan.
“We are pleased to report another strong quarter of top and bottom line growth, as margins benefited from our rapidly growing scale across all of our product categories, as well as improved operating leverage,” CFO Sidney Huang said.
JD has been losing money since its New York IPO in 2014, as it spent heavily to keep pace with larger and highly profitable rival Alibaba. The companies use highly different business models. JD sells e-commerce products directly to consumers while Alibaba operates online shopping malls populated by third-party merchants, but this makes controlling product quality and customer service more difficult.
JD is also in the process of spinning off its finance unit to be run separately. In March, the company announced a deal to sell its 68.6% stake in JD Finance to a group of domestic investors, including JD.com CEO Richard Liu, for about 14.3 billion yuan, to give the business more flexibility to compete with more established players like Ant Financial.
Contact reporter Yang Ge (firstname.lastname@example.org)
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