JD.com Posts Slower Sales Growth Amid Stiff Competition

JD.com Inc., China’s second-largest online retailer, reported slower growth for the first quarter on Tuesday, missing analyst estimates amid heated competition in the e-commerce market.

While the company’s revenue rose 33% to 100.1 billion yuan ($15.7 billion) in the first quarter, it was the slowest rise since JD.com’s debut in New York in 2014. That compared with its fastest quarterly growth of about 60% in 2015.

Adjusted earnings per share were 0.71 yuan in the first three months ended March 31, below the average analyst estimate of 0.81 yuan. The company’s American depositary receipts closed down 4.6% on the Nasdaq Stock Market on Tuesday.

JD.com has accelerated construction of physical stores and invested heavily in logistics services and financial markets in competition with rivals such as Alibaba Group Holdings Ltd., squeezing margins. The e-commerce company announced an ambitious plan in April to open more than 1 million brick-and-mortar convenience stores across China within five years, half of them to be in remote and rural areas.

The company operated 515 warehouses as of the end of March, rising from 486 at the end of last year.

Gross margins also narrowed because of the company’s investment in research and development, said Chief Financial Officer Sydney Huang in a conference call with analysts. Huang said the annual gross margin will remain stable.

Net income increased to 1.52 billion yuan in the quarter reflecting gains from “fair value change of long-term investments, impairment of good will, intangible assets and investments,” according to the company.

The company projected second-quarter revenue of 120 billion yuan to 124 billion yuan, compared to 93.2 billion yuan the same period last year.

Rival Alibaba last week posted better-than-expected 61% growth in revenue for the fiscal fourth quarter ended March 31 while attributing narrow profit margins to a spending spree at home and abroad.