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JD.com Posts Surprise Profit as Chinese Spending Strengthens

China’s second-largest e-commerce company has benefited from the rise of online shopping in a country with patchy physical retail infrastructure, and is now investing in technology to ensure longer-term growth.
JD.com packages | Source: Shutterstock
By
  • Bloomberg

BEIJING, China — JD.com Inc. posted a quarterly profit for the first time as a public company after revenue beat expectations, as the online retailer integrated Wal-Mart Stores Inc.'s Chinese web business and rode strengthening consumer spending.

China’s second-largest e-commerce company reported sales of ¥76.2 billion ($11 billion) for the three months ended March, compared with the ¥73.6 billion expected by analysts on average. The company, which bought Wal-Mart’s “Yihaodian” local shopping platform in 2016, had a net profit of ¥239 million versus estimates for an ¥851 million loss.

JD has benefited from the rise of online shopping in a country with patchy physical retail infrastructure, and is now investing in technology to ensure longer-term growth. It’s spinning off its online payments and finance division and building warehouses and drone delivery networks to become one of Asia’s dominant e-commerce players. Its battle with larger domestic rival Alibaba Group Holding Ltd. may now be starting to spread to Indonesia and other Southeast Asian countries.

It’s said to be in talks to invest hundreds of millions of dollars into Indonesian e-commerce platform Tokopedia, which could form the basis of a bigger push into the region. But it’s already facing competition from Alibaba’s Lazada, which has a headstart in key countries such as Singapore.

“We expect total gross merchandise volume to rise 46 percent year on year including Yihaodian thanks to the recovery of general consumption trends since the start of this year,” China International Capital Corp. analysts led by Natalie Wu wrote in a note to clients before the earnings. “We also expect second-quarter guidance to be strong, on the recent recovery of the retail business.”

JD expects revenue to grow 35 to 39 percent to between ¥88 billion and ¥90.5 billion this quarter, compared with the ¥89 billion that analysts had estimated. Active annual customers rose to 236.5 million, compared with 169.1 million a year earlier.

By David Ramli; editors: Robert Fenner, Edwin Chan and Reed Stevenson.

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