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JD.com’s CEO Exits After a Year at the Helm as Growth Dwindles

China’s JD.com reports a 25 percent jump in quarterly revenue. Shutterstock.
JD.com Inc.’s chief executive officer is departing after only about a year at the post. (Shutterstock)

JD.com Inc.’s chief executive officer is departing after only about a year at the post, a surprise move that coincides with the Chinese internet retailer’s slowest pace of growth on record.

Xu Lei is departing China’s No. 2 online commerce firm after more than a decade of climbing the ranks, handing the reins to chief financial officer Sandy Xu starting June. While the outgoing CEO only officially took up his role around April 2022, he headed up JD’s core retail division for years and was once regarded as heir apparent to billionaire founder and chairman Richard Liu.

Analysts said the personnel change suggests a shift in focus toward profitability, as the firm struggles with competition from PDD Holdings Inc. and ByteDance Ltd. JD’s shares climbed more than 4 percent in pre-market trading in New York.

The management shuffle was announced after JD on Thursday reported revenue grew 1.4 percent to of 242.96 billion yuan ($35 billion). That beat projections but was the company’s lowest-ever pace of expansion. It swung from a loss to net income of 6.3 billion yuan in the March quarter, helped by 2.8 billion yuan of investment gains.

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JD.com Gains as CEO Change Suggests Strategy Shift: Street Wrap

The incoming CEO, a two-decade auditing veteran who spent time with PriceWaterhouseCoopers, now takes up the task of reviving one of China’s largest and highest-profile public companies. JD’s results, the first from a major Chinese tech company for the March quarter, suggest the internet sector is making some headway in efforts to eke out top-line growth, but still struggling to regain momentum after years of punishing Covid Zero restrictions.

JD’s performance was a far cry from the double-digit percentage expansions of previous years, before Beijing’s 2021 clampdown on internet spheres from online commerce to ride-hailing chilled a once-booming, free-wheeling tech sector.

The 48-year-old outgoing CEO Xu, known for devising JD’s signature “6.18″ sales bonanza, said in a statement he was quitting to devote more time to family. His successor becomes one of the few women chiefs of a major technology company, and emphasised in the same statement that Xu will remain involved with the company.

Xu leaves behind a legacy that includes introducing the rival to Alibaba’s Nov. 11 Singles’ Day gala, pushing back against internal opposition to roll out the weeks-long equivalent event around the company’s June 18 anniversary. He also stepped up during the company’s low points — including an investigation into Liu over alleged rape in 2018 — by trimming the workforce and cutting units that weren’t contributing to growth.

What Bloomberg Intelligence says:

The unexpected retirement of JD.com’s 48-year-old CEO as it reported its first quarterly retail sales drop since 2019 suggests the e-commerce company faces heightened market-share challenges in China this year. This raises uncertainty about JD.com’s retail margin gains, which widened year-over-year in 1Q vs. the prior quarter to beat market expectations of lower profitability, through December.

- Catherine Lim and Trini Tan, analysts

JD’s earnings gave investors a sense of what to expect when Tencent Holdings Ltd., Baidu Inc. and Alibaba Group Holding Ltd. report results next week.

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Investors had bet that consumer spending and the tech sector would rebound as Beijing lifted years of sweeping restrictions that hobbled the world’s No. 2 economy. It expanded 4.5 percent in the first quarter of 2023, the fastest pace in a year, with economists expecting growth this quarter to accelerate. But economists have also pointed to slowing trade and other signs that the nascent recovery may be losing steam.

JD is now spending on incentives to ward off intensifying competition from PDD as well as social media platforms such as ByteDance. It launched a 10 billion yuan discount campaign to capture new Chinese users in March even as it pulled away from Southeast Asian e-commerce, closing its Indonesian and Thailand e-commerce sites to try and shave costs elsewhere.

Xu Lei stressed on a call with analysts that he would continue to support the company as the chairman of its advisory council, and lauded his successor for working alongside him in 2018 through JD’s “so-called darkest moment.”

On the company’s discount programs, his successor said the strategy sought to offer consumers wider price ranges and product categories, in an adjustment to post-pandemic shopping patterns. “We are confident in our ability to control the overall costs of this program,” she said. “It has limited impact on our margins.”

JD had avoided the worst of the years-long crackdown that hit Alibaba, which in March made the historic decision to split itself into six business units that could seek independent fundraising and listings.

JD.com itself has spun off several units including JD Health International Inc., and is in the process of listing its property and industrials businesses in Hong Kong. It would remain the majority owner of both companies, which haven’t disclosed fundraising plans.

By Sarah Zheng and Jane Zhang

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JD.com Beats Estimates for Quarterly Revenue

US-listed shares of the Beijing-based company rose nearly 4 percent in trading before the bell.

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