JD.com revenue beats forecast after discounts boost sales

(Bloomberg) — JD.com Inc reported quarterly revenue growth of 1.7%, stronger than expected, as heavy promotional spending boosted online transactions in the face of fierce competition.

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Revenue in the September quarter reached 247.7 billion yuan ($34.2 billion), compared with analysts’ average forecast of 246.6 billion yuan. Net profit increased by 33% to RMB 7.9 billion. Its shares rose 4.5% in premarket trading in New York.

The Beijing-based company has launched a price war to capture market share from rivals such as Alibaba Group Holding Ltd and Pinduoduo Holdings Ltd at a time when consumers are cutting back on spending due to the economic downturn. JD.com is now focused on offering consumers a wider range of prices and product categories, diversifying away from its traditional focus on big-ticket items like smartphones and targeting more frugal post-pandemic shoppers.

It’s unclear whether this had the desired effect. JD.com and its larger rival Alibaba are likely to only achieve single-digit percentage growth during the just-concluded annual Double Eleven shopping festival, lagging far behind other emerging players such as ByteDance and Kuaishou Technology .

According to Bloomberg:

The e-commerce company’s operating costs may start to rise as fee subsidies for merchants and advertising spending continue to rise, which has already helped JD.com double the number of third-party sellers in the second quarter compared with a year ago. As part of a 10 billion yuan subsidy program, product prices on the platform will remain affordable until 2023, raising the possibility that this cost increase will continue into the fourth quarter.

-Catherine Lim and Trini Tan, Analysts

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Chinese consumption is sluggish, plagued by a collapse in the housing market and rising youth unemployment. Deflationary pressure intensified in October, raising concerns about China’s economic growth trajectory. Since the beginning of this year, JD.com’s share price has fallen by more than 50%.

JD.com’s results were a far cry from years of double-digit percentage expansion, after Beijing’s crackdown on internet sectors from online commerce to ride-hailing sent the entire industry into a slump. Although JD.com has avoided the worst hit in previous years, it is still struggling to regain momentum after years of punishing COVID-19 restrictions that devastated the world’s second-largest economy.

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