JD.com beats its own expectations in fourth quarter of 2018
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JD.com beats its own expectations in fourth quarter of 2018

JD.com, China’s second-biggest online retailer after internet giant Alibaba, reported earnings for the fourth quarter of 2018 this week, reassuring investors that the company’s underlying business remains on-track despite significant headwinds. Those headwinds, as anyone who follows the news will already know, include the on-going trade war between China and the US, and a slowdown in the Chinese economy. JD.com said that, while demand petered out for big-ticket electrical goods, it was able to close the gap with greater sales of lower-priced products.

JD.com’s share price has appreciated by 34%, year to date

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Source: Yahoo Finance

JD saw 352 million active user accounts in its fourth quarter, a 20% year on year rise. That spurred on sales growth, which, measured in constant currencies, rose by 22% against the same period in the previous year. This overshot the company’s own guidance for 20% sales growth in the quarter, and also highlights that JD is not only bringing more people onto its platform, but also convincing people to spend more – despite aforementioned headwinds. As you might imagine, given this growth, JD is pumping more cash into tech and content: in the fourth quarter of 2018, it spent 2.6% of revenue on these areas – a year earlier, just 1.9%.

In an earnings call, the company’s CEO, Richard Liu, brought attention to the diversification of JD’s business model, saying: “During the fourth quarter of 2018, our net revenues grew 22.4%, a solid performance on top of an exceptionally strong fourth quarter in 2017 despite relatively soft consumption in large ticket electronics and appliance categories," Liu said. "Revenues from general merchandise categories grew 38% during the quarter, driven by home goods, skincare, and cosmetics categories. In addition, fulfilled marketplace GMV again grew over 40% year-over-year, as we continue to improve marketplace operations.”

Disclosure
Dominion holds JD.com in its Global Trends Ecommerce Fund.


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