JD smashes profit expectations, beats on top- and bottom-lines, share price soars
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JD smashes profit expectations, beats on top- and bottom-lines, share price soars

Chinese ecommerce giant JD.com, the country’s second-largest online retailer, posted earnings for its second quarter this week that blew analysts’ expectations out of the water. It also signalled that its core business was in rude health despite trade issues between the US and China, weakness in the Chinese economy, and its own previous difficulties earlier this year. That’s a positive sign: when things are bad enough that analysts expect to see a loss, and a business comes back with a win instead, more than just chance is at play.

JD’s share price sky-rocketed this week on the back of a positive earnings report

JD Aug 16

Source: Yahoo Finance

Here are the numbers, and we’ll start with the most impressive. The Street had expected JD to make a loss in its second quarter, to the tune of -$6.3 million. When the company was able to defy these predictions, and return net income of $90.7 million, investors reacted positively to the surprise. Beyond this strong bottom-line performance, the signs are that all is good in the world of JD.com. On its top-line, it also saw better than expected performance, delivering a revenue of $22 billion. That’s a 23% climb, year on year, and outpaced analysts’ expectations for revenues of $20.9 billion. Perhaps most important, though, is the continued growth of JD’s customer base. This quarter, the company reported that it had 321.3 million active accounts on its platform – up from 310.5 million a year ago.

One of the key factors in JD’s higher profit in the second quarter was canny deal making with a number of big luxury brands like Prada and Mulberry (according to JD itself, it has partnerships with “more than 20 luxury fashion houses”). These companies use JD as their online sales channel in China – a lucrative relationship for both parties.

In a statement, CEO Richard Liu said: “JD's commitment to bringing users the best overall shopping experience continues to win over consumer mindshare. We will remain focused on leveraging technology and innovation to enhance our offerings, increase efficiency and drive shareholder value for the long term.”

Disclosure

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


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