In the post-market hours of November 15 (Beijing Time), JD.com (9618.HK) revealed its third-quarter financial results, showing a revenue of 247.7 billion yuan, a modest year-over-year increase of 1.7%. This growth rate marks a slowdown from the 7.5% increase seen in the previous quarter. The company's operating profit for the quarter was 9.3 billion yuan, up from 8.7 billion yuan in the same period last year.
Under non-U.S. GAAP, JD.com's net profit for the third quarter reached a historic high of 10.6 billion yuan, compared to 10 billion yuan in the same period last year. The company's CEO, Xu Ran, attributed this success to the effectiveness of JD.com's low-price strategy and platform ecosystem development, along with the company's long-standing supply chain advantages.
Core Retail Business and Cost Management
The core retail business directly related to e-commerce brought in revenue of 212.1 billion yuan, a slight increase of 0.1% year-over-year, compared to a 5% growth rate in the previous quarter. The operating profit for this segment was 11 billion yuan, slightly up from 10.9 billion yuan last year.
Since focusing on a low-price strategy, JD.com has launched initiatives like "billions in subsidies" and "free shipping on orders over 59 yuan for self-operated goods." During the Double 11 shopping festival, the company heavily promoted its "genuinely cheap" and "real low prices" philosophy. As a result, the company's marketing expenses in the third quarter increased by 400 million yuan, a 4.6% year-over-year rise, mainly due to increased promotional activities. Fulfillment expenses, which include procurement, warehousing, delivery, customer service, and payment, rose by 800 million yuan, a 6.1% increase, primarily due to the free shipping policy.
JD.com's R&D and administrative expenses both saw reductions this quarter, decreasing by 7.8% and 5.6%, respectively.
Another major focus for JD.com this year has been the development of its merchant ecosystem, improving its "self-operated-POP (third-party merchants)" system. In the third quarter, the overall number of merchants on JD.com maintained triple-digit growth, with significant increases in both the number and GMV (Gross Merchandise Volume) of POP merchants. According to the company's management, the future target is to maintain a GMV ratio of 4:6 between self-operated and POP merchants.
JD.com's revenue comprises goods and services, with service revenue mainly including platform advertising, logistics, and other income. In the first nine months of the year, logistics revenue was 9.2 billion yuan, up 46%, while advertising revenue was 6.1 billion yuan, down 6.5%.
Goods revenue primarily includes digital home appliances and daily necessities. In the first nine months, revenue from digital home appliances was 38.8 billion yuan, up 3.8%, while daily necessities brought in 23.6 billion yuan, down 6.7%. Total goods revenue was 62.4 billion yuan, a decrease of 0.4%.
Data from the National Bureau of Statistics shows that from January to September this year, national online retail sales grew by 11.6%, with physical goods online retail sales increasing by 8.9%, mainly in food, clothing, and utility items. However, the overall retail sales of consumer goods (including online and offline) grew by 6.8%, with home appliances being one of the most impacted segments, showing a decline of 0.3% compared to last year. This indicates that JD.com's goods revenue performance differs somewhat from the overall market trend.
Leadership Change in JD Retail
On the evening of the financial report release, JD.com also announced a leadership change in its retail business: Xu Ran, CEO of JD.com Group, will also take on the role of CEO of JD Retail Group, succeeding Xin Lijun, who has been appointed to another position. This decision took effect immediately upon announcement.
Xin Lijun joined JD.com in October 2012 and has held various positions, including President of JD Retail's Life Services Business Group and CEO of JD Health. In September 2021, following an organizational restructuring, Xin replaced Xu Lei as the CEO of JD Retail, serving a term of just over two years.
Xu Ran expressed gratitude for Xin Lijun's contributions to implementing JD.com's low-price strategy and assured that the overall strategy of JD Retail would remain unchanged going forward.
Following the disclosure of the financial report, JD.com's stock price rose by more than 6% in post-market trading in Hong Kong.