JD.com, Inc. reported its slowest quarterly revenue growth since listing, indicating that China's second-largest e-commerce firm is feeling the heat from mounting competition in an increasingly saturated domestic market.
JD.com's revenue for the three months to March, while ahead of analysts' average forecast, marks a fifth quarter of slower growth for the retailer, at a time when Chinese e-commerce companies, including key rival Alibaba Group Holding Ltd, are grappling with a crowded market.
Both JD.com and Alibaba have been investing heavily in new business, in an effort to tap fresh markets, but this has hurt their margins, as indicated by their latest financial results.
Slim Margins
JD.com posted 101.1 billion yuan ($15.88 billion) in revenue for the first quarter, versus analysts' average estimate of 98.9 billion yuan, according to Thomson Reuters I/B/E/S.
That was up 33% from a year ago – its slowest growth on record. At its peak in 2015, JD.com was clocking quarterly increases of around 60%.
The retailer said that it expected revenues to rise in the second quarter, driven by its flagship sale event, 618.
It posted a net gain of 1.04 yuan per American depositary share, versus 0.17 yuan a year earlier, even as margins were squeezed by investments in new business lines such as overseas expansion and cloud and logistics projects.
Last week, Alibaba also reported slim margins due to a similar spending spree in new businesses.
Raising Capital
JD.com has opened unmanned stores, spun off its logistics unit, and invested billions of dollars in other markets like Indonesia and Vietnam, similar to initiatives by Alibaba.
Its finance unit is seeking to raise around 12 billion yuan in a deal that would value it at over $20 billion, Reuters has reported. A slew of Chinese fintech firms, including Alibaba's Ant Financial, are also looking to raise capital.
JD.com said that annual active customers for the first quarter rose to 301.8 million, up 27.6% from a year earlier.
It expects second-quarter revenue to be between 120 and 124 billion yuan, up 29-33%, in line with analyst estimates of a 30.8% increase.
Sales are seasonally low for the country's e-commerce firms in the March quarter, but they are expected to pick up in the June quarter, around JD.com's flagship 618 sale event, China's second-largest online shopping event after Singles' Day.
JD.com shares have dropped almost 12% since the company flagged in its fourth-quarter results that beefed-up investments were weighing on the bottom line.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
