JD.com Profit Surges In Second Quarter After Slashing Prices, Installing Trade-in Programme

Chinese online shopping giant JD.com reported a 92 per cent year-on-year jump in quarterly net income to 12.6 billion yuan (US$1.7 billion), despite a flattish revenue, as better operational efficiencies helped the company navigate intensifying competition in the domestic e-commerce industry.

During the quarter ended June 30, the company achieved “growing economies of scale and procurement efficiencies” that allowed it to “bring users everyday low prices without sacrificing quality”, said chief executive Sandy Xu Ran in a statement on Thursday.

Net revenues rose 1.2 per cent to 291.4 billion yuan from the same period a year ago.

JD.com has been engaged in an escalating price war with major rivals, including budget retailer Pinduoduo and Alibaba Group Holding, owner of the South China Morning Post. Industry players have been resorting to price cuts among other strategies to entice consumers who have kept their purse strings tight under a weak economy.

JD.com’s Hong Kong-listed shares closed 1.44 per cent lower at HK$99.35 on Thursday, ahead of the earnings results.

JD Retail – which consists of JD.com’s bread-and-butter businesses of e-commerce, as well as JD Health and JD Industrials – raked in 257 billion yuan in revenue in the June quarter, marking a 1.5 per cent increase from a year earlier.

While China’s retail sales growth slowed from 3.7 per cent in May to 2 per cent in June, online retail grew nearly 10 per cent in the first half of the year, reaching 7.1 trillion yuan, according to data published by the National Bureau of Statistics.

JD.com committed more than 6.5 billion yuan to that programme, with much of that being earmarked for subsidising consumers who trade in their home appliances and electronic goods, such as personal computers and communication devices, said Lei Sun, an executive at the Beijing-based firm’s home appliances and supplies unit, in May.

He expected more than 30 million home appliances and consumer items to be traded in through the company’s platform this year.

JD Logistics, which covers both internal and external logistics operations, reported 44.2 billion yuan in revenue during the June quarter, up 7.7 per cent from a year earlier.

Revenue from the New Businesses group – which includes the on-demand delivery platform Dada, JD Property and overseas enterprises – plunged nearly 35 per cent per cent year on year to 4.6 billion yuan.