JD.com (JD, Financial) reported its Q3 results, setting the stage for upcoming reports from rivals like PDD (PDD, Financial) and Alibaba (BABA, Financial). While JD exceeded earnings estimates, its revenue growth aligned with expectations but failed to ease concerns about China's consumer health.
China is facing economic challenges with rising job losses and a struggling real estate sector, prompting significant stimulus measures, including interest-rate cuts and reduced bank reserves. JD noted that consumer sentiment is improving, but it will take time for these measures to impact consumers fully.
- Q3 revenue grew by 5.1% year-over-year to RMB 260.39 billion, driven by an 8% increase in the general merchandise category. Growth was mainly supported by the non-discretionary supermarket category, which saw double-digit gains. JD expanded its supermarket product range, boosting shopping frequency by 20% in the quarter.
- China's stimulus includes subsidies for trade-ins of home appliances, electronics, and vehicles. JD reported increased demand for these products, with sales rising monthly throughout Q3. However, full potential remains untapped due to limited awareness and supply chain issues.
- Profitability improved, with non-GAAP operating margins up 50 basis points year-over-year to 5%, marking JD's 18th consecutive earnings beat. The company is exploring further profitability enhancements.
- JD aims to strengthen its supply chain and boost user growth and engagement. Quarterly active customers have grown at a double-digit rate year-over-year for four quarters, with Q3 seeing the highest growth. The company is also receiving positive feedback on its free shipping service and JD PLUS membership program.
Q3 highlights included increased demand for general merchandise and steady shopping frequency growth. JD is optimistic about government stimulus measures, which could boost consumer confidence by creating jobs in low-income households. However, JD's performance has not fully alleviated fears of a prolonged economic downturn in China, especially without further consumer-focused stimulus.
