On the heels of positive Singles’ Day sales that saw sales rise 26 percent year-on-year to $23 billion (RMB 159.8 billion), JD.com Inc. announced its Q3 2018 financial results, which didn’t impress Wall Street and sent the online retailer’s stock tumbling to open trading on Monday. But despite the mixed quarterly earnings, China’s second-largest e-commerce platform remained upbeat on its increased net profit and expanded luxury platform TopLife, which offers brands a dedicated warehouse and consumers white-glove service.
In the report, JD stated that revenue in the quarter increased more than 25 percent from the previous year to $15.3 billion (RMB 104.8 billion), but that this sales windfall was also the company’s slowest quarterly growth to date and missed analysts’ forecasts. The e-tailer blamed a slowdown in big-ticket item sales in the quarter for the overall earning stagnation, a trend that echoed comments from Alibaba Group about its most recent earnings call earlier this month. JD.com did, however, triple its net profit year-on-year to $400 million (RMB 3 billion) and expects that trend to continue into next year. The company’s earnings per share beat Wall Street estimates for the quarter.
The company boasts Walmart Inc., Google, and the Chinese tech giant Tencent Holdings as major backers, but it reported its fulfillment expenses had increased 21.8 percent year-on-year in the third quarter, but it decreased slightly as a percentage of revenue to 7.4 percent from 7.6 percent the previous year. The company’s largest increase in expenses was in technology—a number that rose 96.4 percent year-on-year to $500 million (RMB 3.4 billion)—a necessary investment for the internet sales platform.
On the positive side, the company noted that their annual active customer accounts had increased to 305.2 million in the 12 months prior to September 30, 2018, from 266.3 million year-on year. In addition, its premium membership program, JD Plus, surpassed the ‘10 million members’ milestone in September.
The company still expects to compete with Alibaba thanks to its reputation among high-profile luxury brands like John Galliano, Buccellati, and Shang Xia, all of whom have opened shops on JD’s luxury platform TopLife. It also noted the recent addition of high-end flagship stores for cosmetics brands like L’Occitane de Provence, HOUSE 99 and Hera, as well as the fashion brands Salvatore Ferragamo and Furla. Their strong showing in the luxury market even prompted JD.com to open a hi tech warehouse specifically dedicated to its luxury brand partners selling on TopLife.
The company plans to expand its operations to more offline stores that use its big data analytics. It launched its Zu Chongzhi platform in September to analyze real-time in-store data, which it claims will improve brick-and-mortar store efficiency and profitability.
The company expects revenue growth to continue to slow in the fourth quarter as it guided for 18-23 percent year-on-year growth, which is slightly below analysts’ expectations.