JD.com reports record first quarter, warns growth to weaken future profits

jdBEIJING: JD.com Inc logged the first profit since its 2014 listing as an expanded product line-up lured more active users, but China’s second largest e-commerce company cautioned the cost of expanding at home and abroad could crimp future income growth.

Diversifying into data, cloud and artificial intelligence services amid fierce competition in China and Southeast Asia, JD has separated its logistics unit, made new investments overseas and laid out plans to spin off it financial unit this year.

The cost of some of these investments, as well as an increasingly tough domestic market, is likely to weaken quarterly profits this year, Chief Financial Officer Sidney Huang told Reuters on Tuesday.

JD plans to set up a logistics network in Southeast Asia’s biggest e-commerce market Indonesia, which currently accounts for almost all its entire overseas business.

“The e-commerce sector in particular is very competitive… we are constantly looking for new innovations and we have to stay on top,” Huang said, without elaborating.

JD reported a net profit of 355.7 million yuan (US$51.5 million) for the first quarter, compared with a loss of 867.3 million yuan for the same period a year earlier.

Quarterly revenue came in at 76.2 billion yuan, 41% higher than the same 2016 period and topping the average estimate of 73.5 billion yuan from 14 analysts surveyed by Thomson Reuters. Active customer accounts increased by 40% to 237 million in the year ended March, the company said, without giving a quarterly breakdown.

Revenue from new businesses, including its overseas operations for the quarter, stood at 281 million yuan.

JD’s push into Indonesia coincides with a similar drive by rival Alibaba Group Holding Ltd, which last year bought a controlling stake in Southeast Asian online retailer Lazada group for about US$1 billion. Alibaba’s payment affiliate Ant Financial is also in talks to launch a payment venture in Indonesia.

Asked about the Indonesia plans, Huang said JD is replicating the direct-sale model it uses in China, where brands make use of an extensive warehouse network, compared to the marketplace model favoured by Alibaba.

“We will build that infrastructure over the next 3-5 years,” he added.

JD also said it expects the spinoff of its financial arm to be completed in the second quarter.

The firm said in November that it would seek to split off the unit to make it a fully Chinese-owned entity, allowing it to apply for licenses that Chinese laws forbid foreign-listed firms from holding, including mutual funds and securities.

JD expects second-quarter revenue at between 86.6 million and 89.1 million yuan excluding JD Finance, a growth of 33-37%, in line with analyst predictions of 36%.

It made a net profit of 0.17 yuan per American Depository Share in the first quarter, compared with a loss of 0.66 yuan a year earlier.