BRIEF: JD.com profit tumbles on surging marketing expenses

E-commerce giant JD.com Inc. (9618.HK; JD.US) announced on Tuesday that its net profit for the first quarter fell 53.2% year-on-year to 5.1 billion yuan ($751 million), while its non-GAAP profit fell about 42% to 7.4 billion yuan.

The company’s total revenue for the quarter rose 4.9% year-on-year to 316 billion yuan. Revenue from its JD Retail division increased 1.8%, while JD Logistics (2618.HK) revenue jumped 29% and new businesses revenue rose 9.1%.

The company attributed the profit decline to heavy investment in new businesses, most notably its year-old JD Food Delivery service. Marketing expenses surged 45.8% year-on-year to 15.4 billion yuan due to higher promotional spending, while fulfillment expenses rose 18.5% to 23.4 billion yuan amid continued investment in logistics and labor.

JD said its food delivery business continues to improve since its launch a year ago, benefiting from higher operating efficiency and more diversified revenue streams. The company added that average order profitability continued to improve, while the overall scale of its investment narrowed significantly from the previous quarter.

JD.com CEO Sandy Xu said the company’s annual active customer accounts reached a record high during the quarter, with both user scale and shopping frequency posting strong growth, reflecting deeper synergies across JD’s ecosystem. She added that JD Retail achieved its highest-ever first-quarter profitability, while losses in new businesses improved significantly from the previous quarter.

JD’s stock opened higher on Wednesday in Hong Kong and closed at HK$126.7 by the midday break, up 7.01%. The stock is up about 13.9% year-to-date.

By Lee Shih Ta

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