Highlights: JD Executives on Q2 2020 Earnings

Highlights: JD Executives on Q2 2020 Earnings

by Ella Kidron and Yuchuan Wang

On August 17th, JD.com reported second quarter 2020 earnings results. Net revenues grew by 33.8% in the second quarter. Annual active customers for the twelve months ended June 30, 2020 reached 417.4 million, up 29.9% compared with the twelve months ended June 30, 2019. On the earnings call to discuss the results, JD’s management team emphasized the company’s commitment to its partners, the integral role of supply chain across its businesses, as its unrelenting effort to provide the best possible experience for customers and clients alike.

On JD’s Q2 performance, CFO Sandy Xu said, “We are proud that JD played an important role to help our suppliers and users in this extraordinary time and contribute to society. As domestic consumption is still recovering from the disruptions brought by the pandemic, both the release of pent-up demand and a structural shift of consumers’ purchasing behavior from offline to online have added to our strong performance in the quarter.”

Among the highlights, general merchandise grew by 45% year over year, led by key categories such as supermarket and healthcare, demonstrating JD’s position as the leading reliable, full-category platform for consumers in China. Ms. Xu said, “Our supermarket category, including FMCG and Fresh Produce, became the single largest product category by revenue in first half of 2020, surpassing mobile phones, home appliances, and computers, our former champion categories… this steady shift demonstrates our strengthened brand recognition and consumer perception as an everything-store with increasingly broader selections.”

JD Retail CEO Xu Lei emphasized: JD Super has already become China’s largest supermarket online or offline. Going forward, we will further strengthen the establishment of our middle platform supply chain capabilities to satisfy consumers in different scenarios and provide more competitive prices. In addition, we (JD Super) will collaborate with JD Logistics on warehousing, including investments in cold chain logistics, to improve fulfillment efficiency and lower fulfillment costs. Lastly, we will keep promoting our omnichannel (strategy) to provide our supply chain capabilities to create more values not only for JD’s first-party businesses but also hundreds of thousands of offline stores.

In terms of key strategic priorities for JD Retail, Xu added that: First, we will keep opening up our supply chain. Second, we will further develop in lower-tier city markets and industrial belts. Third, we will keep promoting the building up of omnichannel capabilities. Fourth, we, including the whole JD.com group, have been strengthening our investment in technology and services and we will continue collaborating with enterprises on the business side.

JD Logistics was also a strong driver of profitability improvement from new businesses. CFO Ms. Xu mentioned on the earnings call that JD Logistics turned profitable on a non-GAAP basis in the quarter, driven by high order volume during the peak season and technology-driven productivity gains thanks to JD’s “best-in-class” fulfillment capacity. CEO of JD Logistics, Zhenhui Wang said: JD Logistics has attached great importance to the FMCG category this year. We will place more warehouses in the lower-tier markets, enabling more goods to reach customers and more customers to experience better JD Logistics services. In addition to our same- and next-day delivery program, we will provide one-hour delivery service for different categories and cities, letting our customers to choose for themselves.

For JD Health, on top of online pharmacy sales, which saw strong top line growth in Q2, JD’s online medical consultation service volume delivered 400% growth YOY as more users are aware of and get accustomed to the new service. User engagement was a key growth driver, especially lower-tier city users. In Q2, over 80% of new customers came from lower-tier cities, an improvement from previous quarters.

In terms of investments at the group level, CSO Jon Liao reiterated the company’s commitment to investing in companies which are complementary in terms of scale, scope, capability and long-term business value to build long-term strategic value. He also mentioned the company’s strong continued investment in lower-tier cities, supply chain and infrastructure.

 

*Note that all statements above are based on JD’s Q2 earnings call, and are under the Safe Harbor statement in the press release, available here: https://ir.jd.com/news-releases/news-release-details/jdcom-announces-2020-second-quarter-and-interim-financial

 

(ella@jd.com; yuchuan.wang@jd.com)

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