Mar 4, 2020| CFO Sidney Huang: Retirement and Pre-Planned Transition of Role to Sandy Xu


On March 2, announced fourth quarter and full year 2019 earnings. Concurrent with the earnings announcement, Sidney Huang, current CFO of announced that he will retire in coming September when he will turn 55, the “common“ age for CFOs to retire, and that Sandy Xu, current Senior Vice President of and CFO of JD Retail will take the helm in a pre-planned transition. Sandy Xu will officially come into the role beginning in June, leaving ample time for a seamless transition until Sidney’ retirement. The full press release on this announcement can be found here: 

Sidney Huang, current CFO of announced that he will retire in coming September when he will turn 55, the “common“ age for CFOs to retire

Below are Sidney’s opening remarks from the earnings call, in which he provides financial highlights, and further explains this transition plan.

Note that the Safe Harbor statements in the earnings press release apply to all remarks made on the call, and are below the remarks for convenience as well.

Thank you very much, Richard for the kind words. Hello everyone. Thank you for joining us today.

I’ll go through the quarterly updates and financial outlook before giving a few words on the succession plan.

We are pleased to deliver another strong set of results for the fourth quarter of 2019. Our net revenue growth exceeded the high end of our guidance, reaching 26.6%, driven by a highly successful Singles Day sales promotion season and our previously announced reinvestment strategies focusing on everyday low prices, enhanced user engagement and logistics services in lower tier regions. The strong top line growth was accompanied by robust user growth and strong traffic momentum. In particular, we saw 28mn net additional customers since September 2019, reaching a total of 362 million active customers in the past 12 months. This is our biggest quarterly net addition for the past 3 years. In the meantime, our mobile DAU grew 38% in Q4, the fastest in 8 quarters! We continued to make progress in lower tier regions across China through innovative marketing activities, more diverse product offerings and improved logistics services. Similar to Q3, over 70% of new customers in Q4 came from lower tier cities.

Category wise, general merchandise achieved accelerated growth of 37%, the highest growth rate for the past 4 quarters, led by food and beverage, fresh produce, cosmetics, healthcare and home products. Net service revenues grew by 44% year-over-year and contributed 12.3% to our overall revenues, driven by strong momentum from third-party logistics and advertising revenues. For the full year of 2019, our net revenues increased by 24.9% to RMB 577 billion RMB or USD 83 billion and continued to outgrow the industry across most major categories, thanks to the continuously improving and differentiated customer experience.

In particular, general merchandise revenues grew by 34% during the year, as we successfully cultivated customer shopping behavior in traditionally offline focused categories such as FMCG. Net service revenues grew over 44% and contributed 11.5% to our total revenues in 2019, up from 9.9% in 2018, as we leveraged our supply chain and technology capabilities to better serve our business partners.

Fulfilled gross margin, defined as revenue minus costs and fulfillment expenses and divided by revenue, remained relatively stable at 7.6% in the 4th quarter, compared to the same quarter last year, despite heavy reinvestments in everyday low prices and logistics service levels in lower tier regions. On a full-year basis, fulfilled gross margin expanded 88 basis points in 2019, which we believe was a better measure of the improving fundamentals across varying categories, driven by economies of scale and technology-based efficiency.

Specifically, the fulfilment expense ratio in the 4th quarter was 6.4%, down from 6.6% in the same quarter of 2018. For the full year of 2019, the fulfilment expense ratio improved 52 basis points to 6.4%, the best level in 6 years since our IPO, even though we have been providing the most competitive compensation and benefits to our logistics staff, who have now become the hallmark of’s premium service to consumers nationwide.

Our marketing expense ratio was 4.8% in the 4th quarter of 2019, comparable to the same quarter last year, and the full year marketing expense ratio in 2019 was 3.9%, down from 4.2% in 2018, reflecting our more refined marketing strategy with improving ROI.

Our R&D and G&A expenses in the fourth quarter were relatively stable compared to the prior year quarter. On a full-year basis, R&D and G&A expense ratios improved 9 bps and 17 bps, respectively, compared to 2018.

As a result, our non-GAAP operating income increased 125% to RMB 704 million in Q4. On a full-year basis, our non-GAAP operating income jumped 364% to RMB 8.9 billion, and our GAAP operating income reached RMB 9 billion, slightly higher than the non-GAAP measure as we conservatively excluded the RMB 3.9 billion gain on sale of development properties during 2019. This is nevertheless a core income for our logistics asset management business, so it is part of our new business’ operating income. From the group level, we continue to exclude it from our non-GAAP operating income and non-GAAP net income due to its relatively non-recurring nature at this time. On the segment basis, non-GAAP operating income of JD Retail Group increased by 95% to RMB 13.8 billion in 2019 with an operating margin of 2.5%, up 92 basis points from the 2018 level. The non-GAAP expense ratio dropped to 12.3%, the lowest level in 4 years.

Moving to the bottom line: our full year non-GAAP net income attributable to ordinary shareholders increased by 211% to RMB 10.7 mainly supported by our expanding fulfilled gross margin and improving operating efficiency, both driven by economies of scale. On the GAAP basis, net income attributable to ordinary shareholders reached a record RMB 12.2 billion, which included RMB 3.5 billion of fair value change in long-term investments.

Our free cash flow for the trailing 12 months also set a new record of RMB 19.5 billion, driven by over RMB 20 billion of operating cash flow and over RMB 2 billion of net cash flow from our logistics property management business.  Our trailing 12 months free cash flow was 86% higher than our non-GAAP net income in the same period.

In summary, finished a remarkable year with robust revenue growth, solid profitability and free cash flow, and – most importantly – accelerating user growth. This is supported by our customer-centric focus, evidenced by the continuously improving net promotion scores (NPS), our No. 1 internal KPI, as well as our persistent investments in tech-based infrastructure and in our people.

This long-term approach to running our business has also proven its unique advantage during the battle against the coronavirus during recent weeks. Thanks to our years of investments in our self-operated, proprietary supply chain and logistics network, was able to resume full operations very quickly after the Chinese New Year and has been in a unique position to provide broad product selection and uninterrupted timely service to our customers in most parts of the country, as people turned to e-commerce for daily groceries and other necessities. We are very privileged to have been a unique force in fighting this challenging battle.

As a result, while large-ticket durable goods and discretionary products have been negatively affected by the outbreak, the consumer staple categories such as groceries, fresh produce, healthcare and household products are in greater online demand during the past five weeks, and was among the few companies – and, in many cases – the only major platform that could fulfill the orders. Although these are not the most profitable categories, we also implemented strict policies to prohibit any price increases during this time, we are happy to be in a position to support people’s livelihood in this difficult time and become a lifeline for millions of our existing and new customers.

Now on the financial outlook, it is obviously difficult to assess given the uncertain nature of the coronavirus situation. However, based on the past two months’ preliminary results, we do expect our net revenues to continue growing in double digits in the first quarter, thanks to the resilience of our unique business model. In fact, the level of user activities on our platform has accelerated in recent weeks. Daily active customers and the number of fulfilled orders have both been growing at a faster pace than the level in the prior year, so we hope, after the COVID-19 is over, we can quickly resume the robust growth momentum as well as the improving margin trend. With the greater consumer mindshare we have earned during this turbulent time with our existing and newly engaged customers, we are more confident about our market position and our mid- to long-term growth prospects.

Lastly, regarding the CFO succession plan, I would like to point out that this is a pre-planned and well prepared transition. Many of you have met with Sandy in the three international NDRs we conducted together last year. She is a highly seasoned financial executive, and has also earned tremendous respect internally through her outstanding contribution to JD Retail’s financial and operational improvements in 2019 as JD Retail’s CFO. So I feel fortunate to be able to pass my role into good hands before I reach 55, the ideal retirement age I had planned for myself. It’s been truly an honor to have served over the past six and a half years and work with so many talented colleagues who have grown the company by over 700% in six years, and I want to thank Richard for giving me this invaluable opportunity and for the friendship and trust we’ve built along the way.

This concludes my prepared remarks, and we can now move to the Q&A session.

Safe Harbor Statement (from the earnings press release)

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” “confident” and similar statements. Among other things, the business outlook and quotations from management in this announcement, as well as’s strategic and operational plans, contain forward-looking statements. may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission (the “SEC”), in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following:’s growth strategies; its future business development, results of operations and financial condition; its ability to attract and retain new customers and to increase revenues generated from repeat customers; its expectations regarding demand for and market acceptance of its products and services; trends and competition in China’s e-commerce market; changes in its revenues and certain cost or expense items; the expected growth of the Chinese e-commerce market; Chinese governmental policies relating to’s industry and general economic conditions in China. Further information regarding these and other risks is included in’s filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and undertakes no obligation to update any forward-looking statement, except as required under applicable law.