JD.com’s loss widens on spending boost to drive sales

Bloomberg

JD.com Inc. posted a wider
quarterly loss as China’s second-largest online mall boosted marketing spending to drive sales at its mid-year shopping promotion.
The net loss was $74 million in the three months ended June, almost double the 252 million yuan loss of a year earlier. Second-quarter sales jumped 44 percent to 93.2 billion yuan, helped by a partnership with backer Wal-Mart Stores Inc.
JD.com is boosting spending to move beyond its traditional focus on electronic as it seeks a greater share of online sales against
Alibaba Group Holding Ltd. and Vipshop Holdings Ltd.
The Beijing-based company is investing heavily in delivery networks in Indonesia to expand into Southeast Asia while also promoting its own online shopping festival to drive growth.
“Marketing expense is up 63 percent year-on-year and that makes sense if they’re going to push for the Shopping Day sales,” said Kirk Boodry, an analyst at New Street Research.
Gross merchandise volume, the total value of goods sold across its platforms, surged 46 percent.
Chief Financial Officer Sidney Huang said income was eroded by increased shopping subsidies and more marketing spending to attract new customers.
These costs will likely occur in the second and fourth quarters of each year as JD attempts to reinforce two “Christmas-style” shopping events by offering shoppers discounted products.
He expects capital spending to rise as the company expands seven large distribution hubs and distribution centers across the country. Warehouse space grew by 1.3 million square metres in the three months ended in June – roughly equivalent to more than 220 NFL football fields.
“We expect to incur more capital expenditure in the second half,” he said.
The loss comes just one quarter after the company founded by billionaire Richard Liu unveiled its first quarterly net income as a public company in May, which had calmed concerns about rising spending and sent its shares almost 30 percent higher since.
Growing middle-class spending is propping up e-commerce in general. JD’s GMV hit 234.8 billion yuan in the June quarter, up from 160.4 billion yuan a year earlier. Across China, online retail sales rose 33.4 percent in the first half of 2017, according to data from State Council Information Office.