JD.com suggests more logistics spend, shares slide

Shares in JD.com Inc slid Friday after the Chinese online retailer flagged to investors it may sustain spending on logistics and new initiatives to continue riding the country’s online commerce boom, Bloomberg reports.

The company reported a higher-than-expected 31 percent jump in December quarter revenue. The strong results means JD has a “strong foundation for investments in a range of growth opportunity,” Chief Financial Officer Sandy Ran Xu told analysts on Thursday. She declined to forecast margins in short term.

Investors have been concerned that JD’s margins will come under pressure as the company spends to maintain and expand its delivery network. Net margin in the first quarter will drop by 1 percentage point, Bocom analysts Brandy Sun and Connie Gu said in a research note, in part because of investments in infrastructure.

JD’s inhouse logistics network has been instrumental to buoying the company’s operations during the coronavirus disease pandemic, when lockdowns drove a record number of consumers online. That fueled a surge in e-commerce for players from Alibaba Group Holding to Pinduoduo Inc in 2020, straining delivery networks, and questions remain about whether they can sustain growth this year.

The retailer reported sales of 224.3 billion yuan (US$35 billion) in the December quarter, outpacing the 219.52 billion yuan average of analysts’ estimates. Net income was 24.3 billion yuan.

JD’s market value has more than doubled since the start of 2020 despite a broader tech selloff that began last month. The shares fell by 5.8 percent in Hong Kong trading. On Thursday, the company announced its infrastructure management affiliate was raising US$700 million in a preferred share issuance co-led by Hillhouse Capital and Warburg Pincus.

Chinese e-commerce revenue should surpass 50 percent of the country’s total retail sales this year – a first anywhere in the world, according to researcher EMarketer. JD is now preparing to spin off its logistics unit in an initial public offering that could raise roughly US$5 billion, the second debut of a subsidiary since JD Health Inc.’s 2020 coming-out party.