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Impressive Result of JD.com in Q1 2020 Despite COVID-19

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JD.com (NASDAQ: JD) on 15th May 2020 announced the result for the first quarter of 2020. The company was able to deliver results better than the expectation of investors as it remains operational during the coronavirus crisis. The company saw an increase in its revenue by 20.7% over a year.

Financial Highlights from the Q1 2020 result are:

  1. Net Revenue: In Q1 2020, net revenue generated by the company was RMB146.2 billion (US$20.6 billion), increased by 20.7% from RMB121 billion in Q1 2019.
  2. Income from operation: Company was able to earn RMB2.3 billion (US$0.3 billion) in Q1 2020 with respect to RMB1.2 billion earned in the same period of 2019.
  3. Gross Margin: Gross Margin in the first quarter of this year was 8.3% compared to 8.4% reported in the same period of 2019.
  4. Cost of Revenue: The Company witnessed an increase in the cost of revenue by 20.2% due to growth in logistics and online retail business provided to third parties. In Q1 2020, the cost of revenue that occurred by the company was RMB123.7 billion (US$17.5 billion) compared to RMB102.9 billion occurred in Q1 2019.
  5. Fulfillment Expenses: Fulfilment expense includes delivery, warehouse, procurement, customer service, and online payment processing cost. Fulfillment expense reported by the company in the first quarter of 2020 was RMB10.4 billion (US$1.5 billion), increased by 29% from RMB8.1 billion reported year ago.
  6. Marketing Expense: Company has spent RMB4.5 billion (US$0.6 billion) as a marketing expense for Q1 2020, increased by 13.4% from RMB3.9 billion in Q1 2019.
  7. EBITDA: In the first quarter of 2020, EBITDA of JD.com was RMB4.5 billion (US$0.6 billion) compare to RMB3.2 billion in the first quarter of 2019. EBITDA margin for the first quarter of 2019 and 2020 was 3.1% and 2.6% respectively.
  8. Net Income: Company was able to earn a net income of RMB1.1 billion (US$0.2 billion) in Q1 2020, compare to RMB7.3 billion earn in Q1 2019.
  9. Cash & cash Equivalents: Total sum of Cash and cash equivalents, short term investment, and restricted cash at the end of the first quarter of 2020 was RMB75.1 billion (US$10.6 billion).
  10. Annual Active customer account: Total annual active customer account at the end Q1 2020 was 387.4 million, increased by 24.8% from 310.5 million at the end of Q1 2019.
Source: Business Quant

JD.com is supporting the community to fight COVID-19. Company has donated approximately 10 million medical supplies such as face mask, ventilators, protective goggles etc to different countries around the world. In China, the company is providing transportation facilities and supply of essential daily items in needy areas.

JD.com’s retail segment saw impressive growth in Q1 2020. The company took several initiatives to increase the revenue in this segment. Since January, the company was able to attract approximately 20 premium brands to use their platform for selling the products online. World’s premium leather brands such as Delvaux, MSGM, MACKAGE, and Herschel Supply have launched online stone on JD for selling their products. Revenue generated in the retail segment in Q1 2020 was RMB139.4 billion (US$19.6 billion), increased by approximately 20% from RMB116.1 billion earned in Q1 2019. Revenue generated from the retail segment was approximately 95% of total net revenue.

To boost the sales of electronics in COVID-19, JD.com in this quarter organised an online product launch for the leading mobile phone brands Xiaomi, Huawei, and Samsung. As people were unable to visit the physical store, so online consultation about the products were provided to the customer. Revenue generated from the electronics and home appliance category in Q1 2020 was RMB77.6 billion ($10.9 billion) compared to RMB70.7 billion in Q1 2019. As the cost structure of JD.com in the electronics and home appliance category is 50% cheaper than its peer, so this provides an advantage to the company. China government’s data claims that sales of electronics have declined by 21% in the country in this quarter but JD.com outperformed in this category and managed to increase its sales by 10%.

JD logistics launched ‘Mobile fresh basket’, this is an initiative taken by JD.com where fresh products are supplied to the customer from local agriculture producers. JD logistics also expanded its business by doing partnerships with pharma companies, hospitals, schools, and other training institutes for distributing medicine, insulin, books, and other learning material. Logistics and other service revenue segment was able to generate revenue of RMB 6.5 billion (US$ 0.9 billion) in Q1 2020, increased by approximately 35% with respect to RMB 4.5 billion in Q1 2019.

JD-MRO is an e-commerce platform and subsidiary of JD.com that specializes in industrial maintenance, repair, and operations products and service and also provides supply chain solutions to the corporates. On 24th April 2020, the company had announced non-redeemable series A preferred share financing of JD MRO. GGV Capital, Sequoia Capital China, and CPE are the investor for this deal. Company plans to raise US$ 230 million, representing a 10.7% stake in JD MRO. Post this deal estimated market value of JD MRO will be over 2 billion.

In the second quarter of 2020, the company claims that it will be able to generate revenue between RMB180 billion and RMB195 billion with a growth rate of 20% to 30% with respect to the second quarter of 2019. JD.com is a leading e-commerce company in China, businesses have been hit in Q1 2020 due to COVID-19, but JD.com managed to increase in sales. Analyzing the quarterly report and other fundamentals, JD.com will be able to achieve its target in the second quarter of 2020.

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