Reporter Wang Yubiao
The tense atmosphere of "Double 11" has not completely dissipated, and the year-end e-commerce war has only completed a small section. During the break, JD.com submitted this "smooth landing" off-season financial report.
On November 14th, JD Group (HK09618, stock price HKD 132, market value HKD 419.9 billion) released its third quarter 2024 performance report. In the third quarter, JD Group's net revenue was RMB 260.4 billion, a year-on-year increase of 5.1%. The net profit attributable to the parent company was 11.7 billion yuan, a year-on-year increase of 47.8%.
Revenue growth is accelerating in small steps, while profit levels remain healthy. In the current fiercely competitive e-commerce market, JD's financial data continues to provide positive feedback. This is also the primary goal that JD.com CEO Xu Ran has continuously emphasized since taking office. But in order to stay competitive and win market share and time for an uncertain future, JD.com naturally cannot just seek stability.
From Xu Ran's deployment of troops, it can be seen that it is a "two pronged approach" to retaining users and addressing weaknesses. And these two data have also shown significant effect in the third quarter. One is that JD's quarterly active users and user shopping frequency have maintained double-digit growth year-on-year for three consecutive quarters; The other is that the revenue of "supermarkets" and "clothing categories" achieved double-digit year-on-year growth.
Xu Ran's CEO tenure has exceeded that of her predecessor Xu Lei. As the end of the year approaches, what kind of harvest will JD.com have? Can Xu Ran provide a strong upward curve?
3C and daily necessities continue to warm up, and the effect of "national subsidies" has not been fully released
Divided by income type, JD.com achieved positive growth in both product revenue and service revenue in the third quarter. Among them, the revenue from goods increased by 4.8% year-on-year to 204.6 billion yuan, and the revenue from services increased by 6.5% year-on-year to 55.8 billion yuan. The revenue from goods can be divided into two categories: revenue from electronic products and household appliances, and revenue from daily necessities. In the third quarter, the revenue increased by 2.7% and 8.0% year-on-year, respectively.
The Daily Economic News reporter noticed that 3C (computer, communication, consumer electronics) home appliances are JD's traditional core advantage category, and the year-on-year growth rate of revenue in the third quarter has increased. More importantly, the daily necessities category has maintained high single digit year-on-year growth for three consecutive quarters, with supermarkets and clothing categories achieving double-digit year-on-year growth.
Xu Ran mentioned during the earnings conference call that improving user experience ultimately drove the growth of the daily necessities category in the third quarter. However, the reporter learned that the healthy growth of daily necessities this year may be more due to the implementation of some new operational policies after the business adjustment last year.
Previously, Xu Ran had stated that in 2023, JD's major supermarket business underwent relatively significant business adjustments, including overall category planning, warehouse network transformation, refined operations, and some channel adjustments. These strategies will gradually be implemented in 2024.
In addition, to support the national "trade in" project, various e-commerce platforms have been deeply involved this year, which is also related to the new round of competition for the share of 3C home appliances. As one of the largest online 3C home appliance sales platforms, JD.com is also deeply involved. In March of this year, JD.com announced that it will jointly invest 6.5 billion yuan with its partners to promote the "trade in" initiative. Among them, the 3C digital and home appliance categories will receive the largest subsidies, totaling 6 billion yuan.
However, Xu Ran emphasized that the effects of the national subsidy in the third quarter have not been fully released yet. On the one hand, there is a process of market and user education, and on the other hand, the 3C home appliance category will also be limited by insufficient production capacity in the short term. From the perspective of brand owners, expanding production capacity requires a certain period of time, so some products are in short supply. However, the new support policy emphasizes expanding the variety and scale of consumer goods for replacement, which will greatly help to continue to boost consumption next year and in the future, "said Xu Ran.
In terms of net profit, JD's non GAAP attributable net profit for the third quarter was 13.2 billion yuan, an increase of 23.9% compared to the third quarter of 2023.
Retaining users is the foundation. Xu Ran is also strengthening the operation of self operated fashion categories
In addition to focusing on the growth of the two core product categories, JD.com also pays more attention to user data.
The third quarter financial report shows that the number of quarterly active users and user shopping frequency have maintained double-digit growth year-on-year for three consecutive quarters. Thanks to the increase in user activity, the orders and users of third-party merchants have also maintained rapid growth. During the just concluded "Double 11" shopping festival, JD.com announced a year-on-year increase of over 20% in the number of shopping users.
Popularity is the lifeblood of e-commerce platforms. Attracting attention, gaining traffic, and ultimately retaining users are the foundation of all e-commerce platform businesses. However, as platform user activity decreases, business growth will also disappear, ultimately affecting the overall market.
From the perspective of user data growth, it is not easy for JD.com to maintain long-term stable quarterly growth in double digits in the current situation where traffic dividends have been lost. But from another perspective, stabilizing user data has also consumed a lot of investment, resources, and energy from JD.com.
It is worth mentioning that since the beginning of this year, the continuous heavy investment in both clothing and beauty categories shows that, in addition to the stable growth of electrified and supermarket categories, JD.com is striving to explore its own "potential categories", which has become another major event for JD.com.
When answering analysts' questions, Xu Ran emphasized that the expansion of potential categories is the driving force for JD's future growth. She believes that JD's long-term strategy is to focus on user experience and user growth, and then continue to promote the expansion of potential categories, as well as the expansion of products at different prices.
Especially for the industrial belt products that are favored by users in the lower tier market, we are also focusing on investing more resources to promote business development. What is related to this is actually the continuous balance and development of the entire JD platform ecosystem, "Xu Ran further added.
According to her introduction during the earnings conference call, the fashion categories focused on clothing, beauty, etc. are still mainly operated through 3P (third-party merchants). Indeed, we are also strengthening our self operated trading capabilities in this category, but ultimately, which model to choose depends on the user's choice, "Xu Ran emphasized.
For specific investment methods, Xu Ran pointed out that in terms of products, JD.com will pay more attention to continuously optimizing platform algorithms, which means more accurate recommendations. We will also make some investment in price to satisfy the experience while minimizing the price as much as possible. We will create some differentiated capabilities in terms of service.
The reporter also noticed that JD.com disclosed the latest situation of its share repurchase plan in its financial report. JD.com stated that it has fully utilized the authorized repurchase amount under the $3 billion share repurchase plan announced in March 2024, and has adopted and announced a new share repurchase plan in August 2024, which will take effect from September 2024. According to the plan, it can repurchase up to $5 billion worth of shares (including American Depositary Shares) between the next 36 months and the end of August 2027.