Chinese online retailer JD posted mixed results for the first quarter of this year on Tuesday. The company beat market expectations on revenue but recorded its slowest revenue growth as a public company as net losses widened for the quarter.

Why it matters: JD, along with rivals including Alibaba, faces several headwinds, from Covid-19 lockdowns in many Chinese cities to sluggish retail consumption to a weak macroeconomic outlook.

  • The revenue growth rates of major Chinese e-commerce tech giants have been hitting new lows since late last year. JD rivals Alibaba and Pinduoduo, which have yet to release their first-quarter results, recorded their slowest revenue growth for the fourth quarter of last year.
  • These companies are adjusting their operational structures and product lines to adapt to a challenging economic environment.

Details: JD’s total revenue increased 18% year-on-year to RMB 239.7 billion ($37.8 billion) for the first quarter of this year, beating the $35.6 billion high-end estimation compiled by Yahoo Finance. However, this is its slowest growth since JD went public on the US market in 2014.

  • In the first quarter, total revenue for the company’s core retail business increased 17% year-on-year to RMB 217.5 billion, while the company’s second-largest business segment, JD Logistics, climbed by 22% to RMB 27.4 billion compared with the same period last year.
  • The company’s net loss for the reporting period was RMB 3 billion compared to a net income of RMB 3.6 billion one year ago. These increased costs and expenses related to investment in infrastructure, research and development, as well as order fulfillment and employee benefits, which were hiked up by recent lockdowns in Chinese cities.
  • “Since the start of 2022, we have seen many challenges arise in our external environment, including the Covid resurgence, supply chain disruptions, and weak consumer sentiment, among others,” JD’s chief executive officer Xu Lei said in the company’s earnings call, held on Tuesday.
  • Recent omicron outbreaks in China have a much more significant impact on the supply chain than in 2021 because of higher contagion rates, Xu pointed out. While the Covid-19 outbreak in 2020 brought “some positive effect” to the internet and e-commerce sectors by accelerating the online migration of users, the ongoing outbreak has “hit both online and offline enterprises heavily.”  

Context: On Tuesday, China’s top political advisory body held a consultation session to promote the digital economy. Vice Premier Liu He emphasized support for the platform economy and the list of digital companies overseas.

  • China’s online retail sales increased 6.6% in the first quarter of this year, the slowest growth rate since June 2020, according to data from China’s National Bureau of Statistics. On the bright side, more consumers have chosen to buy goods online over the past two years. The online retail sales for physical goods accounted for 23.8% of total retail consumer goods sales in the four months ending April, up from 18.6% for the same period in 2019.

Emma Lee

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.