JD.com (NASDAQ: JD), the largest online retailer in China, just reported results for the first quarter of 2018. The e-tailer beat its own revenue guidance by a wide margin while its GAAP earnings grew more than eight times larger year over year.
Let's have a closer look at JD's first quarter.
JD's first-quarter results: The raw numbers
The JD shares you can access through the Nasdaq stock exchange are American depositary shares, each one representing two Class A shares of the company. Only company insiders and JD's underwriters have direct access to Class A or super-voting Class B shares, as these share classes don't actually trade on any other stock exchange.
Net income from continuing operations
GAAP earnings per ADS (diluted)
What happened with JD this quarter?
- By the end of March, JD had 301.8 million active customer accounts. That's a 28% year-over-year increase and up from 293 million active accounts at the end of the fourth quarter.
- JD's online retail sales rose 31% year over year, counted in Chinese Renminbi. Logistics service revenues, related to JD acting as a fulfillment platform for a growing network of third-party e-commerce sellers, jumped 60% higher. Management expects service shipments to pass the in-house retail platform roughly five years from now.
- Among the company's operating costs, JD's technology and content budget nearly doubled compared to the year-ago period. There were no big one-time expenses baked into this increase, just larger budgets for R&D operations and technology infrastructure investments.
- The infrastructure investments of the first quarter included the opening of 29 new warehouses.
What management had to say
In a prepared statement, CEO Richard Liu underscored how Chinese consumers are embracing e-commerce concepts right now.
"Our core e-commerce business performed very well in the first quarter, as consumers continue to migrate to our model of convenient and trusted retail," Liu stated. "Our 'Retail as a Service' strategy is also gaining momentum as brands, partners and companies in a variety of industries increasingly look to leverage JD's unmatched technological infrastructure to take their businesses to the next level."
Building on Liu's statements, CFO Sidney Huang said that JD is maintaining "a healthy balance between profitability and investing for the future." In other words, excess operating profits are being converted into larger R&D expenses. That's how JD is chasing sustainable growth for the long term.
Second-quarter sales are expected to rise roughly 31% above the same period of 2017, excluding any impact from last year's divestiture of JD Finance. This will be the last report that compares to a year-ago period with exposure to JD Finance.
If the top-line growth target seems low, keep in mind that JD has a habit of underpromising only to overdeliver. For example, the company expected to report something like 32% sales growth in this first-quarter report, a target that was exceeded by approximately $400 million.
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