Date
24 September 2018
JD.com, which is locked in a battle with Alibaba Group in China's e-commerce market, has been in and out of the red for the past year. Photo: Reuters
JD.com, which is locked in a battle with Alibaba Group in China's e-commerce market, has been in and out of the red for the past year. Photo: Reuters

JD.com expects warehousing assets to help shore up earnings

JD.com, China’s second-largest e-commerce firm, is shifting management of its warehousing assets to a separate unit, a move it hopes will revive profits after it swung back to a loss in April-June, Reuters reports.

Executives were quoted as saying that they expect the new unit, which will oversee warehouse sales and warehouse management services, will help offset hefty technology investments.

JD.com currently owns roughly 2.5 million square meters of warehouse space, part of it acquired in recent years on beneficial terms with local governments that are looking to boost job creation and which will soon start to yield returns.

“(These) initiatives are yet to provide meaningful financial results but we believe we’ve made good traction since doubling down on technology last year,” CFO Sidney Huang said on Thursday.

“We expect the monetization of our logistic properties, when realized, will compensate part or all of the additional investments,” Huang was quoted as saying in a call with analysts.

Some of the revenue from the new unit would become visible in the company’s financials within six to 12 months, he said.

JD.com, which is locked in a battle with Alibaba Group for e-commerce market share in China, has been in and out of the red for the past year.

On Thursday, the company reported a second-quarter net loss of US$334.4 million amid increased investments and slower sales.

JD.com’s sales volumes are historically higher in the second quarter due to the company’s mid-year shopping festival ‘618’, an 18-day event, but profits took a hit this year when sales dropped unexpectedly toward the end of the festival, executives said.

“In the last 10 days of June we started to observe softness in our sales growth, but we’ve seen recovery in August,” said Huang.

Executives have blamed unfair competitive tactics by market leader Alibaba for harming JD.com’s clothing sales and creating a “ripple effect” that negatively affects other categories. Alibaba has previously denied its strategies are unfair.

JD.com announced a 31.2 percent rise in revenue to 122.3 billion yuan for the quarter ended June, marginally below the average forecast of analysts polled by Reuters.

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RC

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