JD.com Sales Beat, Scores $830 Million Hillhouse Investment
JD (NASDAQ:JD).com Inc. unveiled better-than-expected revenue and a major investment from Hillhouse Capital, after China’s second-biggest e-commerce firm rode a bounce-back in spending across its online malls.
Shares in JD rose 7.9% in New York after it reported a 34% jump in sales to 201.05 billion yuan ($29 billion) in the June quarter, its fastest pace of revenue growth since 2017. The company also disclosed its JD Health division would get more than $830 million from Hillhouse -- the investment firm founded by Zhang Lei with money from Yale University -- through the purchase of Series B preference shares. The funds will also be used to strengthen its pharmacy supply chain.
The company’s out-performance provides more evidence that China’s economy is among the world’s fastest to recover from the pandemic, aided by strict virus control measures and a rebound in industry output and consumer sentiment. Both JD and larger rival Alibaba (NYSE:BABA) Group Holding Ltd. racked up record sales during the annual “6.18” shopping extravaganza this year, as heavy discounting drew shoppers who had delayed purchases during the worst of Covid-19. Annual active customers grew 30% to 417 million, the quickest rate of expansion in more than two years.
The continued shift toward e-commerce has benefited JD, which is expanding into smaller towns and tapping on strategies like live-streaming to reach new customers and fend off growing competition from the likes of ByteDance Ltd.’s Douyin.
”Our supermarket category, including FMCG and fresh produce, became the single largest product category as revenue in the first half of 2020, surpassing mobile phone, home appliance, home computers,” Chief Financial Officer Sandy Ran Xu told analysts on a post-earnings call.
Read more: First Into the Virus Slump, China Is Proving the Fastest Out
What Bloomberg Intelligence Says
Operations in 2Q benefited from pent-up consumer demand due to China’s 1Q lockdown, and strong sales at the company’s “6.18” anniversary promotion, which won’t recur in 3Q. However, the rapid gain of users from lower-tier cities could drive a sustained increase in long-term demand in categories such as consumer goods, fresh produce, household and health-care products.
- Vey-Sern Ling and Tiffany Tam, analysts
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Hillhouse had backed JD before its IPO. The transaction will close in the current quarter, and the retailer will remain the majority shareholder of JD Health, according to the statement.
JD completed a second listing in Hong Kong in June, raising $3.9 billion to build its logistics and delivery network. That self-operated web of warehouses, personnel and transport links proved instrumental in controlling shipping during the worst of the pandemic, when nationwide lockdowns snarled supply lines. The shares jumped as much as 8.6% in Hong Kong on Tuesday.
Chinese retail suffered a record collapse in the first three months of 2020 but has since bounced back, though concerns remain about the strength and sustainability of domestic consumption.
“While the YoY growth rate for electronic and home appliance products is expected to normalize in 3Q20, we expect the momentum for general merchandise to persist, as the demand for consumer goods remained strong in July even without promotion,” Bocom International analysts led by Brandy Sun wrote.
(Updates with shares and analyst’s comments from the second paragraph)
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