FILE PHOTO: A sign of China's e-commerce company JD.com is seen at CES (Consumer Electronics Show) Asia 2016 in Shanghai, China, May 12, 2016. REUTERS/Aly Song/File Photo
HONG KONG: JD.com Inc shares fell after the company reported a sharp drop in year-end revenue growth as Chinese shoppers reined in spending, and cautioned a recovery will take time.
Its wariness comes despite signs of a rapid rebound in consumer spending in China in recent weeks, underlining the uncertainty that hangs over the world’s biggest manufacturing nation.
China’s second-largest online retailer said revenue rose 7% from October to December, down from 23% growth a year earlier.
It and larger rival Alibaba Group Holding Ltd have grappled with weak consumption sentiment since the world’s No. 2 economy buckled under the weight of China’s rigid Covid control measures.
Total revenue may fall by 1% on year in the three months to March, according to Jefferies analyst Thomas Chong, who said the recovery in overall domestic consumption this quarter may be sluggish.
JD’s shares fell as much as 12% in Hong Kong on Friday to their lowest level since November.
China’s exports and imports continued to decline in the first two months of 2023, clouding the outlook for an economy gradually recovering from the Covid years and waves of infection.
Economists expect consumption to be the main driver of gross domestic product this year, but the data showed a slowdown in urbanisation and a rise in inequality in 2022, two trends which could slow private spending.
Alibaba had reported a mere 2.1% rise in quarterly revenue in 2022’s final three months, underscoring the economic uncertainty that’s prevailed even after China abolished Covid restrictions in December.
Like Alibaba and Tencent Holdings Ltd, JD faces intensified competition from up-and-comers such as PDD Holdings Inc and ByteDance Ltd, and has balanced tightened cost controls with targeted measures to shore up its market share.
JD is closing its Indonesia and Thailand shopping sites while launching a 10 billion yuan (US$1.4bil or RM6.3bil) discount programme back home, spurring worries of a new wave of competition in Chinese online commerce.
While voicing “cautious optimism” regarding China’s consumption rebound, JD chief executive officer Xu Lei told analysts on a conference call the pace of recovery ahead hinges on consumer confidence. Demand would likely pick up pace in the second half of the year, the company said.
The company expects to control its overall marketing costs, in part by roping in merchants to help control the expense from discounts.
“What we hope to do is to transform our marketing strategy from focusing on big sales to creating an environment of everyday low prices, gradually shifting people’s shopping behaviour,” Lei said. — Bloomberg
