JD.com tries to calm investors after decline

Chinese e-commerce giant JD.com's founder Richard Liu said he will shift his focus to concentrate on new businesses and strategy. US prosecutors are considering whether to charge him over rape allegations.
Chinese e-commerce giant JD.com's founder Richard Liu said he will shift his focus to concentrate on new businesses and strategy. US prosecutors are considering whether to charge him over rape allegations.PHOTO: REUTERS

First call since founder's US arrest comes amid rising competition

BEIJING • JD.com founder Richard Liu is struggling to reassure investors of his e-commerce giant's prospects amid rising competition and a global trade war, even as US prosecutors consider whether to charge him over rape allegations.

JD's American depositary receipts slid 8.4 per cent in US trading to the lowest in more than two years after a disappointing earnings report and Mr Liu's first investor conference call since his arrest in the United States. The company on Monday reported lower-than-projected revenue and its first sequential fall in annual active customers since listing.

Mr Liu said on the call he will shift his focus to concentrate on new businesses and strategy while letting his subordinates handle mature operations at China's second-largest e-commerce company. Sales for the third quarter reached 104.8 billion yuan (S$20.7 billion) compared with the 105.7 billion yuan average of analysts' estimates.

"For me personally, I will focus more on new businesses," Mr Liu said through a translator. He later added that strategy, culture and teams would be his other three key priorities.

He has denied any wrongdoing after the arrest, but the authorities are still deliberating whether to charge him with a crime. He did not speak about the rape allegations, nor did he suggest any management change was related to them.

Chief financial officer Sidney Huang fielded the only question on that issue, and claimed it was not expected to have a material impact on the business and declined to comment further.

His team faces a tough challenge as established rival Alibaba Group Holding and popular newcomers like Pinduoduo fight to win growth and market share. The number of customers who bought products or services on JD over the past 12 months, a statistic referred to as "annual active customers", fell by 8.6 million between June and September to 305.2 million - the first decline at the company since it listed shares in New York in 2014.

Further evidence of the slowdown was seen in the company's guidance - it predicted sales during the current quarter of 130 billion yuan to 135 billion yuan, the midpoint of which is about 1.4 per cent below the 134.3 billion yuan that analysts had expected.

And while net income for the quarter jumped to 3 billion yuan, from 1 billion yuan a year earlier, that included fair value changes of 3.6 billion yuan. That mainly represented gains on its stake in luxury marketplace Farfetch, which had an US$855 million (S$1.2 billion) IPO in September.

"The expending investment may cloud JD Mall's operating profit margin in 2H18. Meanwhile, investment in JD logistics and talents recruitment should continue as well," China International Capital Corporation analyst Natalie Wu said in a note to clients before the earnings report. "We see high chances for margin pressure to continue into 2019."

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A version of this article appeared in the print edition of The Straits Times on November 21, 2018, with the headline 'JD.com tries to calm investors after decline'. Print Edition | Subscribe