JD.com Q2 conference call: Core retail shows steady growth, reiterates long-term strategy of "quality delivery," focuses on user experience without engaging in price wars

On the 14th, JD.com held a Q2 earnings conference call. The management reiterated its commitment to long-term investment, striving for synergistic growth with its core business. The financial report released on the same day showed that JD.com's Q2 revenue reached 356.7 billion yuan, a year-on-year increase of 22.4%, but net profit saw a significant decline. Revenue from new business segments soared 198.8% year-on-year, mainly driven by JD.com’s food delivery service. However, the operating loss for this segment sharply widened from 700 million yuan in the same period last year to 14.8 billion yuan, with an operating profit margin of negative 106.7%. In the fiercely competitive food delivery market, JD.com has clarified its long-term strategy. Management stated during the call that food delivery and instant retail are important strategic directions for the company, with the goal of establishing a sustainable business model for five, ten, or even twenty years, rather than pursuing short-term results. Its differentiation lies in the "quality delivery" model. Some excessive competitive behaviors are "unsustainable" and disrupt market order; JD.com is currently more focused on enhancing its platform system and user experience rather than getting involved in price wars. Management also revealed that food delivery users exhibit cross-purchase behavior in categories such as JD.com’s supermarkets, with conversion rates continuously improving. Regarding investments in new businesses, management stated that while the layout of new businesses may impact the group's profit margin in the short term, in the long run, these investments will expand greater growth space and create synergies with core businesses, releasing greater profit potential. The company emphasized that it will maintain investment discipline during the investment process, focusing on return on investment (ROI). Despite new businesses capturing market attention, JD.com’s core retail business continues to show strong resilience. The company reported that revenue from electronics and home appliances grew by over 20% year-on-year in the second quarter. Management specifically pointed out that national consumption policies such as trade-in programs are positive driving factors, but JD.com’s fundamental advantages lie in its strong supply chain capabilities, price competitiveness, and high-quality services, including delivery and installation. For instant retail, JD.com believes it serves as a beneficial "supplement" for emergency needs, while traditional core e-commerce still holds greater advantages in product richness and cost-effectiveness. The company stated that it will actively layout instant retail in the supermarket category to meet multi-scenario demands, but the operational capabilities of core e-commerce remain the cornerstone of long-term growth. In terms of international business, JD.com focuses on localization and supply chain collaboration, advancing its acquisition of Ceconomy to deepen its presence in the European market. The company reiterated its commitment to shareholder returns, having completed a $1.5 billion buyback in the first half of 2024, with dividends reaching $1.44 billion for the year, and plans to continue sharing development dividends through dividends and buybacks in the future. Below is the transcript of the conference call CEO Xu Ran: Hello everyone, thank you for joining our Q2 2025 earnings conference call. In this quarter, we remain focused on providing the best experience for users, reducing costs, and improving efficiency to drive the company's healthy and sustainable growth. At the same time, we have also made positive and exciting strides on the path of long-term development. Overall, we are pleased to report that our total revenue in the second quarter grew by 22% year-on-year, reaching 357 billion yuan. This strong momentum is mainly driven by accelerated growth across various business segments, including electronics, home appliances, daily necessities, and service revenue This quarter, the non-GAAP net profit attributable to ordinary shareholders was RMB 7.4 billion, compared to RMB 14.5 billion in the same period last year. The decline in profit is mainly due to investments in new businesses, including the food delivery service, and their rapid growth. However, it is worth noting that the core business—JD Retail—continues to maintain healthy and improving profitability. In the second quarter, JD Retail's non-GAAP operating profit grew by 38% year-on-year, reaching RMB 13.9 billion, with the operating profit margin increasing from 3.9% in the same period last year to 4.5%. We are confident in our core retail business, and new businesses such as JD Food Delivery are developing well, fully aligning with our strategic planning for driving long-term sustainable growth. These achievements are inseparable from the high morale and close cooperation of our various business teams. These joint efforts have laid a solid foundation for our continuous upward development and ensured the efficient execution of strategic goals. I would like to emphasize three key developments that not only supported this quarter's outstanding performance but will also continue to drive our healthy growth. First, user growth and activity levels have significantly improved. This quarter, we continued to focus on users and strive to create the highest quality user experience. The number of quarterly active users (QAC) saw a significant year-on-year growth rate of over 40%, reaching a new high in total users. The strong momentum in user growth comes from both the natural growth of JD Retail and the incremental contributions from JD Food Delivery and Jingxi. In terms of shopping frequency, the shopping frequency of platform users in the second quarter increased by over 40% year-on-year, higher than in previous quarters. The shopping frequency growth rate for JD PLUS members was even faster, exceeding 50% year-on-year. This also demonstrates the strong appeal of our food delivery service to the highest quality user groups. During this year's "6.18" promotional period, the total number of purchasing users doubled year-on-year, with order volume exceeding 2.2 billion. The strong momentum in user growth and shopping behavior highlights the synergy between new businesses and core retail. In the future, we will continue to deepen this synergy to further enhance user stickiness and the overall lifetime value of users. Second, the core business—JD Retail—continues to grow steadily, achieving excellent performance based on further strengthening supply chain capabilities, with simultaneous growth in revenue and profit this quarter. **By category, the revenue of the electronics and home appliances sector grew by 23% year-on-year, showcasing our increasingly strong supply chain advantages, allowing us to continuously improve in product selection, pricing, and service. Additionally, the daily necessities sector also performed strongly in the second quarter, with revenue growing by 16% year-on-year. Leveraging supply chain capabilities, the supermarket business has achieved double-digit growth for six consecutive quarters, and the fashion sector has also maintained double-digit growth. More importantly, the growth in retail business profit and profit margin has outpaced revenue growth, steadily moving towards long-term goals. All of this is primarily attributed to a strong supply chain, which translates into better user experiences, lower costs, and higher efficiency. Third, our new business development is progressing well, especially JD Food Delivery. Since its launch, the order volume of the food delivery service has achieved exponential growth in the second quarter and reached multiple key milestones. It has now attracted a large number of quality merchants, and the number of full-time delivery riders is rapidly increasing. More importantly, the food delivery business has begun to achieve clear synergies with core retail. In addition to the user growth it brings, we are actively expanding cross-selling opportunities brought by the food delivery business, with the cross-selling ratio of newly introduced users in categories such as supermarkets, life services, and digital accessories continuously increasing As the scale of the takeaway business expands, we believe it can further enrich the supply of local merchants, enhance traffic and user activity, and help create a more vibrant and comprehensive JD.com ecosystem. The current core task of the takeaway business is to strengthen system capabilities, such as order scheduling and product planning, to better serve users and enhance merchant traffic and growth. Thanks to these efforts, despite the complex dynamics of the industry, the order volume of JD.com’s takeaway service has maintained healthy growth since the third quarter, especially in food orders. I want to emphasize again that we do not view the takeaway business as an isolated segment, but rather as deeply integrated into the JD.com ecosystem. In the future, we hope to achieve greater synergy and efficiency through brother businesses within the JD.com ecosystem, such as JD Logistics. This is also the focus of our strategic work moving forward—maintaining strategic focus in the dynamically changing takeaway market and investing efficiently and rhythmically. In addition to solid operations and an increasingly enhanced market position in the domestic business, we are also actively laying out our global market strategy, taking exciting exploratory steps. Internationalization is JD.com’s long-term vision and holds significant strategic importance. We hope to leverage JD.com’s unique advantages in supply chain, technology, and other areas. In recent years, JD Retail, logistics, and real estate sectors have attempted to explore retail formats, warehousing networks, transportation systems, and local operational capabilities overseas, with a focus on Europe and the Middle East. As progress continues, we will disclose more updates on our international business in a timely manner. Overall, the second quarter was a highly productive quarter. While achieving short-term performance, we further enhanced the company’s long-term structural and strategic advantages. The core retail business not only accelerated its growth rate but also continued to improve its profitability, highlighting the resilience of our supply chain-centric retail model. This quarter also marks a key milestone in our long-term development, with significant initial results achieved in key projects both domestically and internationally. All of this is not coincidental but is the result of long-term accumulation of core supply chain capabilities, achieved through careful preparation and strategic expansion. JD.com has always had a clear vision, centered on the supply chain and user-oriented, continuously enhancing user experience, which will continue to drive our long-term development and value creation, creating greater value for users, partners, and shareholders. CFO Dan Su: Hello everyone. In the second quarter, we achieved strong revenue growth and robust margin improvement in our core retail business. Overall revenue grew by 22% year-on-year, further accelerating and significantly exceeding the growth rate of China's total retail sales. All our major core business segments, including electronics and home appliances, general merchandise, and service revenue, achieved double-digit growth, with growth rates improving compared to previous quarters. In terms of profitability, our gross margin reached 15.9% in the second quarter, marking 13 consecutive quarters of year-on-year gross margin improvement, primarily driven by the core retail business. The non-GAAP net profit margin decreased to 2.1%, mainly due to our investments in the takeaway business. Although short-term profitability has been impacted by strategic investments, we firmly believe that these efforts will bring more sustainable growth and long-term value to the company Next, I will provide a detailed introduction to the financial performance of the second quarter. This quarter's performance continued to maintain strong growth momentum, with total net revenue increasing by 22% year-on-year, reaching RMB 357 billion. By business segment, merchandise revenue grew by 21% year-on-year, with electrical appliances and home appliances revenue increasing by 23% year-on-year, and general merchandise revenue rising by 16%. Compared to previous quarters, the growth rate of the two major segments has further accelerated. In the electrical appliances and home appliances business, driven by government stimulus policies and consumer recovery, JD.com effectively meets consumer demand by leveraging its core competitive advantages in these categories (including consumer recognition, strong supply chain capabilities, and excellent execution), providing users with a first-class experience while supporting local governments' trade-in projects. In the general merchandise segment, major categories such as supermarkets, fashion, home, and health also achieved double-digit revenue growth. We continue to see significant potential in the supermarket business and are confident in continuously enhancing user experience through the optimal combination of products, prices, and services while maintaining good growth momentum. Service revenue saw significant acceleration, growing by 29% year-on-year in the second quarter. Among them, platform and marketing revenue increased by 22% year-on-year, marking six consecutive quarters of growth acceleration, with commission and advertising revenue also maintaining double-digit growth this quarter. Additionally, several key operational indicators of the platform ecosystem, including merchant scale and user engagement, have made significant progress. Logistics and other service revenue grew by 34% year-on-year, achieving the highest growth rate in eight quarters, mainly driven by the rapid expansion of food delivery services. Next, I will briefly summarize the performance of each segment: JD Retail: In the second quarter, JD Retail revenue grew by 21% year-on-year, with robust performance across multiple core categories. Meanwhile, JD Retail's gross margin continued to improve year-on-year, a trend that has persisted for 13 consecutive quarters, reaching a historical high for comparable quarters, primarily driven by continuous optimization of supply chain capabilities. In the second quarter, JD Retail's non-GAAP operating profit increased by 38% year-on-year to RMB 13.9 billion, with the operating profit margin rising by 56 basis points year-on-year to 4.5%, showing steady growth. We are confident in our ability to continue consolidating our market leadership and achieve stable profit growth. JD Logistics: In the second quarter, revenue grew by 17% year-on-year, maintaining double-digit growth in both internal and external revenue. Due to ongoing investments in enhancing user experience, JD Logistics' non-GAAP operating profit decreased by 10.3% year-on-year to RMB 2 billion this quarter. However, JD Logistics is prioritizing the construction of foundational capabilities such as last-mile delivery, collection capabilities, and route optimization, which are expected to lay a solid foundation for long-term efficiency improvements and profit margin expansion. New Business: In the second quarter, new business revenue grew threefold year-on-year. Driven by the rapid expansion of food delivery and Jingxi businesses, non-GAAP operating losses widened to RMB 14.8 billion. Despite short-term performance pressures, the food delivery business has brought considerable traffic and user growth, significantly increasing user shopping frequency and clearly boosting the conversion and cross-selling of core retail business. In the future, we will continue to focus on supply, fulfillment efficiency, and user experience in the food delivery sector. Additionally, the Jingxi business saw significant growth in the second quarter, further penetrating and covering more lower-tier markets while enriching the supply of high-cost-performance products The overall profitability of the group showed a gross profit growth of 23% year-on-year in the second quarter, reaching RMB 56.6 billion. The company has achieved a year-on-year increase in gross margin for 13 consecutive quarters, with this quarter reaching 15.9%, mainly due to the continuous improvement in the gross margin of JD Retail, highlighting the high-quality development of its core business. In the second quarter, the non-GAAP net profit attributable to ordinary shareholders was RMB 7.4 billion, a year-on-year decrease of 49%, with the non-GAAP net profit margin dropping to 2.1%, primarily due to short-term profit pressure from strategic investments such as food delivery. The free cash flow over the past twelve months was RMB 10 billion, a decrease from RMB 56 billion in the same period last year, mainly due to cash outflows from the trade-in program and a decline in operating profit. As of the end of the second quarter, cash and cash equivalents, restricted funds, and short-term investments totaled RMB 223 billion. Overall, in the second quarter, we achieved strong revenue growth and healthy margin expansion in our core retail business, reflecting the company's excellent execution and continuously improving operational efficiency. In a volatile market environment, we are confident in our new businesses and look forward to driving further increases in user engagement and shopping frequency through these new initiatives, creating greater synergy potential for future development. With the continued growth of our core business and the execution of new initiatives, we are confident in achieving long-term healthy and sustainable development. Thank you all, we will now enter the Q&A session, and you are welcome to ask questions. Question from a Goldman Sachs analyst: I have two questions for the management. The first question is about the trade-in policy. We noticed that during the 618 shopping festival, the national subsidy policy was briefly suspended in some provinces. Considering that there are still some uncertainties regarding the national subsidy policy next year, and competition from other platforms is intensifying, we also saw that the company performed very well in this regard in the second quarter. Could the management share what strategies JD has for the home appliance category in the second half of this year and next year? How will the company enhance its market share in this sector? The second question is about the food delivery business. There are currently three companies, and even more enterprises competing in this field. Ultimately, it comes down to endurance, execution, and differentiation. Given that the leading company is the largest in scale and the second has very strong financial backing, how should JD, currently in third place, think about its commitment to investment and long-term operations? If we need to continue investing in the food delivery sector for an extended period, which may also lead to losses, how should we evaluate the customer acquisition costs at the traffic entry points, opportunities for cross-selling, and the potential for improving user experience (UE)? We would appreciate the management's insights on these questions. Thank you. Management's Response: Regarding your first question, during the implementation of consumption policies such as the trade-in program, JD has consistently demonstrated robust performance and high responsiveness. This year, this initiative has made significant progress in promoting consumption and driving industry upgrades. The government has also reiterated that this policy and subsidies will continue to be promoted, with central government funds being distributed in batches. During this period, JD has actively responded to national policies and participated in relevant projects to ensure the efficient implementation of these policies. Our achievements are primarily based on the following capabilities: first, a strong supply chain system that ensures stable product supply and provides reliable fulfillment and delivery services; Second, the operational synergy between online and offline allows us to quickly connect with local governments and promote the rapid implementation of projects in various regions. At the same time, we have noticed that consumer demand on the JD.com platform is very strong. In the second quarter, our revenue from electronics and home appliances grew by more than 20% year-on-year. I would also like to add a second point, that national subsidies are a policy opportunity, but they have never been a differentiated competitive advantage for JD.com. We have always formulated clear market share enhancement strategies for all categories of powered products and leveraged our capabilities and advantages in supply chain, scale, and omnichannel around products, prices, and services. In the second quarter of this year and so far in the third quarter, our market share in this area has continued to increase. In terms of product structure optimization, JD.com has collaborated with brand partners to develop multiple smart home appliance products, promoting product upgrades and customization to better meet users' quality renewal needs, while also supporting industrial upgrades. In terms of pricing, we continuously reduce procurement costs through scaled procurement and customized supply chain expertise, striving to provide users with lower prices and higher cost-performance ratio products. In terms of service capabilities, we continue to promote integrated delivery and installation services, even achieving integrated recycling for old-for-new exchanges, providing users with an exceptional old-for-new service experience in the industry. Overall, JD.com's powered product categories will continue to leverage supply chain advantages, actively promote industry upgrades, and further strengthen user perception. We are confident in maintaining growth above the industry average. Regarding the second takeaway question, this is indeed a topic of great interest recently, and we have shared a lot in different contexts. Here are a few key points. Takeout and instant retail are long-term strategic directions for JD.com. We will continue to enhance and improve our operational and system capabilities related to instant retail (including takeout) around user experience, cost, and efficiency, continuously optimizing user experience. As we have shared before, there are many pain points in this industry on the merchant, rider, and user sides. We are better meeting user needs through a quality takeout model. From the progress in the second quarter, on the rider side, as of the end of the second quarter, the number of full-time riders for JD.com takeout has exceeded 150,000, making their work more dignified and secure, enhancing their sense of happiness, while ensuring delivery experience, order punctuality, and service experience. On the supply side, we are more focused on quality takeout, which is also our differentiation. By the end of the second quarter, the number of quality merchants on board has exceeded 1.5 million, and the proportion of quality meal orders continues to rise. We are also helping these quality restaurants increase sales while actively innovating at the supply chain source. Recently, we launched the "Seven Star Kitchen" new model to help consumers enjoy high-quality and affordable dishes. In terms of system capabilities, our takeout R&D and operations team is also rapidly iterating and upgrading, including order dispatch system efficiency, algorithm optimization, subsidy allocation, and advertising systems, aiming to provide a better experience for users, merchants, and riders. Regarding the synergy effect, I want to emphasize that the takeout business is rooted in JD.com's overall business ecosystem. After more than a quarter of operation, takeout and core e-commerce business are generating synergistic value, which was our initial expectation. First, takeout has brought significant traffic and user growth to JD.com, with substantial increases in user activity, user numbers, and shopping frequency in the second quarter Secondly, the conversion rate of takeaway users when purchasing our core e-commerce categories continues to improve, especially in categories like supermarkets, where there is a significant amount of cross-buying. Our business team is also actively promoting internal collaboration, and in the second quarter, we have built capabilities to promote cross-shopping in areas such as algorithms and systems, with related tools set to be launched in the third quarter. Thirdly, there is also significant synergy in market spending and marketing expenses between takeaway and retail businesses. The team will coordinate to measure the ROI of spending across various channels to enhance overall marketing efficiency. Regarding the issue of long-term profit improvement, everyone has noticed that competition in the industry has intensified since July. From JD.com's perspective, we believe that excessive competitive behavior has not led to model innovation, nor has it created incremental value for the industry; rather, it has somewhat disrupted the pricing system and caused difficulties for merchants, making such behavior unsustainable. Currently, we are more focused on improving the platform system to enhance the experience of users, merchants, and delivery riders. At the same time, we are pleased to see that the profitability of the takeaway business is gradually improving. In the future, we will develop more refined promotional strategies targeting different regions and user groups, improve fulfillment efficiency through economies of scale, and continuously enhance system capabilities to drive the profitability of the takeaway business itself. In the long run, as we mentioned before, the takeaway business is not about pursuing short-term results over one or two months; we hope to continue for the long term, five years, ten years, or even twenty years, with the goal always being a sustainable business model. The takeaway business will gradually release economies of scale, improve overall efficiency, and continuously leverage the enormous synergy potential between takeaway and core retail businesses to provide ongoing momentum for the long-term healthy growth of the entire group. Question from UBS: I have two questions. The first is about investment in new businesses. Management mentioned that there will be a series of innovative business investments in the future. Could you please introduce the direction and strategy of these new business investments? From a financial perspective, how does the group balance growth and profit targets? Will these investments affect the company's goals for shareholder returns, such as dividends and buyback plans? The second question is about the daily necessities business. Our daily necessities category has maintained very strong growth for several consecutive quarters. Could management share the core driving factors behind this growth and the sustainability of this growth? Thank you! Management's Response: Thank you for your questions. I will first address the question about new businesses. When we discuss innovative businesses internally, we usually divide them into two categories: one is innovation in business models, and the other is using new or innovative technologies to improve existing business models. Currently, the new business models we are investing heavily in are mainly the takeaway business and JD International, which are explorations of new business models. On the other hand, applying various new technologies in existing businesses is also a very important direction and opportunity of our time. In fact, this type of innovation is very rich within our group, with numerous innovative projects being promoted in almost every business segment, including the application of AI technology in retail, automation in logistics, and continuous improvement in the level of automation of unmanned devices and warehouses, etc. From a group level, we also encourage every employee to have an innovative spirit and actively embrace innovation In addition, our overall internal innovation is centered around the supply chain. The exploration of new businesses is also based on our differentiated supply chain advantages and capabilities, with the core focus on enhancing user experience, which is essentially a natural extension of our core business. Of course, in addition to the domestic market, internationalization has always been an important strategy for JD.com. As I mentioned earlier, we hope to build an efficient retail and logistics fulfillment network covering the globe in the future, providing an exceptional shopping experience for global consumers and becoming a leading retailer worldwide. This is also our long-term goal. We believe that whether it is the exploration and investment in new businesses, new business models, or new technology applications, all will further strengthen JD.com's supply chain advantages and user experience, achieving long-term healthy growth. Our past operational performance has repeatedly demonstrated our achievements in investment efficiency and sustainable growth. For new business models, we will also follow a "small steps, quick runs" approach to explore and drive the development of innovative businesses. Management's Response: While actively exploring new businesses, we will also continuously create value for shareholders and give back to them. First, the total amount we repurchased in the first half of this year was approximately $1.5 billion, and there is still $3.5 billion remaining in the $5 billion repurchase plan. Second, JD.com has paid dividends for four consecutive years, and in April this year, we completed the cash dividend for the 2024 fiscal year, distributing approximately $1.44 billion. In the future, we will continue to conduct annual dividends and give back to shareholders through increased dividends and repurchases. Finally, we will continue to deepen our core business, actively invest, explore new growth curves, build a long-term sustainable business model, and promote the company to achieve stable and long-term growth in revenue and profits, while continuously sharing the results of JD.com's business development with shareholders. Management's Response: As you can see, the revenue from daily necessities has achieved steady accelerated growth for four consecutive quarters. Among them, the supermarket category, which contributes the most, has achieved double-digit growth for six consecutive quarters. The main driver is our procurement and sales team, which has continuously strengthened its operational capabilities over the past two years. We firmly believe that this will continue to drive steady growth in the supermarket category. The next growth strategy is, first, we will continue to strengthen our self-operated operational capabilities. The self-operated model is a unique business model of JD.com and is our differentiated advantage. Through this model, we can continuously reduce procurement costs and improve supply chain efficiency, thereby providing users with higher quality products and more affordable prices. Second, we will enhance user conversion rates. Currently, we have preliminarily observed that takeaway users also exhibit cross-category purchasing behavior in the supermarket category. In response to the large traffic brought by the takeaway business, JD.com's supermarket category will further optimize operations to better meet the diverse needs of these users. I would also like to add my views on instant retail. We are very confident in the operational advantages of JD.com's supermarket category and will seize the opportunities brought by instant retail. We believe that instant retail is a beneficial supplement to various consumption scenarios, meeting users' needs for emergency goods. However, in terms of product richness and cost-effectiveness, JD.com's traditional core e-commerce business still holds a greater advantage Therefore, within the entire retail sector, instant retail is a complement to core e-commerce. JD.com's supermarket category and team will also actively layout instant retail to further enrich users' multi-scenario demand experience. At the same time, in terms of core e-commerce business, we will continue to enhance our operational capabilities. In the long term, we are confident in the sustained growth of categories such as daily necessities. Especially this year, these categories have achieved good performance without relying on national subsidies, with the core reason being the improvement in team operational capabilities. This will also become an important driving force for JD.com's long-term growth. Question from the questioner at Bank of America: Good evening. First of all, congratulations to the company for achieving sustained accelerated growth this quarter, and thank you for the opportunity to ask questions. My first question is about user trends. Benefiting from our continuously improved service levels and related strategies including takeout and national subsidies, this quarter we have seen remarkable growth in active users and traffic on the JD.com platform. I would like to ask the management to share insights on user growth trends, as well as the profile, behavior habits, and retention of new users. Additionally, could you introduce the company's next steps in user growth strategy and long-term goals? My second question is regarding the discussion of the company's growth strategy. How does management view the company's profitability levels and profit margins in the coming years? How should we understand the related expectations and long-term trends? Thank you! Management's Response: Thank you for your questions. First of all, in the recently concluded second quarter, we achieved strong user growth, with both the number of purchasing users and the frequency of purchases exceeding a year-on-year growth rate of 50%. This is the strongest quarter for user growth in recent years. Among them, the customer acquisition and retention efficiency of the retail business itself has continued to improve, primarily benefiting from our sustained investments in low-price mentality and platform ecology over the past two years. These efforts have brought richer supply and better user experience. At the same time, with the improvement in conversion efficiency and the continuous refinement of operations such as content and interaction, we have also been better able to attract and retain users. Additionally, JD.com’s takeout service has achieved rapid growth in less than half a year since its launch, bringing new growth momentum to JD.com's overall traffic, user base, and shopping frequency. The takeout business has attracted more young users, and its impact on the growth of PLUS members is particularly significant. In the second quarter, the purchase frequency of PLUS members increased by over 50% year-on-year. We will accelerate the promotion of cross-selling between takeout and instant retail and B2C e-commerce, including activating old users and converting new users into e-commerce, thereby driving rapid increases in JD.com's overall shopping user base and purchase frequency. In the long term, JD.com is committed to providing a better shopping experience for 1 billion e-commerce users nationwide and achieving lower costs and higher efficiency through the supply chain. Based on user scale, diversification of service scenarios, richness of product and service categories, and service capabilities, JD.com still has significant room for improvement. To this end, we are continuously increasing relevant investments to promote the long-term and sustainable growth of user scale and user value. Regarding profitability, JD.com's short-term profit margins may fluctuate due to industry competition and the pace of its own business investments, **but we always adhere to the goal of achieving high single-digit long-term profit margins, especially the profit margin trend of the core retail business is very healthy ** The continuous driving factors for improving the profitability of core retail include: the supply chain efficiency brought by self-operated businesses. We continuously reduce costs and increase efficiency along the supply chain, which will naturally drive profit improvement, including the enhancement of gross profit margins and cost reduction in logistics. Second, the optimization and changes in category structure. For example, there is still significant room for profit margin improvement in categories such as supermarkets, while relatively mature categories with electrical products also have slight room for margin enhancement. At the same time, as the proportion of platform ecosystem business in JD.com continues to increase, commission and advertising revenue will also continue to grow rapidly, further enhancing overall profit margins. Regarding the investment in new businesses, our core thinking is to help JD.com further break through growth bottlenecks and expand greater growth space. We believe that these investments will bring long-term growth in user scale, GMV, and profits in the future. Although the initial layout of new businesses may impact the group's profit margin in the short term, in the long run, new businesses will gradually become new growth engines, forming greater synergy with core businesses, thereby releasing larger profit space. During the investment process, we will also continuously pay attention to investment strategies, maintain investment discipline, focus on return on investment (ROI), and flexibly adjust and balance based on actual results. Question from the questioner at Jefferies: Good evening, thank you to the management for accepting my question. My question is about JD.com's overseas business expansion strategy for the next few years. Can management share the logic behind our acquisition of Ceconomy? Management's response: Thank you for the question, which I just mentioned. Internationalization has always been one of JD.com's important strategies. Our model for overseas expansion is different from other cross-border e-commerce. JD.com's international business focuses more on expanding supply chain efficiency in overseas markets while providing high-cost performance products to overseas users. On the other hand, JD.com will also adhere to a localization strategy, building local retail and e-commerce businesses, establishing local teams, and promoting local procurement and shipping. At the same time, we will establish long-term win-win relationships with local market participants, placing more emphasis on brand and high-quality product management. In fact, JD.com has been deeply engaged in Europe for several years. Since 2022, we have been innovating and piloting local innovative retail businesses in Europe. Later this year, we will upgrade the related business to the JOYBUY brand, and we will share more progress with everyone at that time. Regarding the acquisition of Ceconomy, we believe that the brand power, supply chain capabilities, and market position established by Ceconomy in the European local market have great value for JD.com. JD.com's own online e-commerce operations and technical capabilities can also form a strong complement to it. Currently, the transaction is still awaiting regulatory approval, and we will communicate with everyone in a timely manner if there are further developments