JD.com's Q1 2024 data brief review - Overall excellent, but JD Retail increases revenue without increasing profits

Brief Comment

Following Alibaba, the second e-commerce giant JD.com released its Q1 2024 financial report, showing accelerated growth in both revenue and operating profit, exceeding expectations overall. It can be considered a report card of both revenue and profit growth.

1) Quarterly Performance:

Q1 2024 revenue reached 260.074 billion yuan, with a growth rate of 7.04% (compared to 3.60% in Q4 2023), showing an increase;

Operating profit was 7.7 billion yuan, with a growth rate of 19.81% (compared to -58.06% in Q4 2023), turning from negative to positive and showing significant growth;

Non-IFRS net profit attributable to ordinary shareholders was 8.899 billion yuan, with a growth rate of 17.23% (compared to 9.87% in Q4 2023), indicating an acceleration in growth;

2) Sources of Profit Growth:

Q1 overall achieved both revenue and profit growth, with profit growth outpacing revenue growth. JD.com's profit growth primarily came from "cost reduction":

The growth rate of operating costs was slightly lower than revenue growth, leading to a 10.42% year-on-year increase in gross profit;

Meanwhile, administrative expenses decreased significantly by 20.99% year-on-year, mainly due to reduced incentive expenses;

Compared to Tencent, the "efficiency improvement" aspect was relatively minor.

3) Segment Breakdown

i) The standout segment in Q1 was logistics: Logistics revenue reached 42.137 billion yuan, up 14.73% year-on-year; operating profit was 224 million yuan, surging 119.95% year-on-year.

ii) The core JD Retail segment, while achieving revenue of 226.835 billion yuan (up 6.82% year-on-year, showing accelerated growth), saw operating profit decline by 5.27% year-on-year to 9.325 billion yuan, likely due to a significant 15.6% increase in sales expenses from promotional activities; the operating profit margin was 4.11%, slightly down from 4.64% in the same period last year.

iii) Other (New Businesses + Dada) showed little improvement this quarter, with revenue at 4.87 billion yuan (down 19.18% year-on-year) and operating loss widening to -670 million yuan (down 79.14% year-on-year); the decline expanded compared to the previous quarter.

4) Business Segment Breakdown

i) Product revenue grew 6.62% year-on-year, with electronics and home appliances up 5.31% and general merchandise up 8.57%, both performing reasonably well;

ii) Service revenue grew 8.75% year-on-year, with logistics and other services revenue up 13.84%, a standout performance; however, platform and advertising services revenue grew only marginally by 1.19%, falling short of expectations.

5) Share Buybacks

The Q1 report disclosed that from January 1 to May 15, 2024, JD.com repurchased approximately $1.3 billion worth of shares, significantly increasing buyback intensity;

Moving forward, it will be worth observing whether the same buyback intensity will be maintained after the recent stock price surge; this applies similarly to other China concept stocks.

6) Summary

JD.com's Q1 report overall showed both revenue and profit growth, a solid performance.

The logistics segment and share buyback intensity were highlights;

However, the core JD Retail segment saw revenue growth without profit growth: while revenue growth accelerated compared to its own performance, operating profit declined year-on-year, reflecting increased investment in promotional activities. Whether these investments will lead to profit realization in the future remains to be seen.

I. Operating Performance

1. Operating Performance - Quarterly