Slowest quarterly sales growth on record

Chinese e-commerce giant JD.com posted its slowest quarterly sales growth on record for the first three months of the year as the Covid-19 lockdown in the world’s second-largest economy weighed on consumer spending.

JD.com beat sales estimates but missed earnings expectations.

Here’s how JD performed in the first quarter of 2022 compared to Refinitiv consensus estimates:

  • Revenue: 239.7 billion Chinese yuan ($37.8 billion) versus the expected 236.6 billion yuan, up 18% year on year.
  • Net loss attributable to shareholders: 3.0 billion yuan versus 655.7 million yuan profit expected. This compares to a net profit of 3.6 billion yuan in the same period last year.

The 18% revenue growth is the slowest quarterly growth rate for JD in its history as a public company.

JD.com shares, which were higher ahead of gains in U.S. pre-market trading, continued to rally after the company’s sales rose, trading 7% higher.

In the three months to the end of December, rival Alibaba reported the slowest quarterly growth rate since it was listed in 2014.

Chinese tech giants are facing a number of headwinds, including Covid lockdowns in parts of China, with financial and economic powerhouse Shanghai being hit particularly hard. This has weighed on the economy as retail sales fell more than expected in March.

Major investment banks have lowered their outlook for China’s gross domestic product growth for 2022 and expect consumption to weigh on the economy.

Regulatory easing ahead?

The Chinese government has tightened domestic regulation of the tech sector in areas ranging from antitrust to privacy laws over the past 16 months.

This has weighed on Chinese internet stocks, with the Hang Seng Tech Index, which includes giants like Tencent and Hong Kong-listed Alibaba, falling around 46% over the last year.

But there are signs that China’s crackdown on the tech sector may be easing.

In April, China’s Politburo, chaired by President Xi Jinping, pledged support for the so-called “platform economy,” which refers to companies offering online services ranging from social media to e-commerce.

Meanwhile, the Nikkei reported that top Chinese officials are meeting with tech industry executives on Tuesday, adding to sentiment that an easing of regulatory tightening may be on the way.

Analysts at JPMorgan on Monday raised their outlook on some Chinese internet stocks, stating that “significant uncertainties due to recent regulatory announcements should gradually ease”.

On Tuesday, Chinese tech stocks rallied on the JPMorgan note.

https://www.cnbc.com/2022/05/17/jd-earnings-q1-2022.html Slowest quarterly sales growth on record

Gary B. Graves

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