beat Wall Street’s expectations in the third quarter as the e-commerce group leaned on price competitiveness and operating efficiency, a sign the Chinese tech sector may be able to outrun a slowdown in the world’s second-largest economy.
(ticker: JD) reported earnings of 6.70 Chinese yuan (92 cents) a share on revenue of 247.7 billion yuan ($34.2 billion). Analysts surveyed by FactSet had expected earnings of 5.87 yuan a share on revenue just shy of 247 billion yuan.
Shares in JD.com were up 6.3% in U.S. trading on Wednesday, with the results likely also buoying shares in
(BABA), which gained 3.3%.
The e-commerce group’s third-quarter results mark per-share profit growth of 7% from the same period a year ago, with revenue up 1.7% from 2022 levels. Sure, that’s not the double-digit growth that investors have seen in years past—but it’s pretty remarkable given the context.
China’s economy has slowed in 2023, bucking hopes of a rebound after Covid lockdowns rocked the country in 2022. As a result, consumer spending has hemorrhaged, with retail sales and imports plunging and deflationary forces taking hold—trends that should wreak havoc on JD.com’s core e-commerce business.
Instead, JD.com and Alibaba have so far appeared to be weathering the storm, meeting consumers with lower prices and cutting costs to keep profits afloat. You wouldn’t know it from stock prices—shares in JD.com are down 49% this year, with Alibaba stock slipping 2% over the same period—but the proof is there. JD.com’s operating margin for the nine months to the end of September rose to 4.3% from 4% a year ago.
“We reported steady top-line performance for the quarter with record profitability driven by our proactive efforts on enhancing price competitiveness and platform ecosystem, as well as our supply chain advantages,” said Sandy Xu, JD.com’s CEO.
So far, JD.com’s ability to be competitive on prices and run a lean business are helping the company outrun China’s slowdown. While it may not be possible to continue this trend if the macro picture darkens further, Wednesday’s results will likely only embolden investors that are growing cautiously more optimistic about the outlook for China and the investment case for its stocks.
Write to Jack Denton at [email protected]