JD.com: Logistics and R&D investment dragged down profits in 1Q18, and clothing was still hurt

According to JD.com's 1Q18 financial report: JD.com's net revenue reached 100.1 billion yuan, a year-on-year increase of 33.1%, of which service net revenue reached 8.6 billion yuan, a year-on-year increase of 60%, the highest growth in the past 8 quarters, mainly benefiting from the growth of advertising and supply chain management revenue. Product net revenue increased by 31% year-on-year to 91.5 billion yuan.

This quarter, the service category is still affected by the "one or the other" policy, and many clothing brands failed to return to the JD platform. JD's clothing category continued to perform weakly, and the GMV of JD's clothing category increased by more than 92% year-on-year compared with the same period in 2017. JD believes that brands are still actively looking for new outlets outside of Alibaba and will eventually return to the JD platform, which will also lay the foundation for the growth potential of JD's third-party advertising revenue.

JD.com’s annual number of active buyer accounts increased 27.6% year-on-year to 301.8 million, compared with 236.5 million in the same period last year.

Operating costs increased by 33.5% to RMB 86 billion, mainly due to the growth of the company's direct sales business, the increase in the cost of providing logistics services to merchants and other partners, and the increase in traffic acquisition costs brought about by providing online marketing services to merchants and suppliers.

Fulfillment costs increased by 39.3% year-on-year to 7.2 billion yuan, compared with 5.2 billion yuan in the same period last year. The cost of revenue increased from 6.8% last year to 7.2% this year. This is mainly because the company built a large number of logistics warehouses in the fourth quarter of last year, which resulted in a large amount of idle logistics costs in a short period of time. I believe that it will be digested in one to two quarters. In the future, JD.com will maintain a balanced development and will not have the situation of high cost concentration and volatility in the fourth quarter of last year.

Currently, JD Logistics’ fulfillment centers cover 7 cities, front-end distribution centers cover 27 cities, and there are 515 warehousing centers.

Currently, more than 20,000 merchants use JD.com's supply chain management services, including 60% of the top 200 merchants on the JD.com platform. Revenue from third-party logistics services has maintained triple-digit growth in the past two quarters. The number of third-party orders entrusted to JD Logistics for warehousing and fulfillment has increased to 20% of all third-party physical orders.

Marketing expenses were 3.5 billion yuan, up 24.7% year-on-year, compared with 2.8 billion yuan in the same period last year.

Technology and content expenses increased 87.2% year-on-year to RMB 2.4 billion, mainly due to the company's continued investment in R&D talent and technological infrastructure.

Administrative expenses increased 16.5% year-on-year to RMB 1.1 billion, compared with RMB 900 million in the same period last year.

JD.com's operating profit margin before unclassified items was 2.1%, compared with 2.2% in the same period last year, with little change.

Net profit attributable to ordinary shareholders from continuing operations was RMB 1,524.9 million, compared with RMB 298.8 million in the same period last year. Non-GAAP net profit from continuing operations was RMB 1,047 million, compared with RMB 1,321.9 million in the same period last year. Diluted EPS was RMB 1.04, compared with RMB 0.21 in the same period last year.

via: 199IT Financial Report Data Center