JD.com’s Sales Growth Offset By Revenue Losses

Until last year, it seemed like there was no ceiling the Chinese economy couldn’t simply break through, but as the country’s long-term economic crisis continues, some retailers are seeing their previously impenetrable profit margins dissolving into dust.

That’s the path JD.com appears to be on after suspending sales on its customer-to-customer marketplace after it became flooded with counterfeit goods. JD.com announced a loss of 7.63 billion yuan ($1.2 billion) or 5.57 yuan ($0.85) per share — far larger than its 454.3 million yuan ($69.4 million)/0.33 ($0.05) yuan per share loss from a year ago. However, while revenue and profits might be down, Sidney Huang, CFO at JD.com, noted that sales had actually increased in that same time period — a silver lining of uncertain comfort for the Chinese eRetailer.

“Despite the macro-slowdown, the consumption growth remains healthy,” Huang told Reuters.

The Wall Street Journal attributed the seemingly contradictory boost in sales to the overall larger customer base JD.com acquired over the course of 2015. By the time Q4 rolled around, these consumers were finally ready to flex their spending muscles — and flex they did, to the tune of 57 percent higher sales compared to the same period last year. JD.com closed 2015 out with 155 million annual active profiles registered on its site — 71 percent more than a year before and 22 percent more than the prior quarter. If these numbers are an indication of growing momentum, JD.com’s executives won’t lose any sleep over losing sales from its P2P marketplace.

“JD.com’s strong momentum continued with another period of solid growth in the fourth quarter,” CEO Richard Liu said in a statement. “China’s middle-class consumers increasingly demand quality brands and authentic products, and we have been very effective at winning over more customers by introducing them to the most reliable and convenient online shopping experience in China. We will remain focused on earning the trust of China’s consumers, while building partnerships with top brands, which value JD.com’s high-quality user base, reputation for authenticity and unrivaled fulfillment capabilities.”