Chinese e-commerce giant JD.com announced its better-than-expected fourth quarter financial results on Thursday, revealing a 31.4% increase in net revenue compared to the same quarter in the previous year.
The company reported that its total earnings increased to 224.3 billion yuan ($34.4 billion) for the quarter which ended on December 31, trouncing market sales expectations of 219.73 billion yuan ($33.74 billion). The online retailer experienced a strong end to fiscal year 2020 by amassing 745.8 billion yuan ($114.3 billion) in annual net revenue, an increase of 29.3% from 2019, beating Wall Street’s estimate of 740.81 billion yuan ($113.87 billion).
As of the end of December, JD’s annual active customers has increased by 30.3% to 471.9 million, up from 362 million the year before, which chief financial officer Sandy Xu claimed was “the largest expansion in our history”. “We continue to see exciting user growth in the lower-tier cities, which contributed over 80 percent of our new users for the first time in Q4 2020,” she said on the earnings call.
JD’s strong financial performance is partly attributed to the COVID-19 pandemic which has required the implementation of physical-distancing rules, thereby turbocharging online shopping. According to McKinsey, there was a 50% increase in Chinese consumers who choose to purchase most or all goods online for most categories as of September 2020. The consulting firm also anticipates that between three and six percent of the market share gained by online channels during this period will prove to be “sticky” after the pandemic fades.
The company’s boost in revenue has also gathered momentum as a result of the Chinese economy’s strong rebound from the coronavirus slump. “Consumer demand which accumulated during the COVID-19 lockdowns earlier last year has been released,” JD Retail’s chief executive officer Xu Lei said.
Following its solid financial results, the US-listed JD.com saw its shares jump by over 5.5% to $94.4 apiece on Thursday.
Founded in 1998, JD.com buys goods from manufacturers and distributors and holds the inventory in its own warehouses – a model that differs from its rival Alibaba, whose marketplace serves as a platform to connect buyers and sellers. JD then arranges for the goods to be delivered quickly to consumers via its in-house logistics network, which also helped the company buoy its operations during the pandemic. JD.com has become the second largest online retailer in China, commanding 28.9% of the e-commerce market share as of September 2020.
“During this quarter, JD continued its strategic transformation into a supply chain-based technology and service company with increasingly diversified sources of revenues,” said Richard Liu, Chairman and Chief Executive Officer of JD.com, in a press release. “With strong momentum going into 2021 and with our recently optimized organizational structure, JD will continue to invest in innovative, high potential businesses to drive long-term sustainable growth.”
JD.com is said to be in talks currently regarding the potential purchasing of part or all stakes in Sinolink Securities, one of the biggest brokerages in China, Reuters reported. News of the deal, which is worth at least $1.5 billion, broke on Friday afternoon, causing the Sinolink Securities stock price to soar by 10% to reach the daily limit of 14.19 yuan ($2.19).