Chinese e-commerce giant JD.com (9618.HK) beat market estimates for quarterly revenue on Thursday, signaling resilient consumer spending on its platform fueled by price cuts and government subsidies.
U.S.-listed shares of the company, the leading online platform for home appliance products and electronics in China, fell nearly 4% in morning trade in the U.S. on Thursday.
Consumer demand in China has remained muted amid persistent economic pressures and trade uncertainty, but retailers like JD.com have leaned on deep discounts, promotions and government stimulus to spur sales.
M Science analyst Vinci Zhang said JD beat forecasts, but the upside came mostly from electronics and appliances propped up by state subsidies.
With those subsidies launching in Q3 last year, "JD will start to face tough year-on-year comparisons and that's when we will really get to evaluate how well the company is doing," Zhang said.
Facing sluggish consumption and fierce rivalry at home, JD.com is tapping new opportunities.
Last month it offered to buy electronics giant Ceconomy (CECG.DE) in a bid that values the German company at 2.2 billion euros ($2.57 billion), seen as a strategic step for JD.com to expand its footprint in Europe and strengthen its global presence in the retail industry.
In February it entered the food delivery business, a field that has been mainly dominated by Meituan (3690.HK) and Alibaba's (9988.HK) Ele.me, offering incentives to consumers to gain an edge.
CEO Sandy Xu told analysts on Thursday that the new food-delivery arm is already feeding traffic into JD's core retail engine but warned that "excessive competition" only undermines pricing and merchants, calling it unsustainable.
Total revenue rose 22.4% to 356.66 billion yuan ($49.73 billion) during the second quarter ended June, compared with analysts' average estimate of 331.63 billion yuan, according to data compiled by LSEG.
Net income attributable to JD.com's ordinary shareholders was 6.2 billion yuan for the quarter, compared to 12.6 billion yuan a year earlier.
($1 = 7.1714 Chinese yuan renminbi)
($1 = 0.8562 euros)
