JD.com: 2021 Q3 Earnings – Key Points to Know!
- Rupam Deb
- Nov 25, 2021
- 4 min read
JD.com – 2021 Q3 Earnings Results
JD.com reported its 2021 Q3 earnings on 18 November 2021. Overall, it’s a strong quarter on the topline, with customer accounts growing by 25% y/y, and revenue growing by 26% (higher than Alibaba’s 16% excluding the consolidation of Sun Art), with JD Logistics growing even faster at 43% driven by external (non-JD) sales. However, operating income decreased by 41%, and net profit turned from a profit to a loss!
What happened? Here are our key points from the earnings results and earnings call!
Annual active customer accounts grew to 552 million as at end September 2021, up 25% from the 442 million a year ago. This growth is higher than the 4.5% growth experienced by Alibaba for its Chinese customers (from 912 million to 953 million).
JD’s customer accounts growth is mainly driven by the lower-tier markets, with 70% of new users coming from those markets. On top of the growth from lower-tier markets, since 2020, JD also started observing 2 groups of people categorized by ages that are rising rapidly on the Internet, which is a trend that is very different from 4-5 years ago.
The first group is consumers aged 45 years or above, who have been demonstrating very strong purchasing power once they started venturing into online shopping. After a period of time when they are customized to the online shopping habits, they find shopping with JD to be more at ease and gives them more guarantees, so their shopping power starts to manifest on the JD platform.
The second group is the Gen Z, being the people aged between 18 to 25 years old. They have also demonstrated increasing consumption demand and purchasing power beyond JD’s own imaginations.
Revenue for 2021 Q3 was RMB 219 billion, up 25.5% y/y, with JD gaining market share, backed by the sustained improvement in its user base and user engagement.
The revenue growth is driven by both growth in net product revenues (22.9% to RMB 186 billion), and a stronger growth in net services revenues (43.3% to RMB 33 billion).
The overall 25.5% revenue growth is higher than Alibaba’s revenue growth of 16% excluding the consolidation of Sun Art (or lower than Alibaba’s revenue growth of 29% including the consolidation).
On revenue breakdown by segment, JD Retail experienced a 23% growth to RMB 198 billion. JD Logistics grew fastest at 43% to RMB 26 billion, driven by the hyper-growth of its external revenue.
Meanwhile, the new businesses segment also grew fast at 33% to RMB 6 billion. As JD started to proactively focus the new businesses in selected markets, it is able to better allocate resources to improve its supply chain for fresh produce and short-chain logistics infrastructure capacity to empower the local merchants and achieve better efficiency. As a result of the strategic shifts and investments, the operating loss of new businesses became even greater, at RMB 2.1 billion compared to the RMB 1.2 billion a year ago.
Within JD Retail, the marketplace business grew faster than the direct 1P business, with the total number and the types of third party merchants accelerating on both the year-on-year and sequential basis. In 2021 Q3, the number of third party merchants joining JD tripled that of Q1 and Q2 combined, with apparel and home categories leading the growth.
This strong growth is driven by the solid progress made to JD’s Marketplace Ecosystem in this quarter. Starting from the second half of 2020, JD has introduced a series of smart operating tools, lowering the entry barriers for new merchants, and provided integrated solutions to further optimize merchants operating efficiency and growth path.
The merchants saw improving operating efficiency, growth path, and satisfaction level, with the Net Promoter Score (NPS) of the marketplace business continuing to improve, particularly the NPS of apparel and home categories which were at their all-time high.
Cost of revenue grew slightly faster than revenue, at 27.3% to RMB 188 billion in 2021 Q3, resulting in a lower gross profit margin for the quarter (of 14.2% vs 15.24% a year ago).
However, as we had mentioned before, due to changing business mix (with increasing omnichannel revenues) and product categories mix, fulfilled gross profit margin, which is the profitability after considering the fulfilment costs (on top of costs of revenue), is a much more meaningful measure to focus on.
Fulfillment expenses (which primarily include procurement, warehousing, delivery, customer service and payment processing expenses) grew by 23.2% to RMB14.3 billion. As a % of revenue, fulfillment expenses were 6.5% in 2021 Q3, down from the 6.7% a year ago.
As a result, overall fulfilled gross profit increased by 11% to RMB 16.8 billion in 2021 Q3. Overall fulfilled gross margin decreased slightly less than the decrease in gross profit margin, to 7.7% of revenue vs 8.7% a year ago.
Operating expenses (after fulfilled gross profit level) grew by 32.8%, to RMB 14.8 billion in 2021 Q3, with:
Marketing expenses growing by 42% (to RMB 7.8 billion), mainly attributable to normalized marketing expenses from last year’s lower level;
Research and development expenses decreasing by 3% (to RMB 4.0 billion); and
General and administrative expenses growing by 91% (to RMB 3.1 billion), primarily due to increase in share-based compensation expenses.
For the remaining points of this earnings summary, check them out at our Multibagger Research Series (linked below).
For our free analysis of other high quality companies, check them out at our free Research Series (linked below).
For our summary analysis of the company, check out the video below.
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