China e-commerce giant JD.com announced earnings on Wednesday that beat analyst expectations for the second quarter, reporting that the number merchants using its marketplace more than doubled to a record high. But U.S.-listed JD stock fell by 2% in early trading, underlining concerns about consumer spending in China.
Beijing-based JD reported adjusted earnings of 74 cents per share on net revenue of $39.7 billion. Analysts polled by FactSet expected JD to report adjusted earnings of 68 cents a share on revenue of $38.6 billion.
Net revenue for JD stock was up 7.5% compared with the second quarter of last year. That includes a 30% increase in net service revenue.
"JD.com delivered both revenues and profitability ahead of our expectation in the second quarter, an encouraging trend we are happy to see amidst our business adjustment and a highly competitive market environment," said Chief Financial Officer Ian Su Shan in a statement with the earnings press release.
JD Stock: Concerns Over China Economy
JD is among China's largest e-commerce companies, competing with Alibaba and PDD Holdings. The company also provides supply-chain technology and services.
JD's report comes the day after data from China's National Bureau of Statistics showed a national slowdown in consumer spending. Retail sales were up 2.5% year-over-year in July, down from a 3.1% increase in June. China's central bank recently cut interest rates, but that has not eased investor concerns.
JD stock dropped 3% to close at 34.88 on the stock market today.
BABA was also down, losing 2.7% to 90.12. PDD edged up by a fraction to 79.02.
BABA stock rose last Thursday on earnings that topped analysts expectations for revenue and earnings per share, which also helped give JD stock a boost. But JD stock was down 36% year-to-date as of market close on Tuesday, while Alibaba is up just 4% on the year, compared with a 15% increase for the S&P 500 index.
Lowering Costs
JD has focused part of its strategy on appealing to customers by lowering costs. That includes a $1.5 billion discount campaign launched in the spring to better compete with PDD Holdings, a recent IBD 50 Stocks to Watch Pick that operates the popular low-cost shopping apps Pinduoduo and Temu.
"Consistent with our checks, we believe consumers responded well to discounting activity," Mizuho analyst James Lee said in a note to clients Wednesday, citing a 5% year-over-year increase in retail revenue.
Additionally, JD.com is working to expand the number of third-party sellers on its marketplace. Chief Executive Sandy Xu said in a press statement that the company is "encouraged to see the number of our marketplace merchants more than doubled and reached a record during the quarter, reflecting our efforts to build a superior marketplace ecosystem, one of our priorities to provide customers with enriched supplies at better prices."
JD stock ranks 15 out of 60 stocks in IBD's Retail-Internet industry group, according to IBD Stock Checkup. It has a weak IBD Composite Rating of 50 out of 99.
