E-commerce group JD beat estimates for quarterly revenue as more people shopped on its platform following Covid lockdowns in China, but its CEO was cautious on the outlook due to logistical disruptions and sluggish consumption.
The resurgence of Covid-19 in the world’s second-largest economy in March and the strict lockdowns it has taken since to curb its spread, including in its most populous city Shanghai, have heavily disrupted normal life and business activity.
JD CEO Xu Lei told analysts on a post-earnings call on Tuesday that the situation was far different to what China experienced in the past two years when outbreaks were limited to smaller areas of the country and boosted online shopping.
This time, the spread of infections to major centres such as Beijing, Shanghai, Guangzhou and Shenzhen, and lockdowns were affecting both online and offline commerce.
“In April, the order cancellation rate was significantly higher than last year due to logistical disruptions. There was an improvement in May, but it was still higher than a year earlier,” he said.
“Consumers are facing loss in income and confidence, and overall consumption is sluggish,” Xu added.
Shares in the Chinese company initially surged as much as 9 per cent higher in pre-market trading but were flat when the market opened and after Xu’s comments.
Analysts at Nomura estimated in mid-April that 45 cities in China, representing 40 per cent of its GDP, were under full or partial lockdowns.
Shanghai’s lockdown has been particularly strict with residents unable to shop for much more than daily necessities due to logistics bottlenecks and a shortage of couriers. The capital Beijing has also been tightening restrictions as it tries to stave off an outbreak.
Underlining the impact of such measures, China’s retail sales fell 11.1 per cent last month in their biggest contraction since March 2020.
Still, investor sentiment towards JD and its peers on Tuesday was helped by comments Chinese Vice Premier Liu He at meeting with tech executives, which fanned hopes that a long-running regulatory crackdown on the sector is easing.
U.S.-listed shares of Chinese firms rose after Liu said the government supported the development of the sector and public listings for technology companies.
E-commerce rival Alibaba Group also surged 7 per cent and Pinduoduo climbed more than 8% before the market opened.
JD.com reported revenue of 239.66 billion yuan ($35.6 billion) for the quarter ended March 31, compared to Wall Street analysts’ estimates of 236.66 billion yuan, according to IBES data from Refinitiv.
Excluding items, JD.com posted a profit of 2.53 yuan per American depository share (ADS), compared with analysts’ expectations of 1.62 yuan.
The net loss attributable to ordinary shareholders stood at 2.99 billion yuan, compared with a profit of 3.62 billion yuan a year earlier.
- Reporting by Tiyashi Datta in Bengaluru, Sophie Yu in Beijing, and Brenda Goh in Shanghai; Editing by Krishna Chandra Eluri, Jan Harvey and Emelia Sithole-Matarise, of Reuters.