JD.Com Navigating "Hard Hit" To Consumer Market Amid Virus Outbreak

In its fourth-quarter 2019 earnings report, Chinese ecommerce giant JD.com JD highlighted disruption from the outbreak of the coronavirus, COVID-19, over the last five weeks. The company provided first-quarter 2020 guidance, but noted that it is "subject to change."

On the company's earnings conference call, management said that the consumer market has "taken a hard hit" since the outbreak. However, they also said that the epidemic has created an environment for new users to come to the platform for the first time as well as driving increased activity by active users on the platform.

The Beijing-based company reported fourth-quarter 2019 adjusted earnings per share (EPS) of Renminbi (RMB) 0.54, RMB 0.03 higher than the prior year period. The $0.08 in adjusted EPS exceeded analyst's expectations of $0.06.

During the period, U.S. $1 was worth slightly less than RMB 7.

Management said that large ticket durable goods and discretionary items have declined the most since the outbreak of the virus. However, the platform has seen a spike in order volume for groceries, produce, healthcare and daily necessities in recent weeks.

Fourth-quarter net revenue increased 27% year-over-year to RMB 170.7 with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of RMB 1.96 billion, 33% higher year-over-year.

JD.com's Key Performance Indicators

The company's official first-quarter 2020 guidance calls for net revenue growth of "at least 10% compared with the first quarter of 2019," but noted that this guidance is "subject to change in light of uncertainties related to how COVID-19 develops."

Home appliances are likely to be the only product category to experience year-over-year revenue declines during the first quarter. Concerns around home delivery and installation were stated as some of the reasons for diminished appliance demand. Recent increases in laptops and small appliances "as more people stay home and cook their own food" have provided an offset to declines in larger appliances.

Management did state that they "believe that the epidemic situation is getting better for some regions" and noted that some provinces are coming back online.

JD.com saw annual active customer accounts increase 19% year-over-year to 362 million in 2019 with full-year net revenue increasing 25% to RMB 577 billion, or $83 billion.

"We are pleased to conclude 2019 with another strong set of results in the fourth quarter. The year 2019 sets a new milestone in our corporate history with record earnings and excellent cash flow on an annual basis as our continued investments in infrastructure and technology began to yield solid financial results," said JD.com Chief Financial Officer Sidney Huang.

During the fourth quarter, JD.com opened two "ultra-large sorting centers" in Chengdu and the disease's epicenter of Wuhan. Each facility is capable of handling more than one million daily orders.

JD.com is an ecommerce company and a retail infrastructure service provider. At the end of 2019, the company had more than 700 warehouses (16.9 million square meters), 270,000 merchants using its online marketplace and 220,000 employees. JD.com is almost twice as large as its nearest Chinese retail competitor.

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