At a turbulent juncture, JD.com reports overall profits and break-even for logistics business

Its controversial corporate shuffle has yielded positive results.

China’s e-commerce giant JD.com disclosed on Tuesday that it booked RMB 150.3 billion (USD 21.9 billion) in net revenue in the second quarter of 2019, up 22.9% year-on-year. The company earned net income of RMB 618.8 million — a reversal from net losses of RMB 2.2 billion in the second quarter of 2018.

CEO Richard Liu said during the earnings call that profitability in the first half of the year was the consequence of years of commitment to the company’s business plans, which leverage on economies of scale and advantages in cost and efficiency.

The number of annual active customer accounts increased to 321.3 million in the 12 months ending June 30, representing an increase from the 310.5 million mark on March 31, said JD.com in a press release. However, the scale of JD.com still lags behind Alibaba and Pinduoduo. Annual active buyers counts for Pinduoduo and Alibaba, both of which have yet to release their second quarter earnings, reached 443.3 million and 654 million, respectively, in the 12-month period ending March 31.

Liu said during the earnings call that JD’s overall profitability was also due to some business segments breaking even or yielding profits.

He emphasized the case of JD Logistics, which handles delivery services for the conglomerate’s own retail business as well as external companies and individuals, and said it broke even in the second quarter.

CFO Sidney Xuande Huang said during the same call that JD Logistics delivered a stellar quarter as its capacity utilization and staff productivity reached the normalized level during a seasonally busy three months.

JD Logistics is piloting a new remuneration structure, offering couriers only performance-based compensation, replacing the previous model of base salaries plus bonuses.

After the move triggered internal complaints and widespread external scrutiny, Liu cited JD Logistics’ losses exceeding RMB 2.8 billion (USD 417.5 million) in 2018 to justify the controversial change, adding that the company had no choice but to ask its couriers to pick up external orders to increase revenue.

The changes in JD Logistics were only part of the corporate reshuffle of JD.com. The company fired 10% of its underperforming senior executives and threatened to sack underperforming or overpaid employees in a leaked email in April.

Outside of China, Liu  was detained in August 2018 by police in the United States due to rape charges. He was later released. After the US prosecutors declined to press charges, Liu and JD.com were taken to a civil court by his accuser. The first hearing for this case is scheduled to take place on September 11.

Comments