May 15, 2020 / 10:01 AM / 14 days ago

JD.com forecasts revenue above estimates on demand for daily essentials

(Reuters) - China’s JD.com Inc on Friday forecast second-quarter revenue above analysts’ estimates after an upbeat quarter, riding on a surge in online orders of groceries and daily goods from consumers sheltering at home to prevent the spread of the coronavirus.

FILE PHOTO: A sign of China's e-commerce company JD.com is seen at its shop at a mall in Shanghai, China October 26, 2018. REUTERS/Aly Song

The web retailer’s strategy of holding inventory and having full control of its in-house delivery network helped it to compete with larger rival Alibaba Group Holding Ltd, which outsources its logistics operation to third-party firms.

Grocery demand got a boost as most people opted for cooking at home instead of eating out due to lockdowns imposed to stop the spread of the coronavirus.

On a post-earnings call, Chief Executive Xuande Huang said he expects people to still cut back on eating out as a measure of caution, even as China slowly removes restrictions.

“Essentially, people will be cooking at home. And so that will increase the overall demand for fresh and supermarket sales, both online and offline.”

The cost per order reached an all-time low during the first quarter because the order volume spiked unexpectedly, company executives said on the call.

Sales in its product segment, which includes online retail sales, rose about 20% 130.09 billion yuan (15.08 billion pounds), beating estimates of 123.62 billion yuan, according to IBES data from Refinitiv polled by three analysts.

JD, which has been working to expand into price-sensitive lower-tier cities, said more than 70% of new customers in the quarter came from those cities.

Executives also stressed that it was using Jingxi, a shopping platform targeting lower-tier cities, to help pandemic-hit exporters sell to domestic consumers online.

JD said in March it would give out 1.5 billion yuan worth of coupons for branded goods in categories including electronics, to encourage consumers to spend while the broader economy deals with virus-related uncertainties.

The company expects current-quarter revenue in the range of 180 billion yuan and 195 billion yuan. Analysts on average were expecting 176.65 billion yuan.

JD’s total net revenue rose 20.7% to 146.21 billion yuan in the first quarter ended March 31, while analysts on average had expected 136.53 billion yuan.

Excluding items, the company earned 1.98 yuan per American depositary share, above estimate of 0.83 yuan.

Reporting by Ayanti Bera in Bengaluru and Josh Horwitz in Shanghai; Editing by Sriraj Kalluvila and Maju Samuel

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