JD.com shares slide 9% as weak retail growth overshadows Q2 earnings beat

JD.com's shares plummeted 9.2% on Friday, as investors prioritized concerns over weaker core retail sales and signs of persisting pressure on consumer demand over the company's second-quarter earnings beat. The stock's price dropped to its lowest point since June 14, while the Hang Seng Index declined by 0.9%. Alibaba Group, which tends to follow JD.com closely during earnings reports, saw a 1.6% decline.

JD.com's net income attributable increased by 15% year-over-year to approximately RMB7.1 billion, and non-GAAP net income rose 21% to RMB8.93 billion, both surpassing market expectations. However, revenue fell 2.9% year-over-year, despite reaching RMB346.4 billion.

The primary concern lay within JD Retail, the core of the business, where revenue declined by roughly 4.7% year-over-year. Operating income also dropped by 3.3%, although the division retained a comparatively strong operating margin due to supply-chain efficiencies and growth in marketplace and marketing services, which partially offset weaker merchandise sales.

Within product revenue, electronics and home-appliance sales experienced an 11.8% decline. Conversely, service revenue proved more resilient, with marketplace and marketing revenue up 8.3% and logistics and other service revenue increasing by 5.9%.

Despite challenges, JD Logistics demonstrated strength, with revenue rising 24% year-over-year and operating income increasing by 16%. JD CEO Sandy Xu suggested that sales momentum began to improve in June, and electronics and appliance growth should strengthen in the second half as the comparison base from last year's promotion period lessens.

JD attributed the quarterly revenue decline, in part, to a high comparison base, rising raw-material costs, and weak consumer confidence. The results also highlight broader challenges facing Chinese consumer spending, with JD's total revenue falling for the first time in over a decade, even though the company exceeded expectations.

Investors are now focused on whether improved profitability can compensate for slower top-line growth.