Between April 29 to May 3, 2023, China celebrated a labor day holiday. The country could find crowds in local areas. When resorts and vacation destinations hiked prices, demand softened. Chinese customers are spending less. This trend is bad news for JD and Alibaba.
JD (JD) posted quarterly results that, while strong, did not lead to a sustainable rally. The stock rallied from $35 to around $37.60 only to close at $35.30 last week. This stopped BABA stock, another e-retailer, from rallying.
JD reported revenue of $35.4 billion, up by 1.4% Y/Y. However, the CEO’s resignation for personal reasons, adds uncertainty. The CFO will lead the firm, so the concern is unfounded.
JD ran discount programs in the quarter to offer competitive prices and services. The subsidy program included low cost and free shipping. This will push through product, decreasing supplies.
JD will leverage its supply chain to realize economies of scale. It will pass its savings to customers, increasing loyalty. Expect everyday low-price items to attract and retain customers. Alibaba and Pinduoduo (PDD) will face significant competition from JD.
Look for gross merchandise volume rising faster than that of revenue. Third-party merchants are increasing activity on JD. This should enhance shareholder value.
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