On March 6th, JD Group released its performance for the fourth quarter and full year of 2023. Against the backdrop of reviving its low price strategy, JD Group's revenue in 2023 was 1084.7 billion yuan, a year-on-year increase of 3.7%; Under non US GAAP accounting standards, operating profit was 35.4 billion yuan, a year-on-year increase of 28.3%; Under non US GAAP, the net profit attributable to common shareholders was 35.2 billion yuan, a year-on-year increase of 24.8%.
Under the low price strategy, in 2023, JD's net profit margin attributable to common shareholders under non US GAAP was 3.2%, compared to 2.7% last year. Regarding this, Xu Ran, CEO of JD Group, believes that low prices may not necessarily have a significant impact on profits, and JD's strategy in 2024 will not undergo significant adjustments in the overall direction.
Low price strategy improves overall profit for one year
Over the past year, low prices have been JD's most important strategy. From launching a "billion yuan subsidy", setting up a "9.9 free shipping" entrance, lowering the free shipping threshold, launching a "refund no return" service, to the "really cheap" and "cheaper" on Double 11, as well as JD's procurement and sales bargaining, all revolve around the low price strategy.
The financial report data also revealed the transcript of the low price strategy. In 2023, JD's retail revenue was 945.3 billion yuan, accounting for more than 80% of the total revenue, a slight increase of 1.7% year-on-year; JD Logistics revenue was 166.6 billion yuan, a year-on-year increase of 21.3%, accounting for approximately 15% of the total revenue; Other business revenue, including Dada, decreased by nearly 11% year-on-year and accounted for less than 10% of total revenue.
JD's retail sales saw a slight increase, thanks to its stable revenue from electronic products and household appliances. The annual revenue increased by 4.4% year-on-year, but the revenue from daily necessities decreased by 4.8% year-on-year. On a quarterly basis, after three consecutive quarters of year-on-year decline, JD Retail's revenue finally returned to the growth track in the fourth quarter.
The overall profit improvement of JD.com mainly benefits from the performance of logistics business and cost control.
In 2023, JD Logistics adjusted its net profit to 2.76 billion yuan, a year-on-year increase of 218.8%, turning losses into profits, mainly benefiting from the growth of external customer revenue. At the same time, research and development expenses, general and administrative expenses decreased by 500 million yuan and 1.4 billion yuan respectively. Although the fulfillment expenses and marketing expenses have increased, the above-mentioned expenses are for the purpose of serving the low price strategy and logistics efficiency, and JD.com is not stingy with the money that should be spent.
spare no effort in ecological openness
In a conference call after the financial report, Xu Ran stated that in 2024, JD.com is confident that it will continue to maintain a faster growth rate than the industry in the home appliance and electronics categories, while competition in the supermarket category remains very fierce. She mentioned that due to JD's unique business model, JD will face challenges in an open ecosystem, and its approach may be slightly different from other platforms.
She mentioned that the challenges of an open ecosystem are inseparable from JD's architecture adjustment a year ago. In order to better tap into the platform's products and traffic, and deepen the implementation of the low price strategy, JD Retail made organizational adjustments last year. In January 2023, JD Supermarket established a POP business department to vigorously develop open ecological businesses and attract more third-party merchants to settle in through tariff reductions and other means. In April of the same year, JD Retail abolished the business group system and changed it to a business unit system, splitting business units according to segmented categories, no longer distinguishing between self operated and POP, and fully integrating.
The above strategy has indeed made third-party merchants on the platform more active. Financial report data shows that the number of third-party merchants on the JD platform increased by 188% year-on-year in 2023. After third-party merchants joined, competition with self operated brands in terms of price control and sales has also emerged. During the Double 11 period, the price control dispute between JD, the baking appliance brand Haishi, and Li Jiaqi's live broadcast room was an explosive point, and the increase in third-party merchants may also put pressure on JD's self operated revenue.
But JD's continuous efforts to introduce third-party merchants into the open ecosystem will not stop. During a conference call after the financial report, Shan Su, Chief Financial Officer of JD Group, stated that the platform has launched a series of support measures for new and old merchants, including free commission for new merchants and active commission reduction for certain categories and marketing venues. The open ecosystem will continue.
Repurchase+dividend to stabilize stock price
After the financial report was released, JD's US stock rose by 16.18%, with a stock price of $24.91 and a market value of $39.21 billion, up $5.4 billion. JD Group's Hong Kong stocks also surged 6% on March 7th.
The boost in stock prices is related to JD Group's annual cash dividends, with a total dividend payout of approximately $1.2 billion, exceeding the $1 billion in 2023. In addition to dividends, JD Group will also carry out a new share repurchase plan. After the existing share repurchase plan expires and takes effect, JD will repurchase shares worth no more than $3 billion within the next three years.
This is almost the common choice of Internet giants to stabilize their share prices. On February 7th, Alibaba released its performance for the third quarter of the 2024 fiscal year, announcing that the board of directors had approved an increase of $25 billion in the share repurchase plan, bringing the total repurchase scale to $65 billion. Vipshop, which had never distributed dividends before, also passed its annual cash dividend policy on February 22nd, announcing a total dividend payout of approximately $250 million.
