JD.com executives interpret Q4 financial report: Emphasis on long-term shareholder returns and confidence to continue to gain market share

JD.com today released its fourth quarter and full-year financial reports as of December 31, 2023. Net revenue in the fourth quarter was 306.1 billion yuan, a year-on-year increase of 3.6%. Net profit attributable to ordinary shareholders was 3.4 billion yuan, an increase from 3 billion yuan in the same period in 2022. Net profit attributable to common shareholders calculated on a non-GAAP basis was 8.4 billion yuan, an increase from 7.7 billion yuan in the same period in 2022.

For the full year of 2023, the company achieved net revenue of 1.0847 billion yuan, a year-on-year increase of 3.7%. Net profit attributable to ordinary shareholders reached 24.2 billion yuan, a significant increase from 10.4 billion yuan in 2022. Calculated on a non-GAAP basis, the company's net profit attributable to ordinary shareholders was 35.2 billion yuan, an increase from 28.2 billion yuan in 2022.

After the financial report was released, Jingdong Group CEO Xu Ran and CFO Shan Su attended the analyst conference call, interpreted the financial report, and answered analysts' questions.

The following is the transcript of the analyst Q&A session of this conference call:

Goldman Sachs analyst Ronald Keung: First of all, congratulations on the very stable performance of this quarter Performance. My question is, we have seen that JD.com and other e-commerce companies have used the two data of "growth" and "market share" as relatively focused strategies to develop this year, that is, to maintain market share or increase market share ( return to growth momentum). In addition, the current growth rate of the e-commerce market is also slowing down. So how will management balance growth and profits this year while driving growth? Can management give us an answer from the perspective of absolute profit or specific profit targets?

Also, in terms of shareholder returns, we see that the company now has almost $1.2 billion in fixed dividends. My question is about the company's overall shareholder return. The company has almost $6 billion in free cash flow in 2023. Does management believe there is room for improvement in returns from potential dividends and share repurchases in the future?

Xu Ran: I will answer the first question, and Shan Su will answer the second question about returns.

First of all, the balance between growth and profit has always been a very good issue. In 2023, you can see that we have also taken many actions on the basis of continuing to focus on business health, including user experience, low-price mentality and the construction of brand ecology.

For example, you can actually see that in the past year, we have been continuously improving the user’s shopping experience and services, including launching, upgrading, and expanding the scope of price protection, “free door-to-door "Return and exchange" has also gradually expanded from self-operation to our 3P (third-party merchant) business, as well as "refund without return" and other services. In fact, (these) are sparing no effort to improve users' shopping experience and service levels. At the same time It is also constantly improving JD.com’s differentiated shopping and service experience. By the fourth quarter, we saw an accelerated growth in the number of shopping users, especially the growth of new users, and this growth trend continued into the first quarter. At the same time, I believe that everyone has not seen a significant drop in the company's profits, although our services and experience are constantly improving. That's the balance we're trying to find.

At the same time, we are also optimizing our procurement costs and enriching low-priced pallets. While emphasizing the low-price mentality, on the one hand, we have strengthened the supply of low-price products, such as launching a series of measures such as "10 billion subsidies", "9.9 free shipping" channel and "lowering the free shipping threshold" , in fact (these) all allow users to experience low-price, high-quality goods while driving users to increase their shopping frequency. We also believe that by continuing to improve user experience, it will enable us to achieve healthier user growth and increase shopping frequency, which will naturally drive the company's business scale and market share to grow.

From the perspective of platform ecology, more and more new merchants are joining our platform, and the number of active merchants entering the track is also accelerating. This has brought us a better and richer product supply, and also led to accelerated growth in the number of users and order volume of JD.com’s 3P business. Therefore, we will continue to pay attention to user experience in 2024, continue to focus on the key directions of price competitiveness and improving platform ecological construction, and pay more attention to the implementation of these strategies. We are also confident that we will continue to gain market share.

What I want to emphasize is that our business model itself determines the improvement of business scale. The improvement of technical level will inevitably bring about the improvement of efficiency, and the benefits brought by these improvements allow us to continue to invest them in In the user experience, it will bring better user stickiness, user shopping frequency and user growth, which will continue to bring about the growth of business scale. This is a positive cycle that can be sustained and does not necessarily have a significant impact on profits. This is also the logic of our business model that we have continued to communicate with the market for so many years. In fact, profits will naturally come from our continued improvement in market share and value creation for users. From a management perspective, we will also balance the pace of investment and growth, and continue to focus on how to bring better returns to shareholders.

Shan Su: Thank you for your attention to shareholder returns. I would like to take this opportunity to report to you our thoughts and actions we are executing.

First of all, JD.com focuses on the long-term healthy development of its business, including the healthy expansion of business scale and the long-term stable growth of profits and cash flow. On this basis, we attach great importance to long-term shareholder returns and will reward our shareholders in different ways. The company's balance sheet is very strong, and we believe that "maintaining good shareholder returns" and "continued investment in the business" are our focus.

We have just announced that we will pay an annual dividend of US$1.2 billion this year. The increase in dividend amount is due to the rapid growth of profits last year, which will create real cash income for our shareholders. Currently, we have paid a cumulative dividend of US$4.2 billion for three consecutive years. Our next goal is to continue to pay annual dividends and share the company's value creation with shareholders.

At the same time, the board of directors also approved a new repurchase plan. The company plans to repurchase US$3 billion in the next three years. We will resolutely implement the repurchase and communicate with investors regularly. I believe the market will see the company's real efforts in sharing the company's value with shareholders.

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