Can JD.com Bring Its Costs Under Control?

By Paul Ausick Updated Apr 27, 6:26PM EDT · Published May 8, 8:40AM EDT

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JD.com Inc. (NASDAQ: JD) reported first-quarter fiscal 2015 results before markets opened Friday. The Beijing-based online direct retailer reported an adjusted diluted loss per American depositary share (ADS) of $0.02 on revenues of $5.9 billion. First-quarter results compare to the consensus estimates for earnings per ADS of $0.03 on revenues of approximately $5.74 billion. One ADS equals two Class A ordinary shares.

Gross merchandise value (GMV), the total value of sales transacted on the company’s websites, doubled to $14.2 billion, and annual active customer accounts increased by 90% to 105.2 million in the 12-month period to March 31. The increases in GMV and net revenues were primarily due to the growth in active customer accounts and the number of fulfilled orders in the first quarter of 2015, according to the company.

Costs of revenues rose 58% to $5.2 billion year-over-year, primarily due to growth in the direct sales business and increased traffic acquisition costs. Fulfillment expenses, which include procurement, warehousing, delivery and customer service, rose 97% to $400 million.

In its outlook, JD.com estimated that net revenues will range between about $7.0 billion and $7.2 billion. Consensus estimates call for a loss per ADS of $0.06 on revenues of approximately $7 billion. For the full year, analysts expect earnings per share of $0.54 on revenues of about $28.1 billion.

The company also announced this morning a $350 million investment in Chinese travel website Tuniu Corp. (NASDAQ: TOUR). JD.com’s travel site now will be operated exclusively by Tuniu, and JD.com said it will forego commissions on the Tuniu-operated site and instead collect fees on flights and hotel bookings made by Tuniu on other JD.com sites. The investment is widely seen as a boost to JD.com’s nascent travel business at a time when the business appears to be set for big growth in China.

JD.com’s ADSs traded down about 3.8% in Friday’s premarket session to $31.82, after closing at $33.08 on Thursday. The consensus price target is around $36 per ADS and the high target is around $44.00.

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About the Author Paul Ausick →

Paul Ausick has been writing for a673b.bigscoots-temp.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.

He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.