Chinese e-commerce billionaire's fortune halved

The policy of selling cheap goods has not been successful, the assets of JD's owner have decreased by more than half this year, down to 5.1 billion USD.

JD founder and chairman Richard Liu has seen his fortune plummet as the company’s shares have fallen about 60% on the Nasdaq since peaking in January. In Hong Kong, they have also plunged by a similar amount to a record low, making them the worst performer on the Hang Seng Tech Index so far this year.

Analysts say the Beijing-based e-commerce company is struggling to implement the low-cost sales strategy that Liu outlined in February, when he pledged to invest more than $1 billion to subsidize products.

Despite shifting to selling more affordable products like $1.30 toothpaste and $11 Bluetooth headphones, the slowdown in China’s economy has made JD’s strategy less successful than expected. It lags Alibaba and PDD Holdings in attracting low-cost sellers, according to research from Morningstar analyst Chelsey Tam.

JD Founder and Chairman Richard Liu. Photo: Bloomberg — JD Founder and Chairman Richard Liu. Photo: *Bloomberg*

Moreover, JD's leadership still wants to protect some of its profit margins, making its price cuts less aggressive than those of its rivals, according to Wang Xiaoyan, an analyst at Shanghai-based research firm 86Research.

“Successful transition to a low-price model requires a lot of financial investment and a strong commitment from management to fight a price war,” Ms. Wang said. But so far, JD is still hoping to control costs, and the results from its low-price strategy have not been good, according to experts.

This has left the tech company lagging behind rivals in revenue and user growth, while sales in its traditional segments such as electronics and high-value goods are under pressure due to weak demand.

JD replaced its CEO in the second quarter as part of a surprise leadership shakeup. The company’s revenue rose 7.6% to $39.5 billion and net income rose 50% to $900 million. The results were better than expected but still below Alibaba’s 14% revenue growth and PDD’s 66% growth in the same period.

Analysts don’t see a recovery for JD. Last week, at least seven Wall Street brokerages, including Jefferies and Morgan Stanley, cut their price targets on the company’s stock.

Jefferies analyst Thomas Chong cut his price target to $80 from $97 but maintained his buy rating. He expects JD’s third-quarter revenue to rise just 1% to $34 billion. “We have revised our revenue estimates to take into account the impact of global economic challenges and the gradual recovery of consumer sentiment,” he said.

Eric Wen, founder and CEO of research firm Blue Lotus Capital Advisors, expects JD to see signs of renewed growth next year, when consumption could pick up and the economy could improve further as Beijing’s stimulus efforts take effect.

He said JD should improve its business strategy by accelerating overseas expansion amid growing competition at home. “JD has not done enough on this. For example, they could learn from Amazon and export some of their logistics capabilities overseas,” he said.

Phien An ( according to Forbes )

Source link