(Reuters) -Chinese e-commerce giant JD.com exceeded market expectations for quarterly revenue on Thursday as deep discounts and government subsidies encouraged customers to spend, driving up strong year-end sales.
U.S.-listed shares of the company rose more than 6% in premarket trading.
Vinci Zhang, analyst at M Science, said it is a strong set of results overall. However, most of the revenue beat was driven by electronics and home appliances which is, in turn, being driven by government subsidies.
“So how much of the overall beat is happening organically, we don’t really know,” he said.
The country’s government has ramped up fiscal stimulus to bolster domestic consumption, which includes incentives for consumer goods trade-ins, encouraging consumers to purchase updated appliances.
JD.com is a major retailer of home appliances in China. SPDB International raised its fourth-quarter revenue forecast for the e-commerce giant in January, because of the government’s trade-in policy.
“We expect a significant improvement in the growth of electrified product categories, mainly benefiting from the national subsidy-driven sales growth of home appliances, computers, and other categories,” the securities house said in a report.
JD.com and Alibaba have slashed prices on everything from toys to tech appliances to lure shoppers amid intense competition at a time when consumption in the world’s second-largest economy has slowed sharply.
JD.com is also venturing into new areas beyond e-commerce and logistics networks. In February, it announced its entry into the food delivery business.
“The food delivery business is a nice compliment to its existing business structure because JD owns a lot of warehousing and logistics capabilities, so adding on food delivery just feels like it’s a natural extension of that,” said M Science’s Zhang.
JD.com reported total revenue of 346.99 billion yuan ($47.91 billion) for the fourth quarter, a 13.4% increase over the year earlier.
Net income attributable to JD.com’s ordinary shareholders was 9.9 billion yuan for the quarter ended December 31, compared to 3.4 billion yuan a year earlier.
($1 = 7.2430 Chinese yuan renminbi)
(Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar and Jan Harvey)
