JD.com Inc. CFO Sidney Huang told analysts that the company's investments in its logistics business will impact its margin in fiscal 2018.
JD plans to invest in two areas of logistics in 2018, Huang said March 2 during an analyst call after the company posted a net loss of 909.2 million Chinese yuan for the fiscal fourth quarter ended Dec. 31, 2017. JD's shares were down 7.2% to $43.89 as of midmorning trading.
The Chinese e-commerce giant said it expects to post a non-GAAP net margin between 1% and 2% for fiscal 2018, which ends Dec. 31. The company reported a non-GAAP net margin from continuing operations of 1.4% in fiscal 2017, according to its earnings release.
JD said it will build more warehouses, requiring capital to spend on land and equipment. The company also plans to invest in "logistic technologies." Huang said the company has already launched the first of its fully automated warehouses, and it plans to introduce automated delivery robots on numerous campuses in Beijing. In addition, JD is testing self-driving trucks, he said, without quantifying the investments.
"These investments will probably not yield any near-term immediate operating or financial benefits," Huang said on the call. "But we believe, as the technologies continue to advance and labor costs are expected to increase, these investments will be very valuable."
Jin Kyu Yoon, an analyst at Mizuho Securities Asia Ltd., said on the call that JD's 2018 margin guidance "means we're going to see very little, if any, operating or net income margin leverage."
In the past months, JD has reportedly discussed raising funds for its logistics unit, particularly to sell 15% of its wholly owned JD Logistics unit to Chinese tech giant Tencent Holdings Ltd. and other investors, according to Bloomberg.
Huang said on the call that JD's revenue grew 38.7% year over year during the fiscal fourth quarter of 2017, driven by the home appliances and electronics categories. He said JD has been able to realize "economies of scale" and benefits from supplier relationships from the company's strong position in those categories.
"This is what we have seen exactly in 2017," he said. "Even though we had been the largest player, we continue to see very, very robust growth way ahead of the industry average."
As of March 1, US$1 was equivalent to 6.36 Chinese yuan.
