It is reported that in 2009-2017, JD's accumulated operating loss was 19.9 billion yuan, with an average annual loss of 2.1 billion yuan. Why does JD have so many accumulated losses in nine years? What's the reason?
Reasons for JD's 9-year operating loss of 18.8 billion
On March 2, 2017, JD group (NASDAQ: JD) released its Q4 and full year results in 2017 before opening. For JD, investors are most concerned about growth, efficiency and structure. After the financial report was released, Jingdong shares fell 7.1% in pre market trading, fell nearly 9% in volume after the opening and narrowed to 5.2% at the closing.
After the change of Gmv statistical caliber
Since Q3 in 2017, JD has made significant adjustments to Gmv statistical caliber. According to the existing data, the new Gmv is about 140% of the old Gmv.
In Q4 2017, according to the new method, the Gmv of JD reached 403 billion, an increase of 33.1% year on year. In Q1 2015, the year-on-year growth rate of Gmv was as high as 90%; the year-on-year growth rate of each quarter in 2016 dropped to below 50%; in the last two quarters of 2017, the growth rate fell to 30%.
According to Hu olfactory, November 14, 2017, Jingdong changed the way of Gmv disclosure not only to make the data look good, but also to further improve the proportion of third-party Gmv. Because if the proportion exceeds 50%, it means that the attributes of JD e-commerce platform will change qualitatively.
Removing barriers to third-party Gmv share can also directly drive revenue growth. However, since Q2 2016, the year-on-year growth of Jingdong's revenue has been lagging behind that of ajin, and the adjustment of Gmv statistical caliber has not reversed the situation. In Q4 2016, the year-on-year growth rate of Jingdong and Ali's revenue was 45% and 54% respectively; in Q4 2017, the year-on-year growth rate of Jingdong's revenue dropped to 39%, while Ali's revenue increased by 2% to 56%.
In 2017, Jingdong's revenue was 362.3 billion, with a year-on-year growth rate of 39.2%, the lowest since its inception.
Overall, after JD adjusted the Gmv statistical caliber, the growth rate is still not ideal.
Accumulated loss in nine years 18.8 billion
In the past, with the increase of the third-party Gmv proportion, the gross profit margin of Jingdong increased significantly. Because Beijing's proprietary business earns price difference with a gross profit margin of less than 10%; the third-party platform business earns Commission with a gross profit margin of about 70%. In Q4 2017, the gross profit margin of JD fell to 13% and returned to Q4 2014. In Q2 2017, the gross profit margin also fell to 14%. Jingdong's gross profit margin ended to rise slowly and declined, which is noteworthy.
When the gross profit margin is lower than the sum of expenses, JD will suffer from operating loss. This has been the case in six of the last eight quarters.
In 2017, the operating profits of jd.com in Q1 and Q3 were 'normalised' twice, with profits of 830 million and 500 million respectively, but in Q4, it lost 1.6 billion. The annual operating loss was 835 million.
After excluding 2.78 billion equity incentive costs (including 1.52 billion of Liu's administrative department) and eliminating 1.78 billion amortization, JD claimed '5 billion profit' (strictly speaking, 'non GAAP profit of going concern business' was 4.97 billion').
Since 2009, JD's operating loss has accumulated 18.8 billion yuan, with an average of 2.1 billion yuan per year.
Net profit is affected by many factors. Non GAAP profit is completely manipulated by people. In contrast, operating profit is the best indicator to reflect the business status of enterprises.
To build a daily inventory is a step insurance game
Front warehouse is an important strategy of JD. The advantage is that it can deliver goods in the first time and shorten the waiting time after the user orders.
In 2010, Jingdong's inventory was insignificant and its book value was only 1.1 billion yuan. By the end of 2017, the inventory had reached 41.7 billion yuan, a net increase of 12.8 billion yuan over the end of 2016, an increase of over 44%.
In Q4 2017, the inventory turnover days of JD were 38.1 days, and 37.6 days in the same period of 2016.
At the end of 2016, there were 256 warehouses operated by JD, with a total area of 5.6 million square meters. By the end of 2017, there were 486 operational warehouses in JD, with a total area of about 10 million square meters. It is reported that JD plans to increase the storage area to 50 million square meters.
By the end of 2017, the book value of JD's assets, equipment and facilities had reached 12.6 billion yuan. In addition, there are 3.2 billion projects under construction, 6.7 billion intangible assets and 7.1 billion land use rights (about three times of 2016). All of the above are 29.5 billion yuan in total, almost all of which are formed by the investment of Jingdong warehouse and logistics. The depreciation and amortization of these assets are the logistics costs of "resounding". If they are ignored in the name of non GAAP, it means that nearly 30 billion assets are "windblown". JD can use them in vain.
Similarly, it is not appropriate for JD to "non drop" billions of equity incentive costs. Equity incentive is very important for attracting, retaining and motivating talents, which has become the 'rigid cost' of enterprises. If equity incentive is not used, the remuneration paid by JD will be much higher than now.
After the storage area of 50 million square meters is completed, Jingdong's inventory will reach hundreds of billions. The investment in storage site and facilities is huge, and the inventory occupies the capital, so it needs to bear the risk of damage, unsalable, impairment and so on. This is a dangerous move!
Where does' free cash flow 'come from?
Jingdong's' accounts payable 'is mainly formed by the third-party seller's payment settlement. In 2013, JD had only 36.5 million accounts payable. By the end of 2017, it reached 18.6 billion, with an expansion of 508 times!
In recent years, the turnover of accounts payable of JD has been slowing down. The average turnover days at the end of 2017 was 59.1 days, 7 days longer than that at the end of 2016.
The Chinese people can best understand what is' average '. There are 170000 sellers in Jingdong. If Haier can get the payment one month after the goods are sold, thousands of small and medium-sized sellers may have to wait six months.
In 2016, JD began to disclose "free cash flow". Its source is not profit but "net cash flow generated by operating activities": no profit is needed, only the purchase price can be used to generate "net cash inflow", thus forming the so-called "free cash flow".
Against the background of accounting for 18.6 billion suppliers, in 2017, JD made a net interest income of 1.57 billion (interest received minus interest paid). This "input" made the statement look better, and finally only lost 11.72 million (loss of 3.4 billion in 2016).
It's a bit far fetched to call the money owed 'free cash'. It's moving to lend the money owed to creditors and earn more than 1 billion interest.