JD.com, Inc.

thank you for standing by for JD.com's third quarter 2024 earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks there will be a question and answer session. Today's conference is being recorded. If you have any objections you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director, Investor Relations. Please go ahead.

Thank you. Good day, everyone. Welcome to JD.com's third quarter 2024 earnings conference call. For today's call, CEO of JD.com, Ms. Sandy Xu, will kick off with her opening remarks, and our central, Ms. Yiyan Shen, will discuss the financial results. and then we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today only, and will include forward-looking statements. And please refer to our latest safe harbor statement in the earnings press release on our website, which applies to this call. We'll discuss certain non-GAAP financial measures, Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Also, please note, all figures mentioned in this call are in R&D, unless otherwise stated. Now, let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thanks for joining us today to discuss our Q3 2024 results. We had a solid Q3 with improved operating and financial results. our top-line growth accelerated sequentially, our active user base and shopping frequency expanded with stronger momentum, and our bottom line achieved another substantial uplift. At the heart of this achievement is our relentless focus on building supply chain capabilities and logistics infrastructure, which enable us to continuously unleash strength in delivering lower cost, higher efficiency, and best-in-class user experience. This is the key competitive strength that we are focused on as we face an ever-changing macro and competitive landscape. Citi has been dedicated to establishing core supply chain capabilities since day one, along with putting significant efforts into building out retail and logistics infrastructures around the country to better serve consumers and contribute to the real economy of local areas nationwide. This enables us to play a key role in contributing in the treating program, both online and offline. JD is best positioned to support this program not only with our strong user man-share in home appliance and 3C categories, but more importantly, with our supply chain capabilities and our fulfillment infrastructure. Consumers are attracted to JD's platform for the wealth of product selections, our integrated service, covering every step from dismantling, shipment to installation of the heavy bulkhead appliances, and smooth checkout process using trade-in subsidies. The trade-in program has proven to be very effective in unlocking consumption potential and driving the technological upgrade of the entire industry chain. and we expect to continue to play our role in this effort to better serve customers and suppliers, stimulate consumption, and promote healthy industry development. Turning to general merchandise category, in Q3, its revenues increased by 8% year-on-year, a healthy momentum that has been sustained for three consecutive quarters this year. it was primarily attributable to our supermarket category, which delivered another double-digit revenue growth year-on-year in the quarter. As a key growth driver for us, the supermarket category continued to enrich its product portfolio in the quarter to cover different price tiers. It has also launched many initiatives, such as direct shipment from suppliers to customers that gained strong traction among our users. As such, with improving user experience, we saw healthy increase in both user base and user engagement in supermarkets, particularly with a robust 20% increase in shopping frequency during the quarter. Also notably, within our fashion category, apparel and sports and outdoor both recorded double-digit revenue growth year-on-year during the quarter, thanks to our efforts to enrich product selection, enhance user experience, and drive user man-share of shopping for clothing on JD. It's clear that our supply chain strength is at the core of our progress in operations and financials. In addition to that, Going forward, we will continue to focus on a few key areas to drive our high-quality, sustainable growth in the long run. First, user growth and engagement. We've seen a set of encouraging results resulting from our efforts and investments in users. The number of our quarterly active customers has been growing at double-digit rates year-on-year for the last four quarters in a row, with Q3 being the highest. The growth was distributed across market tiers and user groups, including new and existing users. In addition, in Q3, user shopping frequency maintained double-digit young year goals, primarily driven by our increased price competitiveness, category mix shift, and wider coverage of free shipping service. Our JD Plus program is on the right track, as we saw a set of metrics, including active class number and shopping frequency, continue to improve. All this progress in user growth and engagement really speaks to the fact that we've been providing best-in-class experience to users of different income spectrums and demands. with the right products, price, and service offerings. On such robust momentum, we will continue to invest with discipline in user growth and user experience. In addition to users, let me share some progress we made on price competitiveness and platform ecosystem. We further improved our price competitiveness as we continue to leverage on the strength of our 1P supply chain capabilities, as well as our enriched 3P product offerings and white label goods. As a result, we are better able to serve both our existing users and new users, and our NPS for price competitiveness increased year-on-year for another quarter, particularly we saw a steeper trajectory of user base expansion and other volume growth in lower tier markets compared to that of higher tier markets on our platform. Low price is the very essence of retail and our commitment to that will never change. To reinforce our everyday low price user mindshare, we have launched a series of campaigns such as the monthly Super 18 sales that offers a selection of discounted products on the 18th of every month, the weekly Black Friday offering deals that mainly cover supermarket categories, the daily late-night flash sales, offering deep discounts for a limited time and limited supply, as well as the half-price clothing promotions. These offerings are highly welcomed by our users. Last but not least, we also continue to make progress on our platform ecosystem. We onboarded more 3P merchants during the quarter, particularly SMEs and those from industry belts, to expand our product offerings at different price tiers. As such, our active merchant base maintained a very healthy year-on-year growth. More importantly, we also made solid progress in the quarter in user engagement, which led to accelerated year-on-year growth in 3P order volume and the number of users who purchased 3P products on our platform, both of which reached record high growth levels in Q3. Our NPF for 3P offerings rose year-on-year as well. As to monetization, commission revenues returned to a positive growth in Q3, in line with our expectations as the impact of discounted commission fees fully lapsed. Advertising revenues in our retail business grew by double digits year-on-year. thanks to the healthy growth of our ecosystem and improving traffic allocation efficiency for both 1P and 3P merchants. That said, we are still at the very beginning of exploring the potential of our platform ecosystem to drive our business scale and profitability. We will continue to prioritize further optimizing our tools and infrastructure to better empower merchants, hence further improving user experience on our platform. That's the wrap-up for our Q3. Moving to Q4, we've just concluded Singles Day grant promotion. With this year's theme of cheaper and better, our supply chain trends were brought into full display. Our team did a great job expanding product assortment for both our 1P and 3P offerings, providing competitive prices and serving users with best-in-class experience. We saw users respond well with user number and order volume, both recording double-digit goals during the promotion. Finally, we are very encouraged by a more supportive policy environment that aims to realize the huge potential of consumption in China. and at the same time drive industry upgrades, create employment, and lift household income, which will further fuel consumption confidence. While we see consumer sentiment starts to improve, we understand it takes time for the benefits of the policies to feed through. We will continue to focus on executing our strategies in place, building up supply chain capabilities, and fully tapping into our potentials to drive lower cost, higher efficiency, and best-in-class user experience. We believe this will lead us to further expand our market share and profits. With that, I'll turn it over to Ian for our financial highlights. Thank you.

Thank you, Sandy, and hello, everyone. In Q3, our top-line group accelerated from last quarter and outpaced the group of domestic total retail sales driven by strength across our major business segments and categories. Our general merchandise category continued with strong momentum in the quarter, and more importantly, we saw a turnaround in revenue growth in our electronics and home appliances category due to our comprehensive support for China's nationwide trading program. With our strong user mindsets, supply chain capabilities, and logistics services that we have built over the past two decades. We are able to provide superior customer experience and bring value to business partners and the society at large. We also achieved an increase in profitability during the quarter as we continue to improve cost and efficiency, especially on the logistics side. Both gross margin and non-GAAP net margin expanded at a solid pace year-over-year in the quarter. Moreover, we continue to return value to shareholders. During the quarter, we completed our share repurchase program announced in March this year and launched a new $5 billion share repurchase program for the next three years through the end of August 2027. In detail, we repurchased a total of 31 million Class A ordinary shares, equivalent to 15.5 million ADIs, which accounted for 1.1% of our ordinary shares outstanding as of June 30, 2024. The total value of the shares we purchased in Q3 was approximately $390 million. During the nine months, Ended September 30, 2024, the total value of the shares repurchased was $3.65 billion, which accounted for 8.1% of our ordinary shares outstanding as of the end of 2023. The progress reflects our commitment to creating value for shareholders. With that, let me turn to our Q3 financial performance. Our net revenues grew by 5% year-on-year to RMB $260 billion in Q3, of which product revenues were up 5%. By category, revenues of electronics and home appliances grew by 3% year-on-year, with growth improving sequentially in each of these three months. September was notably strong for home appliances and PCs, due to our contribution to the trading program, which has been proven very effective in boosting overall consumption. And we've seen this upbeat momentum sustain our platform in Q4 quarter to date, including doing a single-state grant promotion. Of note, it's our unparalleled supply chain capabilities and keen focus on user experience that set us apart from the peers in the industry. Revenues of general merchandise recorded another solid growth of 8% year-on-year in the quarter, of which revenues of supermarket category, apparel, and the sports and all-dots of fashion category also double-digit increase year-on-year. With massive time and our investment in building user experience and user mind share in the general merchandise category, we believe there is significant headroom for us to drive further growth over time. Service revenues grew by 7% year-on-year in Q3, of which marketplace and marketing revenues up 6%, and logistics and other service revenues up 7%. For marketplace and marketing, commission revenues returned to positive growth in a quarter, as the impact of our discounted fees to merchants fully lapsed. Advertising revenues maintain solid momentum, with advertising revenues from JD Retail recording another double-digit year-on-year growth in Q3. Key operating metrics of our platform ecosystem showed positive progress in user engagement, including a steady increase in 3P audit volume and active users who purchased 3P products on our platform. Now, let's turn to our segment performance. JD Retail revenues were up 6% young in Q3, thanks to the turnaround of electronics and home appliances and the robust growth of general merchandise. Moreover, JD Retail recorded another meaningful gross margin improvement in the quarter as we continue to drive better scale benefits of 1P, favorable mixed shifts towards higher margin categories and higher contribution of 3P. As a result, we are able to pass over the savings to our users and offer them an enriched portfolio of quality products of different price tiers. The achievement in gross margin offset the increase in our operating expense, especially in marketing expense as we devoted efforts to drive user groups and user engagement. As a result, JD Retail's non-GAAP operating income increased by 6% year-on-year, and operating margins stayed stable at 5.2% in Q3, compared to the same period last year. Now, looking to JD Logistics, JD Logistics revenues increased by 7% year-on-year in Q3. This was due to healthy momentum in both internal and external revenues, which increased by 8% and 6% year-on-year, respectively. As JD Logistics continues to unlock economies of scale and rise operating efficiency, it made outside improvements across profit lines during the quarter. In particular, it now gets operating income increased by 624% year-on-year, and operating margin came in at 4.7%, up 400%. compared to a year ago. Going forward, we expect JD Logistics' high efficiency and superior service will continue to benefit JD Group as a critical component of our integrated supply chain. Turning to new business. In the quarter, revenue of new business was down 26% year-on-year, mostly due to the adjustment of the Jinxi business. Non-GAAP operating loss of new business was RMB 616 million in the quarter, compared to a loss of RMB 192 million a year ago. The result was largely due to the increased loss in Zinqi. Moving on to our consolidated profit performance. In Q3, at the group level, gross profit grew by 16% year-on-year, and gross margin grew by 165 bps to 17.3%. is the 10th quarter in a row, with our growth margin extension on a year-on-year basis, a strong proof of our high-quality development path. Moreover, our non-GAAP operating income increased by 18% year-on-year, and operating margin came in at 5% in Q3, up 54% year-on-year. Non-GAAP net profits Attributable to ordinary shareholders increased by 24% year-on-year, and net margin came in at 5.1%, up 76 bps year-on-year. We are well on track to achieve our long-term margin target, with some of the previous quarters already reaching it. For the full year of 2024, we're confident to achieve double-digit growth of our non-GAAP net profits. Our last 12-month free cash flow as of the end of Q3 was RMB 34 billion, compared to RMB 39 billion in the same period last year. The decrease was the result of the timing difference of our working capital and the impact of the trading program, which was partially offset by our increased profit and moderated capex. By the end of Q3, our cash and cash equivalents restricted cash, and short-term investments, added up to a total of RMB 197 billion. To conclude, we had a very solid Q3, with both top and bottom lines trending in the right direction. Looking ahead, we're more confident in the economic environment and the tendency of domestic consumption. We look forward to fully utilizing our core capabilities to play our role in the implementation of the government's stimulus measures. We will continue to execute our strategies in supply chain, price competitiveness, and platform ecosystem to create value for our users, business partners, and shareholders along the way. With that, I will turn it back to Shawn. Thank you. Thank you, Ian.

For the Q&A session, You are welcome to ask questions in Chinese or English, and our management or answer your question in the language you ask will provide English translation when necessary for convenient purpose only. In case of any discrepancy, please refer to our management statement in the original language. Okay, now, operator, we can open the call for Q&A session.

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star 2. If you're on a speakerphone, please pick up the handset to ask your question. Your first question comes from Ronald Keung from Goldman Sachs. Please go ahead.

Thank you, Sandy, Ian, and Sean. I would like to ask about our growth. After the COVID-19 vaccine is out, can you help us measure the amount of growth in the third quarter and the fourth quarter? And how much is the continuity of the vaccine? For example, how should we look at the continuity of the vaccine in the first and second quarter of next year? And then in addition to this change policy, I would like to hear about our main driving force for the future growth of Jindong. What are some of the new strategies and progress that we have to maintain our goal of running faster than Shilin Dapan? Thank you, management, for taking the question. I have a question on our growth. And we've seen the appliance trading programs. Could you help us just quantify the boost to third quarter and potentially into the fourth quarter? And how is the sustainability of this heading into next year for the policy-wide boost to appliance? And then excluding appliance, what are our strategies in supermarket general merchandise growth? 3P and price competitiveness to sustain the strategy for next year if we want to keep the target of growing above retail industry growth. Thank you.

Thank you for your question, Ronald. In the past, the government has introduced a series of economic and consumption policies, including consumer goods and change. These policies have been implemented across the country, and they have made a lot of progress. In the context of government-related departments, we are also using our years of experience in the supply chain to respond quickly. Through our own backup, we can improve efficiency and upgrade services, so that good products, good prices, and good services can guide our users and cover more consumers. Thank you, Ronald, to take your first question. So in recent months, the government has been rolling out a series of stimulus measures, including the trading policy nationwide, to support economic growth and consumption.

and these efforts have shown positive progress. And under the comprehensive planning of the government bodies, JDE has swiftly responded by increasing inventory and enhancing service efficiency to support the program, leveraging our extensive experience in supply chain management, we are well positioned to offer quality products and convenient services at competitive prices to a broad base of Chinese consumers. So here what I want to emphasize is that our swift response to the trade-in program is due to our years of experience in proactively providing trade-in services, which has made us technologically prepared and systematically compatible with such initiatives. Additionally, JD's unique supply chain capabilities, including our self-operated sales model, logistics and fulfillment capabilities, and large item services, and combined with our strong user mindshare in the home appliances category, have made us the preferred partner and preferred supplier for our customers in the treating program.

Yes, so from the effect of the exchange rate, we also see that the national stock of the exchange rate has achieved positive progress. In fact, we can see the effect of the national stock in a certain extent compared to the obvious improvement in July and August. So from the perspective of the Middle East, we actually also see that So on the effects of the trading program, we've seen promising outcomes so far. The National Bureau of Statistics

reported that September sales of household appliances and consumer electronics grew significantly compared to July and August. So this trend is also mirrored on JD.com, where the trading program has driven our increased demand of sales for home appliances and computers in September. Our sales on these categories increased sequentially in each of the three months in Q3.

Then it is worth noting that the effect of national supplementation in the third quarter has not been fully released. On the one hand, consumers have a process of education. Not all users understand this policy. On the other hand, short-term, these products will also be limited by the lack of production capacity. Therefore, from the perspective of the brand, they also need a certain period of expansion capacity.

At the same time, it is also noteworthy that a full potential of the trading policy has yet to be fully realized in Q3. By part, it's because some of the consumers haven't been fully aware of this policy. It takes some time for them to be educated and to take advantage of this trading policy. And on the other side, due to some limited production capacity, the high consumer demand for some subsidized products may not be fully met in the short term, and for the brands and the manufacturers, they may require time to ramp up production. Additionally, at the recent National People's Congress meeting, the government just unveiled to introduce more forceful fiscal stimulus plan based on next year's economic and social development objectives. and expanding the trading program in greater scale and categories of consumer goods is a measure included in this supportive plan. We believe expanding the trading policy would further support consumer spending. 对,我们理解国家推进消费品以及换新补贴其实不仅仅是为了

We also hope that consumer confidence can continue to be strengthened. This is good for the entire retail industry and all kinds of manufacturing industries. We think that if the policy continues and expands to more categories, it will be very important. So far, we have seen that the demand for home appliances and computers on our platform continues to rise steadily. And with more users participating in the exchange, the traffic and visits on our platform are also increasing rapidly. So we will continue to surround the cost-effectiveness experience to improve both our

We believe the government trading program is not solely aimed at boosting short-term consumption, but also at fostering the healthy development of key industries, creating jobs and increasing household income, and restore consumer confidence, and strengthen consumer confidence benefits the entire retail industry. and all sorts of manufacturing sector. And we hope the policy will continue and expand to other categories to sustain this meaningful momentum. And currently, this program remains attractive to consumers as reflected during JD's single-stake grant promotion, where our home appliances and computer sales continue to grow steadily. And moreover, the trading program has increased the traffic and visits JD's platform. We're committed to enhancing our supply chain across all categories, electronics, supermarket, and fashion, etc., focusing on cost, efficiency, and user experience to deliver cheaper and better shopping experiences to our customers.

The second question is about the growth strategy. In fact, over the past year, we have always surrounded the user experience, cost efficiency, and continued to push our various strategies and strategies to the ground. First of all, in terms of price competitiveness, we will always insist on continuing to increase the scale and efficiency of our supply chain to continuously reduce our own purchase cost. to continue to bring lower product prices. In addition, for non-brand products, we will continue to attract more high-quality white-collar industrial belt merchants and more low-price high-quality product choices through our POP mode and our coaching mode to meet the needs of different users. At the same time, as I mentioned, we have also built super 18s Regarding your second question on growth strategies, this year, we have steadily advanced our strategic plan, focusing on enhancing user experience, optimizing costs, and boosting efficiency.

So enhancing price competitiveness, our ongoing strategies include our continuous lowering our 1P procurement costs by scaling our supply chain and increasing efficiency. That allows us to offer products at a more competitive price. At the same time, to increase the supplies of non-brand products We are introducing more white-label sellers and affordable products through our channels like 3P and Jingqi business models to cater to the diverse shopping needs across user groups. At the same time, we strive to strengthen the everyday low-price user mindshare by building our promotional metrics, as I mentioned in my remarks, such as the monthly Super 18 sales, the weekly Black Friday deals on supermarket categories, and the daily late-night flash sale events.

So on the general merchandise category in Q3, it also maintained healthy growth and continued to outperform the market. And specifically on the supermarket category, we focused on

our reform of the warehouse network for great term efficiency. And this approach led to double-digit revenue growth in Q3, along with improved profitability. And on the fashion category since September, we have increased the investments on user side, mainly focusing on reinforcing users' mindshare of shopping for clothing on JD. And this focus contributed to double-digit year-on-year growth in clothing categories. and other subcategories in Q3.

Yes, in terms of platform ecosystem construction, we have just shared that our third-party 3P business has achieved very healthy indicators. I will not repeat this. In these aspects, we will continue to push forward. Although we have achieved good results so far, there is still a lot of room for improvement. For the long term, we are confident that we will maintain a high rate of growth and continue to acquire market share.

And thirdly, on the strengthening of our platform ecosystem, on the 3P part, I've already mentioned or won't repeat, there's a lot of healthy growth that's been achieved across different metrics, whereas we see there's still plenty of room to improve in many aspects. So overall, we are confident in our ability to sustain a faster-than-market growth rate and continue expanding our market share. Thank you.

Cheers Andy.

Thank you. Your next question comes from Alicia Yap from Citigroup. Please go ahead.

Hi, good evening. Thank you for answering my question. Congratulations on your strong performance. I have two very quick questions. One is to follow up on what we just talked about, that the government of Shenzhen and Shenzhen is still excited. In fact, the stability of real estate has also driven the growth of the demand for home appliances. But recently, a lot of investors are paying attention to next year, especially our growth driving force in the second half of the year. They are worried that there will be a high interest rate in home appliances, which may lead to a slow growth rate next year. We think if... In fact, if the real estate market is further stabilized, it may actually bring a more sustainable price chain demand. This is our idea. I don't know if Manager Ding Dong has any opinion on this growth. Then please, Manager, introduce some growth driving forces next year. Then the second question is that in recent months, in fact, the company's The profit growth is above 7% and one of them is mainly the profit increase in logistics and the profit increase in retail. But Jindong has achieved a good profit increase this year. Can you share with the management team what kind of investment direction will the company take next year? What are the initial thoughts on the overall profit growth? I will quickly translate it here. Thanks for taking my questions. There are two questions. First is that it's good that JD has been benefiting from the appliance trading stimulus and also with the stabilizations of the real estate sector, which likely have attracted the demand for appliance in the end of 3Q and also into the 4Q. But investors lately have a new concern about the growth driver into next year, especially for the second half of next year, and worry that there might be a high base for appliance sales and also JD growth might slow down. we would try to argue that if real estate actually stabilized, further stabilized, which could actually drive more sustainable demand for appliance, and it may not necessarily see a rollover of the growth for JD. So what is management view for these? I appreciate if we can address all the various JD growth driver into the next year. Second question is, One of the bigger boosts of better than expected profit beat the last quarter that we deliver likely to have driven by JD logistic margin improvement and also JD retail cost optimization and also the efficiency improvement. JD also has delivered very good profit improvement already this year. As we head into next year, 2025, can management provide any preliminary thoughts in terms of the investment, the spending that you might want to invest, and how would overall margins and profit growth outlook are heading into next year? Thank you.

Thank you, Alicia. That's a great question. I'll answer the first question first. Thank you. So for next year, we will still be optimistic. And then about the driving force of this growth, in fact, we have already answered some of the first questions. I think that maybe we should stick to one is to say that in our long-term strategy, we pay attention to the experience of users and the growth of users. And then we will continue to promote these products that we think are more potential, as well as the expansion of products of different price ranges. Especially those industrial-grade products that Xia Chen market users love, we are also focusing on investing a lot of effort to promote the development of these businesses. And then, of course, this is related to our brand, Sheng Tai. And thank you, Alicia, for your question.

I will address the first part on the growth. So as I just mentioned, our belief is that for the treating policies the government introduced is playing a role as leverage. It is not only aimed at a short-term consumption increase for the home appliances categories, but more play a role to boost the consumption with the job created and increase the household income to restore consumption confidence. So in my opinion, the consumption confidence restoring is more meaningful to help JV's growth in terms of the specific categories and our targeted groups. So for the next year, we remain cautiously optimistic for the overall economic and consumption growth trajectory. And in terms of our company's growth drivers, we will continue to carry out our long-term strategic plans, mainly focused on, first, to continue to foster our users' experience and user growth, and continue to invest Those categories that have a high growth potential and expand our product offerings with a wider range of prices that cater to the needs of the lower tier markets and introduce more products from the industrial belt, et cetera. We are making steady efforts to invest in these businesses. And thirdly, we continue to invest in our platform ecosystem to provide a thriving environment for everyone to continue growth.

At least in terms of profits, first of all, there are three driving factors for the long-term growth of Jindong's profit rate. The first is that Jindong's scale and efficiency on the supply chain will continue to be released. From the Q3 financial report just released, you can see that our net profit rate is gradually increasing. This is mainly due to our continuous increase in product profit rate through the efficiency of the supply chain. So regarding the prospects on profits,

I'd like to share our thoughts. First, our long-term profit margin improvement will be driven by three key factors. JD's strength in supply chain scale and efficiency will continue to drive margin growth. As you can see in our Q3 earnings, we saw a continuous increase in our net margins, which is mainly due to the gross profit margin improvement in product supply chain and JD logistic profit growth. driven by cost management and efficiency improvement. And the second driver is the category mix. There is still significant potential for margin improvement in many categories, such as the supermarket category. Additionally, favorable category mix shift itself can also lead to higher margin. And the third driver is our 1P versus 3P mix. As the ratio of 3P business grows over time on our platform, It will also positively impact our marginal growth.

At the same time, we will also combine the changes in the macro and market environment, as well as our own long-term strategic deployment, insisting on the user experience and growth, core supply chain ability, taste, quality, and other directions, firmly investing with discipline, and then for long-term deployment. In the long term, our utilization rate will continue to improve with the health development of the business and the improvement of efficiency. In line with JD's long-term strategies and in response to the macroeconomic and market changes, we will continue investing in areas that enhance user experience, strengthen

our core supply chain capabilities, and build user mindshare in specific categories. And maintaining strategic focus on long-term planning is crucial for our business success. Over the long run, our profit margin will continue to improve alongside healthy business growth and increased operating efficiency. And JD's long-term profit margin goal will reach a high single digit. As for specific growth and profit guidance, will be shared at appropriate time. Thank you.

Our next question for you. Thank you.

Thank you. Your next question comes from Kenneth Fong from UBS. Please go ahead.

Hi, good evening. Thank you for answering my question. I have two questions. The first one is about competition and investment. During the 31st, we saw that various e-commerce platforms were investing in their own equipment. Then the business will have a large-scale supply policy. Director Guan, can you share with us how the current business situation is? We just talked about the direction of some companies' investment. So let's open it up and think about which aspect of our focus will have what impact on the green. As for investment, my other question is about clothing and makeup. Because we saw in the news that Dingdong will be in the layout of clothing My first question is about competition and investment. During Double Eleven, e-commerce platforms have been investing aggressively on both users and merchants. So can management share your view on the current industry competitive landscape? Also, for area, for Jingdong investment, and for this investment, how should we think about impact on margin? My second question is on the expansion in the agro and cosmetic categories. Because in the news, we saw that we are investing $3 billion and $1 billion respectively. on cosmetic and apparel category. So can management share more about that? Would it be 1P or 3P in terms of operation? And any results that we can share? And then more medium to longer term, what is J.D.' 's competitive advantage versus peers in our positioning? Thank you.

Kenny, let me answer your question about industry competition and company investment. First of all, our view is that China's retail consumer market is huge, has a very suitable population structure and distribution for e-commerce development, and has the most developed infrastructure in the e-commerce market in the world, including logistics, payment, social, and other infrastructure construction are very developed. Therefore, China's e-commerce market still has a lot of penetration and room for improvement. Hi, Kenny. Thanks for the question. I will take the question on the industry competition and our investment.

So first of all, I want to address that we continue to hold the view that China is a highly promising retail market supported by favorable demographic structure and distribution, along with the world's most advanced e-commerce infrastructure, including robust logistics, payment systems, and social media integration, et cetera. So there's still significant room for e-commerce to expand its market penetration. And with the implementation of supportive measures to boost consumption, including the recent trading policy, we're seeing positive momentum that will inject fresh growth energy in e-commerce. 然後在這種大趨勢下,京東的投入將會始終聚焦在提升用戶體驗和用戶增長上。

We will surround ourselves with cost efficiency experience, continuous construction, and the ability to differentiate, create our own core capabilities, and have targeted capabilities in the construction of long-term, sustainable investment and continuous strengthening of the user's mind. Some specific progress can be shared with you. In the user experience, In the past year, we have continued to increase the price competitiveness, reduce the threshold of self-sufficiency, and make it easy for users to experience the service, free access, and return of goods. For example, we have now expanded the service of free access and return of goods from self-sufficiency products to HOP products, and launched innovative services such as late-night delivery, which are indispensable for users to provide an over-the-counter shopping experience. As we continue to improve user experience, we are also attracting new users. The number of customers in the Q3 quarter continues to maintain a double growth and continues to show an acceleration trend. We expect that the number of users will continue to maintain a rapid growth trend. In terms of creating new products, we have become the first shopping platform for many users to add electricity, computer, mobile phone, etc. So given this e-commerce development momentum, we will maintain

focus on enhancing user experience and driving user growth, developing our differentiated supply chain capabilities based on cost efficiency and user experience, building our core capabilities and competitive edge, making targeted investment in self-operated supply chain and logistic service for sustainable long-term growth. At the same time, continuously strengthening user mindshare. Here are some specific updates. And our user experience over the past year was focused on enhancing user experience by increasing price competitiveness, lowering the free shipping threshold for our self-operated products, and improving our free at-home return services. And now we have extended many services from 1P to 3P products, such as free shipping for over 59 yuan and the free home return services. Additionally, we've introduced innovative services like compensation for delayed shipping to constantly exceed user expectation. And alongside these improvements on user experience, we are actively working to attract new users. In Q3, we achieved a double-digit year-on-year user growth with accelerated momentum, and we expect this growth to continue. And in terms of strengthening customer mindshare in key categories, and JD has become the go-to destination for home appliances, computers, mobile phones, and electronic categories. As we support the government's trading policy, we also take the opportunity to further integrate our services to reinforce user trust on these categories. And in general merchandise categories like the market, supermarkets, and the fashion, we continue to build a stronger user mindshare Our promotional campaign on the payroll category launched in September. It's a prime example of enhancing user awareness and engagement in the payroll category. 商时期间我们也取得了不错的表现,总体上超过我们的预期。

We see that as the number of new users increases, the traffic of our users increases significantly, and the number of visitors to the Jingdong App increases significantly. The number of active users and orders has a very good growth. During the whole boom, the number of active users increased by more than 20%, and the number of daily purchase users increased by more than 20%. And on this basis, users' purchase frequency continues to maintain a growth of double the number. In summary, Jingdong will continue to firmly surround the cost-effectiveness experience as an investment, constantly improving our difference-making, based on the public sector, and the user experience as the core competitive advantage. In this process, we will of course pay attention to the balance and high-value development of key indicators such as GNV profits and core revenue. Overall, we are very confident that the profit will exceed the growth of double the number.

So here, we are also pleased to share the single-day grant promotion performance, which overall exceeded our expectation. With JD's rising user mindshare, we've seen notable improvement in user traffic, with our APP's unique visits witnessing significant increase during the Shopping Festival. And both the active users and orders during the Shopping Festival experienced a faster growth, The number of active users achieved a double-digit growth, and the average daily active customers increased by over 20%. At the same time, user shopping frequency maintained double-digit growth year-on-year. So all in all, we will continue to invest in reducing cost, improving efficiency, and enhancing user experience, focusing on our unique strengths in supply chain and user-centered experience. At the same time, We will closely monitor GNV profit, cash flow, and other key metrics to achieve a balanced, high-quality growth. And for the full year, we're confident that JD Group's profit will exceed double-digit growth.

Then let me answer the second question. That's right. In particular, in the makeup category, we will strengthen the cooperation with domestic brands and new brands, so that these brands can work together to create more market space and grow together. We will also expand 100 billion subsidies to the makeup product category to strengthen the attraction of makeup products to consumers. We also saw a lot of new high-value users in this round of events.

So, Kenny, thank you very much for recognizing our efforts in the fashion and beauty categories. We've been steadily increasing our investment in these categories with the key goal to enhance user experience as part of our long-term strategy. And to build user interest and engagement with JD's apparel offerings, we're expanding our product selection, especially the good quality and fashionable product selections, and emphasizing premium services. We've been launching and will continue to plan promotions, including the 50% off campaign on the apparel category to better appeal users and increase their recognition. Specifically, on the beauty products, we are strengthening partnerships with domestic and emerging beauty brands. We expressed a high expectation to work together on exploring market potential for common growth in these categories. And so far, our $10 billion discount program has expanded to cover the entire beauty category, gaining popularity among GD users. And on the apparel products, In September, we launched several initiatives to boost JD's presence in the payroll category, such as the 50% Off campaign and the London Fashion Show, showcasing our broad brand selection and competitive pricing. And all these campaigns have attracted new users with high purchasing power who showed greater order values and high repurchasing rates within a month. Especially during the single-stick brand promotion, we see new active users in fashion and beauty and their shopping frequency both achieved healthy growth.

关于我们的运营模式,目前我们的时尚品类还是以3P的方式为主。 但的确我们也在加强这个品类的自营的操盘能力。 那最终究竟选择哪一个模式还是取决于用户的选择。 As for the investment, I remember you asked us about the method of investment. In fact, our investment is still around user experience, that is, product price and service. In terms of product, we will continue to optimize our algorithm and make our recommendations more accurate. In terms of price, we will indeed make some investment and let users experience a more favorable and affordable price. And in terms of the operating models, and currently most of fashion products on our platform come from 3P sellers. At the same time, we're also setting up efforts

on our 1P operational capabilities, but definitely the users will have the final say to choose between 1P and 3P. And in terms of the investments, we will continue to focus on the products, price, and the services. and we will continue to better our algorithm to introduce more tailor-made products to the relevant customers. And we will also invest in improving the price competitiveness and offer more affordable products on these categories, along with more differentiated services. And with that said, we welcome all the analysts and all the staff our partners to use and experience our apparel and fashion categories. And if you have any suggestions, we are very happy to hear from you. Thank you.

Thank you.

Your next question comes from Thomas Chong from Jefferies. Please go ahead.

Good evening. Thanks, management, for taking my question. My first question is about the macro. Can management comment about the recent macro policy measures have any positive impact to consumer sentiment? And my second question is about capital return. Can management comment about the latest updates on shareholders' returns related to buyback and dividends? Thank you.

谢谢Thomas的问题。 对,我觉得首先这个非常简单的回复就是yes, 就是近期的宏观政策呢,我们的确看到对消费者的情绪已经产生了正面的影响。 Thank you, Thomas, for the question. So my short answer is yes. Current macro policies have been taking a positive effect on the overall consumption sentiment.

And we expect, as these policies continue to take effect, this will help to improve the economic fundamentals and to help recover and improve household income, which will all provide more energy and vitalization to the consumption potential.

To answer your question about shareholding, in the first three seasons of this year, we have carried out a strong shareholding. In the long term, we will continue to buy back our shareholders in different ways based on business health growth. The first is the progress of the buyback. In the first three seasons of this year, we have accumulated 36.5 billion US dollars, which is equivalent to 8.1% of the shareholding on December 31, 2023. In Q3, we announced a new return plan of $3.51 a year. Our goal is to reduce the total share price for the long term. Thank you.

And regarding the shareholder return, we have constantly executed our shareholder return plan over the first three quarters of the year, and we remain committed to delivering returns through multiple channels based on sustained business growth. And our share repurchase progress over the first three quarters We've repurchased 3.65 billion U.S. dollars worth of shares, totaling approximately 255.3 million ordinary shares, or 127.6 million EDS, representing 8.1% of total shares outstanding as of December 31, 2023. And in Q3 alone, we repurchased approximately $319 million worth of shares, and we have fully utilized the repurchase amount authorized under the $3 billion share repurchase program. And in Q3, we announced a new three-year repurchase program totaling $5 billion, which will execute with the aim of reducing total number of shares in the long run And on the dividend progress, we completed a $1.2 billion dividend distribution for 2024 in the first half of the year and plan to continue with a steady annual dividend payment based on profitability. So for the long term, we are dedicated to rewarding shareholders through share repurchase, dividends, and strong operational performance, sharing the value created by our business success.

Thank you.

Thank you so much. Let's take the last question, please.

Thank you. Your next question comes from Jie Long Shi from Numura. Please go ahead.

I have two questions. The first question is about JV Supermarket. So just wondering, what is the size and the margin of JD Supermarket business? And what was the rationale to have decided to exit our previous investment in Yonghui Supermarket? The second question is about JD3P. So just wondering, what does JD think of its potential in 3P? And what are your strategies to further unleash the potential of 3P? Thank you.

Thank you for the question, Jialong. Commercial goods have always been a very important part of our business, and it is also one of the most important driving forces of our future growth. Commercial goods are not only one of the largest goods in Japan's general merchandise, but they are also larger than any commercial chain in China. However, if we look at the scale of the entire industry, the scale is still huge. Its concentration is also very low compared to these developed countries. In September this year, when we established the 10th anniversary of the Jindong Supermarket, I also told the media that the Jindong Supermarket is one of the important battlefields of the Jindong Group's victory in the next 10 years. So, to be honest, the scale of commercial trade and its profitability have not yet reached our long-term goal. We believe that there is still a great potential for development in the long term. We are also full of confidence in the future growth of commercial trade. Over the past few years, we have maintained a double-digit growth rate in commercial trade. We are also continuously improving our core business capabilities, including our self-serve trading capabilities. Thank you, Jialong, for your question.

The supermarket category has always been a core part of our business and one of the most important drivers for our future growth. It represents the largest segment among our general merchandise categories, and by sales volume, surpasses any supermarket chain store in China. At the same time, it's also worth noting that China's supermarket sector is vast and highly decentralized compared with other developed countries. In September, JD Super marked its 10th anniversary and emphasized during the celebration to the media that the supermarket business is one of the key battlefields that will shape JD's future in the coming decade. Admittedly, given its current scale and profitability, JD Super still have a way to go to meet our long-term expectations. However, we see significant potential in this category and remain confident in its healthy growth trajectory. And just this year, JD Super has achieved the double-digit year-on-year growth driven by our enhanced operational capabilities. So we will continue to strengthen our core capabilities in our 1P management in terms of the scales, our refined operations, and reforming warehouse network, et cetera, to drive up the profitability. and continue to centering on the product offerings, price competitiveness, and other differentiated services to improve user experience and users' mindshare in the supermarket category. 对,然后在永辉持股的变动呢,主要是因为我们要聚焦自身的核心业务,那然后我们也实现了当初战略投资的目的和预期合作的效果。 And our strategic investment in Yonghui matched the initial objectives we set at the beginning of the collaboration. The recent shareholding change reflects our proactive decision to sharpen our focus on JD's core business areas.

Thank you very much. 在目前看,我们的3P的业务从能力规模和利润的贡献上还是有很大的提升空间。 And regarding the question on our 3P development, our platform ecosystem development goal is centered around enhancing user experience.

We aim to offer the best products, price, and services through a mix of sales models, with 3P playing a key role in expanding our selection of products and brands. So eventually, this will be our users' natural choice. And building a robust platform ecosystem, there remains substantial room for improvement in 3P operations, business scale, and the profit contribution to the platform.

In fact, we have been building our platform's infrastructure and business tools for the past few years. But to be honest, there is still a certain gap with the business expectations. So in this regard, we will continue to invest more and help our business to better do flow operation and obtain user and user education. We are also looking forward to working with the business. So let the platform ecosystem naturally become our long-term driving force to improve our income and profits.

And for quite a period of time, we have been investing in platforms, infrastructures, and providing all sorts of merchant tools. Of course, there's still a way to go to better our supplies to our merchants and to help them to better to do the traffic allocations. and user acquisition, et cetera, to create a win-win situation. So over time, the platform's ecosystem, we aim to have it become a long-term growth driver, generating increased revenue and profitability.

Thank you.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to JD.com's Sean Zhang for closing remarks.

Thank you for joining us today on the call, and thank you for all the great questions. That's a wrap. If you have further questions, please contact me and our team. We really appreciate your interest in GD.com and look forward to talking to you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.