JD.com, Inc.

Hello and thank you for standing by for JD.com's second quarter and interim 2025 earnings conference call. At this time, all participants are in 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 of Investor Relations. Please go ahead.

Thank you, operator. Good day, everyone. Welcome to JD.com's second quarter and interim 2025 earnings conference call. With us today, our CEO of JD.com, Ms. Sandy Xu, and our staffer, Ms. Ian Shen. Sandy will kick off the call with her open remarks, and Ian will discuss the financial results. After that, we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly call Steve Hopper. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today's only, and will include forward-looking statements. Please refer to our latest Steve Hopper statement in earnings press release on IR website, which applies to this call. We'll discuss certain non-GAAP financial measures. Also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note all figures mentioned today in this call are in RMB unless otherwise stated. With that, let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our second quarter 2025 earnings conference call. In the second quarter, we stayed focused on providing the best user experience, lowering costs, and improving efficiency to drive healthy, sustainable growth. At the same time, we took some early exciting steps to further advance our long-term development. Looking at the overall performance, we are pleased to report a solid top-line growth of 22% year-on-year in the second quarter, with total revenues reaching 357 billion RMB in the quarter. This strong momentum was driven by encouraging acceleration across most of our business lines, including electronics and home appliances, general merchandise categories, as well as service revenues. Our non-GAAP net income attributable to ordinary shareholders in the quarter was 7.4 billion RMB compared to 14.5 billion RMB in the same period last year as a result of the investment and rapid growth in our new businesses, including our food delivery business. That said, our core business, J.D. Retail, continued to see healthy profitability improvement. JD Retail's non-GAAP operating profit increased by 38% year-on-year to 13.9 billion RMB in the second quarter, with an operating margin of 4.5%, up from 3.9% in the same period last year. Overall, we are confident in our core retail business. Well, our new businesses, including JD Food Delivery, are progressing well as planned, aligning seamlessly with our strategic roadmap to drive long-term sustainable growth. Behind these results, I'm particularly encouraged by the high morale and collaborative spirit across all the business teams at JD. Their collective effort forms a solid foundation that will continue to propel our upward momentum and effective execution of our strategic goals. I want to highlight three key progress we achieved that underpinned our strong performance in the quarter and will sustain our healthy growth going forward. User growth and engagement stand out as a key achievement for us in Q2, as we continue to center on users and spare no effort in delivering the best possible user experience. Growth of our quarterly active customers, or the QAC, accelerated notably to over 40% year-on-year in Q2, and total QAC base reached a new milestone. The strong user momentum in the quarter was driven by both the accelerated growth of JD Retail's organic user base, as well as incremental contributions from JD Food Delivery and Jingxi Business. In addition to user growth, we also see stronger user engagement. In particular, user shopping frequency on JD's platform rose by over 40% year-on-year in the second quarter, a notable improvement from previous quarters. For JD Plus members, their shopping frequency grew by an even faster pace of over 50% year-on-year in Q2. This is clear proof that our food delivery offerings resonate strongly with our highest quality user group. We also achieved record-breaking results on the user fronts during the June 18th grant promotion this year, with the total number of purchasing users more than doubled year on year, and total order volume surpassed 2.2 billion orders. The positive momentum in user growth and shopping behavior stands as a powerful testament to the synergies between our new business initiatives and core retail business. We will continue to deepen the synergies and unlock the greater value, which we expect will strengthen overall user stickiness to our platform and drive higher lifetime value across the JD ecosystem. Secondly, our core business JD Retail continued to gain steady traction on the back of our further strengthened supply chain capabilities. In Q2, JD Retail achieved robust momentum on both top and bottom lines. By category, electronics and home appliances maintained a strong momentum in the quarter, with revenues up 23% year on year. This reflects our ever-evolving supply chain strength. which enables us to further enhance procurement capabilities and offer users extensive product selections, competitive price, and superior services. These strengths have positioned us as a leader in the industry, both during periods of trade-in programs and throughout the day-to-day development. Our general merchandise business also delivered strong performance in the second quarter with revenues up 16% year-on-year. In particular, driven by our supply chain strengths, our supermarket category further extended its streak of double-digit revenue growth to six consecutive quarters. Meanwhile, our fashion business continued to maintain double-digit year-on-year growth in revenues in Q2. The strong top-line growth of JD Retail was coupled with an even stronger operating profit growth and margin expansion in the quarter, progressing well toward its long-term target. The continued improvement in JD Retail's profitability is primarily driven by our stronger supply chain capabilities, which ultimately translate to better user experience, lower cost, and greater operating efficiency. Thirdly, we are also encouraged by the healthy development of our new business initiatives. JD Food's delivery business has experienced rapid growth since its launch, with daily order volume increasingly exponentially in Q2 and several key milestones successfully achieved. We've made significant progress in onboarding high-quality merchants, and the number of full-time delivery riders has increased rapidly. More importantly, JD Food delivery has started to generate clear synergies with our core retail business. Beyond the user-related insights, I just shared, we are also proactively capitalizing on the cross-selling opportunities brought by food delivery business. We are pleased to see the progress so far, particularly the increasing cross-sale ratio of new users brought in by food delivery. Supermarket categories, lifestyle services, and electronic accessories have benefited the most from this trend. Additionally, as our food delivery business scales, we believe it will further enrich our local supply of merchants and drive user traffic and engagement to all of our 3P merchants, helping establish a more dynamic and comprehensive 3P ecosystem on our platform. For JD, the current priority for our food delivery business is to enhance core system capabilities, from optimizing order dispatching algorithms to refining route planning technologies, all to strengthen JD Food Delivery's ability to better serve users and drive traffic and user growth to merchants on our platform. Driven by these efforts, We are encouraged to see that despite industry dynamics, JD Food Delivery has maintained a healthy order volume growth, especially for meal orders in Q3 quarter to date. I want to reiterate that we do not view our food delivery as a standalone business, as it's deeply integrated with JD's broader ecosystem. We aim to further unlock synergies, not only between JD Food Delivery and JD Retail, but also with JD Logistics and other businesses across our ecosystem. This is where our strategic focus lies. Going forward, we will stay focused on our strategic priorities and invest with high efficiency at appropriate pace. amid the evolving dynamics in the food delivery market. In addition to our robust operations and rising market position in the domestic market, we've also been proactively looking at opportunities to grow globally and taking some early exciting steps. Going global is a long-term vision and holds strategic value for JD as we aim to leverage JD's unique advantages of supply chain know-how and technology. In recent years, JD Retail, JD Logistics, and JD Property all have taken steps to test and build out overseas retail formats, warehouse networks, transportation infrastructure, and local operational capabilities, especially in Europe and the Middle East. We will share more color of our international development as we progress. To conclude, Q2 was a very productive quarter. We delivered both short-term results and strengthened our long-term strategic positioning. Our core retail business achieved accelerated top-line growth alongside solid profit expansion, underscoring the resilience of our supply chain-based retail business model. Q2 also marked an important milestone in our long-term development as some of the key initiatives, both domestically and globally, steadily moved forward and started to show early tangible results. None of this happened overnight. These are the results of years of dedicated effort to strengthen our core supply chain capabilities, combined with extensive preparation to support our strategic expansion. We always have a clear vision. Everything we do is centered on supply chain, with our commitment to putting users first and elevating user experience. This will continue to drive every step of our long-term development and value creation for our users, business partners, and shareholders today and tomorrow in China and across the globe. With that, now let me turn the call over to our CFO, Ian.

Thank you, Sandy, and hello, everyone. In Q2, we delivered a strong top line and robust margin improvement in core retail business. Our total revenues growth for the second quarter was 22%, further accelerating from last quarter and significantly outpacing the growth of China's total retail sales. We saw double-digit growth across our major business lines, including electronics and home appliances, general merchandise, and service revenues, all showing accelerated momentum compared to previous quarters. Regarding profitability, our gross margin reached 15.9% in Q2, marking the 13th consecutive quarter of gross margin expansion on a year-on-year basis, primarily driven by our core retail business. Our non-GAAP net profit margin was down to 2.1%, mainly due to our investments in food delivery. Although near-term profitability is impacted by strategic investments, we remain confident that those efforts will position the company for sustained growth and long-term value creation. Now, let's go through our financial results in Q2. Our top-line growth. maintained a strong momentum in the quarter. Total net revenues increased by 22% year-on-year to RMB $357 billion in Q2. Breaking down the mix, product revenues were up 21%, with electronics and home appliances revenue up 23% year-on-year, and general merchandise revenues increasing by 16% year-on-year in the second quarter. both showing further acceleration compared to previous quarters. For electronics and home appliances, with government's ongoing stimulus policy and the revitalization of domestic consumption, JD is well positioned to fulfill the demands of consumers and provide best-in-class user experience, as JD has core competitive advantages in those categories, including strong user mindshare robust product supply capabilities, as well as superior execution capabilities to effectively support local government's trading programs. For general merchandise, major categories such as supermarket, fashion, home goods, and health all achieved double-digit revenue growth in Q2. We continue to see substantial untapped potential in our supermarket categories. And we're confident in our ability to provide greater user experience with the best combination of product, price, and service in this category while maintaining healthy growth momentum. Service revenues saw a significant acceleration, rising 29% year-on-year in the second quarter. Notably, the growth rate of marketplace and marketing revenues was 22%. which has accelerated for six consecutive quarters. Both commission and advertising revenues maintained double-digit growth momentum in the second quarter. Key operating metrics of our platform ecosystem also showed meaningful progress in terms of both merchant base and user engagement. Logistics and other service revenues were up 34%. The growth rate of logistics and other services marked an eight-quarter high in Q2, primarily driven by our expanding food delivery business, which generated additional delivery revenue. Now, let's turn to our segment performance. JD retail revenues were up 21% year-on-year in Q2, driven by solid performance across many of our key categories. In addition, JD Retail continued to achieve year-on-year growth margin expansion, a trend sustained for 13 consecutive quarters. It also marked the highest level for any comparable quarter since inception. This strong track record has been primarily driven by the continued improvement of our supply chain capabilities. In terms of operating income, in the second quarter, JD Retail's non-GAAP operating income was up 38% year-on-year to RMB $13.9 billion, and the operating margin was up 56 bps to 4.5%, maintaining a steady upward trend. We remain confident to further consolidate our market-leading position and drive steady profit improvement moving forward. Moving to JD Logistics. JD Logistics' revenues were up 17% year-on-year for Q2, with both internal and external revenues sustaining double-digit growth momentum. As JD Logistics continues to invest in user experience, its non-GAAP operating income in the quarter declined by 10.3% to RMB $2 billion. That said, JD Logistics is prioritizing capacity-building initiatives in last-mile pickup and delivery, as well as route optimization. These targeted investments are expected to lay the foundation for efficiency gains and margin expansion in the long term. Turning to new business, in Q2, new business revenues tripled year on year. At the same time, its non-GAAP operating loss widened to RMB 14.8 billion. primarily driven by the rapid expansion of food delivery and business. Despite near-term financial impact, the food delivery business has driven meaningful traffic and user growth and significantly boosted user shopping frequency. We have also observed a visible uplift in conversion and cross-selling with our core retail business. Moving forward, we will continue to focus on merchant supply, delivery efficiency, and user experience for food delivery business. Additionally, our Jinxi business also saw significant growth in the second quarter as we further penetrated into lower tier markets with expanded offerings of value for money products. For our consolidated profit performance in the second quarter, Our gross profit was up 23% year-on-year to RMB $56.6 billion. We have delivered 13 straight quarters of gross margin expansion year-on-year, reaching 15.9% in the second quarter. It was primarily driven by JD Retail's gross margin improvement, highlighting the high-quality development of our core business. Non-GAAP net income attributable to ordinary shareholders was RMB 7.4 billion in Q2, down 49% year-on-year, and non-GAAP net margin declined to 2.1%. This near-term margin headwind mainly reflects our strategic investment in food delivery. Our last 12-month free cash flow as of the end of the second quarter was RMB 10 billion, compared to RMB 56 billion in the same period last year. This was primarily due to cash outflows associated with the trading program and the decline in operating income. By the end of Q2, our cash and cash equivalents, restricted cash, and short-term investments, totaled RMB 223 billion. In summary, Our second quarter performance was highlighted by robust top-line growth and healthy margin expansion of our core retail segment, reflecting our strong execution capabilities and improving operational efficiency in a dynamic market environment. Looking ahead, we're excited about our new business initiatives and expect it will further accelerate growth in users and shopping frequency while creating great potential for generating synergies. With the continued momentum in our and well-executed new initiatives, we are confident in our long-term healthy growth. 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 will answer your question in the language you ask. We'll provide English translation for convenience purpose only. In the case of any discrepancy, please refer to the management statement in the original language. 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 two questions at a time from each caller. If you have more than two questions, please join the question queue again after your questions have been addressed. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Ronald Kung with Goldman Sachs. Please go ahead.

Thank you, Sandy, Ian, and Sean. I have two questions. First, I would like to ask about the restructuring. During 618, we saw that some provinces briefly suspended their national subsidies. Looking at the uncertainty of some national subsidies next year, and other platforms, the competition has increased. uh uh There are more companies participating in this competition. In fact, what we need to fight for is endurance, execution, and innovation. Considering that the first place is actually the largest, the second place has a very strong financial background. For us, how should we think about the future of JDM? Let me translate it for you. Thank you, management, for taking my questions. First is on trading program, that we've seen some temporary suspension of trading programs during June 18th. And given some uncertainty about the magnitude or kind of extension of the program next year and some increased competition with other platforms as well, I just want to hear what is our electronics and appliance strategy for the second half, given the very strong first half growth. next year's strategy of growth and market share targets. Second is on food delivery. This is an intense competition of three players or more. Always these contests, there's a contest between kind of persistence, execution, and differentiation. So how should we think about JD's long-term commitment on this and particularly competing with number one, which has the larger scale, and number two with very deep pockets, being a third player at this point. could mean some foreseeable loss for a foreseeable period. So how do we assess the customer acquisition, cross-sell, and the eventual path to improving economics?

Thank you. Thank you, Ronald. First of all, the first question is, during the fall of the national policy, whether it's the ability to respond or our own performance is stable and solid. Since this year, the new national policy that has been changed can also be seen to promote consumption, promote industrial upgrade, and achieve very good progress. The state policy of resuscitation will continue. The central funds will also be distributed. In the process, Jindong continues to respond to the state policy, and plays an active role in promoting the policy's effective landing and the resuscitation project. The driving force behind this includes the first one, which is that we ourselves have very strong supply chain capabilities, which can ensure stable and full supply, as well as the ability to deliver and deliver well. Thank you for your question Ronald. For your first question,

During the implementation period of the trading program, JD has demonstrated a consistently solid performance and responsiveness. During the trading program period, the program itself has made significant progress in boosting consumption and driving industry upgrades this year. The government has also reiterated that the trading subsidy will be continued and with central funding being distributed in batches. During this period, GD has consistently taken a proactive approach to the national policies, actively supporting the training program and contributing to the effective implementation. Our capabilities that enable us to achieve this include, one, Number one, our robot supply chain capability, which ensure a stable supply of product along with reliable fulfillment and delivery services. Number two, our system and offline operational capabilities, which enable us to quickly coordinate with the local government and facilitate the rapid implementation of the trillion initiative across regions. Meanwhile, we have observed robust consumer demand on JD platform in Q2. The revenue growth of our electronics and home appliance category surpassed 20% year-on-year.

Yes, but the second point I would like to say is that state-owned enterprises are a positive opportunity, but they have never been our differentiating competitive advantage. We have a clear strategy to improve the market share for all our products. We also use the product price and service to show our supply chain capability, size advantage and full channel advantage. In the second and third seasons, we have continued to achieve continuous improvement in the market market share. In terms of product structure optimization, Jindong also cooperated with the brand to develop a series of smart home appliances to promote product upgrades and customize more products to better meet the needs of user quality change and at the same time promote industrial upgrades. In addition, in terms of price advantages, we also use scaled purchasing and customization of these supply chain's professional capabilities Secondly, I want to highlight that the trading policy itself is an opportunity

not a competitive advantage of JD, but we have a clear strategy to strengthen our market share. We focus on product price and service and leverage our supply chain capabilities, scale, and omnichannel expertise. We have sustained market share expansion throughout Q2 and Q3 to date. First, in terms of product structure optimization, Leveraging the national subsidy, JD partners up with brands to accelerate product development, innovation, to launch new products such as smart home appliances and customized products. These efforts have helped better satisfy users' demand and quality replacement and advances industry upgrades. In terms of price advantage, We continue to expand our price advantage by leveraging our expertise in bulk purchasing, product customization, and we always strive to reduce procurement costs and lower the price for our users. In terms of service capability enhancement, we continue to advance our integrated delivery and installation services, offering the industry-best trading experience.

Lastly, in the long term, JD will leverage its supply chain advantages in electronics and home appliances to actively drive industry upgrades.

and strengthen our user mind share. We are confident in sustaining growth that is outpacing the industry, thereby solidifying and expanding our market share.

Regarding the second question about take-out, this is indeed very popular recently. In fact, we have also made a lot of sharing in different occasions. I may pick a few more key points to talk about. One is that take-out and real-time sales are very important for the long-term strategic direction of Jindong. We will always focus on experiencing cost efficiency in these aspects to continue to build and improve. On your second question regarding food delivery,

which is a heated topic that attracted a lot of attention lately, and we have shared recently some of our thoughts. Here I just want to share some of the highlights. So again, food delivery and on-demand retail is a key long-term strategic direction for JD with our commitment to improve on user experience, cost, and efficiency. We continue to establish and enhance the operational and system capability related to the on-demand retail business and optimize user experience. As shared before, we have identified and met needs across the industry among merchants, riders, and users, and we are effectively addressing these needs through our quality food delivery model.

From the progress of the second quarter, at the start-up end, at the end of the second quarter, the number of full-time start-ups has exceeded 150,000 people. This indeed makes the full-time start-ups' work more dignified and guaranteed, and increases their sense of happiness. At the same time, it also guarantees our delivery experience to the users, as well as the experience of order accuracy and service. In terms of supply, we are more focused on quality delivery, This is a point of difference. At the end of the second quarter, the number of high-quality customers has exceeded 1.5 million. And the number of high-quality food orders continues to rise. We are also helping these high-quality restaurants to get more sales. Of course, we are also continuously innovating at the source of the supply chain. Recently, we have also launched a new model of 7-star cooking to help consumers eat quality and cheap dishes. Looking at some of the specific progress we made in Q2,

On the rider side, at the end of Q2, the number of full-time, full delivery riders on JD have exceeded 150,000. JD's full-time employment system ensures that riders can work with dignity and security, which in turn also enhances our delivery experience. Both our order punctuality and service quality are steadily improving. On the supply side, we focus on quality food delivery, which is an important differentiation of JD Food Delivery. We onboarded over 1.5 million high-quality restaurants in the second quarter. Moreover, the proportion of orders from meals continued to rise, and we are helping quality restaurants achieve higher sales. We are also constantly innovating at the source of supply chain, launching a new innovative business model called 7th Fresh Kitchen Model to help consumers enjoy quality and affordable meals. In terms of system capabilities, Our food delivery R&D and operation teams are rapidly iterating to enhance system functionality, including order dispatching efficiency, algorithm improvement, subsidy efficiency, and the advertising system to provide a better experience for users, merchants, and riders.

Yes, and then about the problem of coordination, I would like to emphasize again that our take-out business is still deep in the business ecosystem of Jingdong. So after more than a quarter of the operation, it is in line with our core e-commerce business. And this also meets our initial expectations. First of all, we also see that take-out has also brought obvious traffic and user growth for Jindong. In the second quarter, the activity of users, the number of users, the shopping frequency, etc. have been greatly improved. The second is that the conversion rate of our core e-commerce products for take-out users is also continuously increasing. Especially in the products such as supermarkets, it is very natural to see uh, uh, uh, In terms of synergy, I want to emphasize that JD Food Theory is deeply integrated into JD overall ecosystem.

After more than a quarter of operation, JD full delivery starts to generate synergistic value with our core business. This is within our initial expectation. First, JD full delivery is driving notable traffic and user growth in Q2. DAU of JD app and QAC as well as user engagement all have improved significantly. as well as shopping frequency. The conversion rate of food delivery users purchasing B2C e-commerce products is steadily increasing. This includes new food delivery users cross-buying e-commerce products and the improvement in shopping frequency among existing users. So we have observed strong cross-selling that is taking place. We aim to enhance this synergy as we develop several capacity in Q2, which will be launched in the third quarter. Furthermore, there is also synergy potential between food delivery and the retail business in terms of marketing spending. Our team will evaluate the ROI across different marketing channels and boost overall marketing efficiency.

There is another question about long-term improvement. As you can see, the competition in the industry has been escalating since July. From the point of view of competition, we think that these over-competition behaviors do not generate innovation and do not generate value for the industry. Instead, it will to a certain extent disrupt the price system of the industry and also bring a lot of problems to the business. Therefore, it is not sustainable. At this stage, we are still working hard to improve our platform system. to improve the experience of our users and merchants. We also see that the advantages of our own delivery business are gradually improving. In the future, we will increase the sales strategy for different regions and user groups in a more detailed way. The increase in the scale efficiency will lead to the improvement of the profit-making efficiency, as well as the improvement of the system capability, which will lead to the improvement of the operating capacity of our own delivery business. In the long term, As I said before, we are not looking for results in one or two months, but we want to do it for 5, 10, 20 years. So we are looking for a sustainable business model. We will gradually release the scale effect to improve efficiency. At the same time, we will continue to release the huge co-operative potential between take-out and our core sales business to provide motivation for the long-term health growth of the entire group.

Regarding the long-term unit economic improvement, we have noticed the competition starts to intensify since July. But we are focusing, we're currently focusing on improving the platform system and enhancing experience of users, merchants, and riders. The UE of J.D. Food Theory is gradually improving. Moving forward, we don't believe the low-quality competition creates any value to the industry. So we're focusing on more refined subsidy strategy tailored to different regions and user groups to improve the fulfillment efficiency fueled by economic scale, enhance system capability collectively to improve the profitability of our food delivery business. In the long term, We view this business as a long-term business initiative on JD. This is a 5-, 10-, even 20-year initiative. This is not a one-month, one-quarter, two-quarter kind of business model. The food delivery business will gradually leverage economic scale to boost efficiency, and we will continue to unlock the huge synergetic potential between food delivery and core retail business to support the company's long-term healthy growth. Thank you, Ronald. We can take the next question.

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

Hi, Mr. Sandy, Sean, good evening. Thank you for accepting my question. I have two questions. The first is about the investment in new business. The management also mentioned that there will be a series of new business investments in the future. Can you tell us about the direction of investment in new business and the strategy from the financial side of the group to balance the growth and profit goals? Will these investments affect the company's return on shares? Thank you management for taking my question. My first question is about investment in new business. Management mentioned that we have a series of new business initiatives to invest in. Can management share about the direction and strategy for this new business investment? From a financial perspective, how would this affect the revenue growth and our profit targets? And how should we think about the impact, if any, to the shareholder return policy, including dividends and then share repurchase? And my second question is about the strong growth behind the general merchandise categories. We noticed that these categories have shown a few consecutive quarters of very robust growth. Can management share the drivers behind and its sustainability going forward? Thank you.

Thank you for your question. Let me answer the question about new business. There are two types of innovation in our internal discussion. One is the innovation of the business model. The other type of innovation is to use new or innovative technology to improve the existing business model. So, the new business model that we are investing in is what you see. Delivery business, surprise international business, etc. These are new business models. The second type is to apply all the new technologies in our current business. It is also a very important time and opportunity. There are many innovations in this type of company. Almost every business block has an unprecedented innovation project in progress. This includes the application of AI technology in our sales business. and the automation of logistics, unmanned equipment, warehouse automation, etc. From the perspective of the group, we also encourage every colleague in the position to have the spirit of innovation and embrace innovation. The second is that our internal innovation is all around supply chain. The exploration of these new businesses is also through our differentiated supply chain advantages and capabilities to enhance the user experience as the core. In fact, these are all the natural eyes of our core business. Of course, in addition to the domestic market, internationalization has always been a key strategy in the Middle East. As I said at the beginning, we also hope to build a more efficient retail and logistics travel network that covers the world to bring extreme shopping experiences to global consumers. to become a global leading retailer. Of course, this is a long-term goal. So we believe that all of these, whether it's new business, new business model, or new technology applications, exploration and investment will further strengthen the experience of the supply chain advantage and improve the user experience to achieve long-term health growth. In the past, our check report has actually proven many times that we will also pay attention to investment efficiency and sustainable growth. Thank you for your question.

Kenny, let me first address your question regarding the strategy, the JD strategy for new business initiatives. Within JD, we look at new business in terms of innovation of business model. adoption of new technology. So as you have observed, JD continues to explore and innovate in new directions with synergetic potential with our current core business. So in terms of new business model, I can name JD Food Delivery, JD International and International Business, and Jingxi Business are the innovation of business model. At the same time, we are boosting innovation by new technology increasing in various business scenarios, such as, for example, the adoption of AI across various business scenarios. The example is NMAN logistic equipment and warehouse automation. We believe we are in the great era of technological development, so JD must fully embrace innovation. We have numerous internal innovation projects, and we are encouraging every team of JD to embody a spirit of innovation. JD's internal innovation are also centered around supply chain, leveraging our unique supply chain advantage and capability to enhance user experience is always our core focus. These explorations are a natural extension of JD's core business. Both domestically and internationally, we are committed to deepen our presence in the retail market by continuously enhance our existing business capability while exploring on-demand retail and expanding into low-tier markets. At the same time, as China's largest retailer, international expansion has always been a key strategy for JD, and we aim to build a more efficient global retail network to provide an exceptional shopping experience for consumers worldwide and become a leading global retailer. This is a long-term goal. We believe that this new business exploration and investment will further strengthen JD's supply chain advantage and enhance user experience, driving continued growth in our user base and user engagement. This gives us the confidence in achieving a sustainable positive cycle of scale, growth, efficiency improvement, and profit increase. steady progress towards our long-term profitability goals, the track record has repeatedly demonstrated that our commitment to investment efficiency will remain unchanged. We always adopt a small-step, quick-progress kind of approach to explore and drive development of innovative business. While actively exploring new business, we will continue to create value and return to shareholders. First of all, in the first half of the year, the total amount we repurchased was about $1.5 billion. Currently, the $5 billion repurchase plan is worth more than $3.5 billion. Second, Jindong has been in the red for four consecutive years. This year, in April, we completed the cash encouragement distribution of $14.4 billion in the year of 2024. Then we will continue to distribute the annual bonus. In the future, we will continue to increase the bonus and return to the shareholders. Finally, we will continue to deepen the core business, actively invest in the development of the new party curve, and build a long-term sustainable growth business model that drives the company to achieve

While we actively explore new business opportunities, we will continue to create value and return to our shareholders. In the first half of this year, our total share repurchase valued at about $1.5 billion, and our current $5 billion share repurchase program The remaining amount was 3.5 billion USD as of the date of this announcement. Secondly, we have paid out cash dividends to our shareholders for four consecutive years. This April, we completed the payment of about 1.44 billion USD annual cash dividend for the year of 2024, and we will continue to do so going forward. We will return to our shareholders through growth, dividends, and share buybacks going forward. Lastly, we will also strengthen our execution of core businesses and proactively take on new growth opportunities. We aim to build a business model for the long term, driving steady, sustainable growth in revenues and profits along the way, and sharing our business success with our shareholders.

The second question is about the Japanese product category. As you can see, the Japanese product category's income has been accelerating steadily for four consecutive seasons. The largest shareholder category has achieved a double growth in six consecutive seasons. The driving factor in this is our marketing team, which has been continuously strengthening its business capabilities in the past two years. We also believe that this will continue to promote the steady growth of our shareholder category.

Regarding the second question about our general merchandise category, as you have noticed, in Q2, the general merchandise revenue growth has recorded four consecutive quarter of steady acceleration. The major category, supermarket category, which is the largest contributor to the GM revenue, has maintained a double-digit growth for six consecutive quarter. This is primarily due to our team's continuous effort to enhance operational capability over the past two years.

We believe this will continue to drive the steady growth of our supermarket business. The self-sufficiency mode is the special business mode and the ability to differentiate. We can also continuously reduce the cost of purchasing through this mode to improve the efficiency of the supply chain and bring better products and lower prices to the users. The second point is to improve the conversion of users. Currently, we have also seen that delivery users are buying in the cross-class of commercial products. In the face of the large volume of delivery to us, the commercial products in Jingdong will also to optimize their operations and better meet the needs of these vending users. So here I would like to add to talk about in-time sales. So we are very confident in the operation of the entire Jindong commercial product line. We will also seize this opportunity. So in-time sales, we think, is a kind of supplement to all kinds of consumer scenarios. It can meet the needs of users for urgent goods. But in terms of product abundance, Our traditional core e-commerce business still has a greater advantage. So in the entire retail market, we think that in-person retail is a better supplement to core e-commerce or the entire retail business. Then our supermarket products or supermarket teams in Jingdong will also actively implement in-person retail further. but at the same time, in the core e-commerce business, we will continue to build and strengthen our business capability. In the long term, we are full of confidence in the continuous growth of the Japanese white product. These products, in this year's growth, you can see that this is the performance made without the influence of the Ministry of State. Its core benefit is the improvement of our team's business capability. This will become our long-term growth driving force.

Moving forward, JD supermarkets will continue to enhance in the following areas. The first one is the 1P model, which represents our unique business model and distinctive capability. We can further reduce procurement costs, improve supply chain efficiency, and offer better products at lower price to our users. we aim to improve user conversion. We have observed initial cross-sell by food delivery user in supermarket category. To embrace the massive traffic generated by food delivery, GD Supermarket team will implement refined operational strategy, including optimized product recommendation and marketing campaign to better meet this user needs. I also want to share some view to address the on-demand retail opportunity. We maintain strong confidence in JD Supermarket's operational strength, and we will also aim to seize the opportunity of on-demand retail. We recognize on-demand retail serves as a complementary channel addressing specific urgent needs It currently has limitation in product variety and cost effectiveness compared to the traditional B2C e-commerce. In the broader retail market, instant retail remain a relatively small segment. JD supermarket will strategically expand into on-demand retail to fulfill diverse consumption use case, particularly for the time-sensitive categories. but we'll always focus on building the core e-commerce operational capabilities. We remain confident in the sustained robot growth of our general merchandise category. This year, the growth of this category has been achieved without the impact of 3D and 3D, and is primarily driven by the enhanced capability of our team, positioning this category as a key growth driver for our business going forward. Okay, thank you. We can take the next question.

Thank you. Your next question comes from Joyce Zhu with Bank of America. Please go ahead.

Hi, Sandy. Good evening, Ian. Congratulations on the company's growth this week. Thank you for accepting my question. My first question is about user trends. What is the strategy and long-term goal of the company's next step of user growth? I will translate my questions. My first question is on user and traffic trends. Company saw substantial user and traffic growth in the second quarter. Could management share more colors on user profiles, behaviors, and retentions, and also user growth strategies and targets down to the road? My second question is on bottom line outlook. How does management budget investment for growth opportunities, and how should we expect margin and profit for the next couple years, and even like in the company's profitability trend over the longer term? Thank you very much.

Okay, thank you. First, in the second quarter of the past year, our users have achieved a strong growth. The number of users bought in that quarter and the number of users bought in the same period have increased by more than 50%. This is also the strongest growth trend of our users in recent years. On the one hand, the customer and storage efficiency of our own sales have been continuously improved. The core advantage is that in the past two years, in the efforts of the first new system and platform ecosystem, which brings us a richer supply and better experience. At the same time, the improvement of conversion efficiency, the continuous improvement of content and interaction, and other refined operations also help us to attract and store users better. At the same time, Jindong's take-out and delivery has risen rapidly in less than half a year, which has brought new growth driving force to the overall traffic of Jindong, users and frequency. At the same time, take-out and delivery has brought us more young users, and the increase in the number of Plus members is more obvious. The number of Plus members has increased by more than 50%. We will speed up the delivery of cross-sales to real-time sales and B2C e-commerce, including the conversion of old users and new users' e-commerce, which will lead to a rapid increase in the number of total shopping users in the capital and the number of e-commerce.

For your first question, in Q2, we saw strong user growth with quarterly active customers and user shopping frequency, both up over 40% year-on-year. This marks the most robust user momentum we have seen in recent years. On one hand, our core retail business has seen improvement in user acquisition and retention, primarily driven by our low-price strategy and the platform system development over the past two years. These efforts have enriched our product supplies and enhanced the user experience. Moreover, improvements in user conversion efficiency coupled with our efforts to create more engaging content and other operational refinements have further supported user attraction and retention on our platform. On the other hand, JD Food Delivery has achieved rapid growth within less than six months of its launch, providing new growth momentum for user traffic, active users, and user shopping frequency on JD's platform. Food delivery business has brought in an increasing number of young users and significantly boosted JD Plus members' shopping frequency by over 50% year-on-year in Q2. we will continue to accelerate cross-selling from full delivery to on-demand retail and B2C e-commerce, including efforts to enhance engagement with existing users and convert new users to our e-commerce offerings, thereby driving rapid growth in JD's overall user base and user shopping frequency.

In the long term, JD.com's goal has always been to provide a better customer experience for 1 billion e-commerce users across China, and to achieve lower costs and higher efficiency in the supply chain. Therefore, we see that in terms of the number of users, the diversification of service users, products and service categories, and the ability of service users, there is still a lot of room for improvement. We are also continuing to make relevant investments to drive the long-term growth of JD.

Looking at the long-term, JD's goal is to serve the 1 billion e-commerce users in China as we continue to focus on enhancing user experience, lowering costs, and driving greater efficiency. We see great potential for improvement in areas such as user skill, diversified service scenarios, a wider range of product and service offerings, and our ability to offer higher quality services to our users. We have been making strategic investments in these areas to deliver long-term sustainable growth in our user base and user value.

For your question about profitability,

JD's profit margin may fluctuate with industry dynamics and our investment pace in the short term. However, our long-term goal to achieve a high single-digit profit margin remains unchanged, especially the profit margin of our core retail business has been on a very healthy trend.

The core retail can continue to improve its profitability, The increase in the supply chain efficiency brought by the self-sufficiency, while we continue to increase and decrease the price of the supply chain, it will naturally lead to the improvement of our profits, including the increase in the commodity margin rate and the decrease in the price of logistics. The second is the increase in the product category and the transformation. The profit rate of commercial supermarkets and other products still has a greater room for improvement, and the profit rate of relatively mature electric products also has a small room for improvement. In the platform ecology,

The drivers of our core retail's profit expansion include, first, increased supply chain efficiency, which has been reducing costs and improving efficiency for both upstream and downstream players along the supply chain, and at the same time, driving improvements in our own profits. including higher growth margin of product sales, as well as logistics cost reductions and efficiency gains. Second, better profitability across categories. For example, our supermarket category still has a lot of room to improve its margin performance, and our well-established categories, such as electronics and home appliances, also have a potential for margin improvement. Third, development of our 3P ecosystem As the proportion of our 3P business goes up over time, marketplace and marketing revenue will also have rapid growth, which will benefit our margin performance.

In terms of investment in our new business, our focus is to break through the skyline of growth. and open up more growth space, we believe it will bring long-term growth of user GNV and profits. The period of the early investment layout will affect the profit rate of the group in the short term. In the long term, new business will gradually turn into new driving force for growth, resulting in greater co-operative value of core business, and ultimately creating greater profit space. In the process of investment, we will continue to pay attention to the investment strategy, and maintain the regularity of investment, and pay attention to the ROI, and then, according to the effect, dynamic balance.

Regarding our thoughts on new business investment, we aim to unlock greater growth potentials with the new opportunities. We are confident this will drive long-term growth in users, GMV, and profits. The early-stage investment will impact JD Group's margin in the short term, But in the long term, the new businesses will gradually evolve into new growth drivers, creating greater synergies with our core business, and ultimately enhancing our profitability. In the process, we will also focus on our strategies, invest with discipline, and focus on ROI. We will maintain flexibility to balance our efforts and inputs based on actual results.

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

Thank you. Your last question comes from Thomas Chong with Jefferies. Please go ahead.

晚上好,謝謝管理層接受我的提問。 我的問題是關於京東在海外業務擴張未來幾年的戰略。 管理層可不可以分享一下我們收購Economy的邏輯? Thanks, management, for taking my question. My question is about our overseas expansion. Can management share about our thoughts about the next few years' strategies, as well as the recent deal with us economy? What's the logic behind? Thank you.

Thank you, Thomas. As I said, internationalization has always been a key strategy in Beijing. Our internationalization model is different from other cross-border e-commerce models. Jindong's international business will focus more on supply chain capabilities. On the one hand, we hope to seize the opportunity for Chinese high-quality brands to go out to sea and help many excellent Chinese brands to effectively expand the overseas market and provide high-performance products to overseas users. On the other hand, Jindong will also insist on localization to create local retail and e-commerce businesses, to establish local teams and employees, to purchase local goods, and to establish long-term supply and demand relations with local market participants. Moreover, we will focus more on brands with high-quality products. Jintong has been operating in Europe for several years. Since 2002, we have been innovating and trying new things. our new retail business in Europe. Later this year, we will also upgrade to become a brand of Zhao Yibai. At that time, we will also share with you more progress. Regarding the acquisition of Seconomy, we believe that the brand power and supply chain capacity and market position established by the European market and Seconomy in the local market in Europe are of great value to JD. Our online e-commerce domain Thank you so much for your question.

As I have mentioned, as the largest retailer in China, international expansion has always been a key strategy for JD. But our international expansion strategy differ notably from other cross-border e-commerce models. Our international business focuses on supply chain capability. So on one hand, we aim to seize the opportunity of a Chinese premium brand going global, helping them efficiently expand into international markets while providing overseas consumers with cost-effective products. On the other hand, JD is also committed to localization, meaning developing local retail and e-commerce business, establishing local teams and workforce, conduct local procurement and local fulfillment. So to build a long-term mutual beneficial relationship with participants in local markets. Moreover, JD will emphasize on selling branded high-quality product. JD has been operating in Europe for three years, steadily building our retail e-commerce property and logistic warehouse infrastructure while accumulating extensive experience. So since 2022, we have been piloting innovative retail model in Europe, and we plan to officially launch our retail e-commerce platform called Joybuy later this year, and we will share more updates later on. Regarding the proposed acquisition of Zconomy, we believe the European market as well as The economy's brand strength, supply chain capabilities, and market position in European markets hold significant value for JD, and both parties can achieve synergistic results. On the other hand, JD can provide online operation expertise and technology know-how. So the transaction is subject to regulatory approval currently. We will provide further update as appropriate. Thank you. So that's the last question.

Thank you. We are now approaching the end of the conference call. I will now turn the call over to Shawn Zhang for closing remarks.

Thank you. Thank you all for joining the call today. If you have further questions, please contact me and our team. We appreciate your interest in GD.com and look forward to talking with 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.