JD.com says $3.9 billion stock offering will raise funds to improve logistics efficiency

Chinese e-commerce retail giant JD.com Inc. announced plans today to raise an estimated $3 billion through a stock offering in order to finance improvements to “key supply chain based technology initiatives” and slow growth of fulfillment expenses.

JD.com said the money would help enhance customer experience while improving operating efficiency. The company plans to apply the unspecified technologies to business operations including retail, logistics, and customer engagement. The gross proceeds of the stock sales are expected to be about $3.9 billion, before deducting underwriting fees and the offering expenses.

The injection of funds could help the sprawling company to control its rising fulfillment costs. In its most recent earnings report, the retail giant declared net revenues for the first quarter of 2020 of $120.6 billion, an increase of 20.7% from the first quarter of 2019. In comparison, amazon.com reported just $75.45 billion in revenue for its 2020 first quarter.

Despite the impressive gain, JD.com said the cost of its fulfillment expenses was rising even faster, counting its procurement, warehousing, delivery, customer service, and payment processing expenses. JD’s fulfillment expenses for the quarter rose by 29.0% over the first quarter of 2019 to $1.5 billion. Fulfillment expenses as a percentage of net revenues was 7.1% for the first quarter of 2020, compared to 6.7% in the same period last year, as the spread of COVID-19 caused a shift in product mix and incremental costs, the company said.

“JD’s resilient business model helped drive solid top and bottom-line results for the quarter that exceeded our expectations,” Sidney Huang, chief financial officer of JD.com, said in its earnings release. “We are also pleased to see an accelerating increase in user engagement, demonstrating our strengthened brand image and expanded consumer mindshare. Throughout the COVID-19 outbreak, JD has implemented disciplined financial control policies while providing undisrupted and timely services to consumers. We will continue to invest in technology and customer experience to support our future growth.”