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Alibaba's Chinese rival stumbles as losses widen

Reuters with CNBC
Key Points
  •'s Q2 net loss was 496.4 million yuan versus 252.3 million yuan loss year prior
  • The e-commerce giant said it completed the spin-off of its subsidiary business, JD Finance
  • Founder and CEO Richard Liu said he expects JD to achieve non-GAAP profitability in 2017
Zhang Peng | LightRocket | Getty Images, China's second-largest e-commerce firm, on Monday said its net loss widened in the second quarter, as marketing costs damped the impact of higher-than-forecast revenue growth.

China's main rival to Alibaba Group reported net loss attributable to shareholders of 496.4 million yuan ($74.43 million), from 252.3 million yuan in the same period a year earlier.

That was on revenue which grew 43.6 percent to 93.2 billion yuan, well above its forecast range of 88 billion to 90.5 billion yuan.

Marketing expenses rose 63 percent to 4.1 billion yuan, mostly due to sales events in June.

The result comes as JD looks to expand overseas with investments in Southeast Asia, as competition at home intensifies while customer growth slows. It is also seeking to boost per-customer spend in China by bringing more overseas brands onto its local platforms through strategic partnerships.

JD in June said it intends to begin direct sales in Thailand before the end of the year and has plans to tap other markets in the region. It expanded its partnership with Wal-Mart Stores during the second quarter and invested $397 million in fashion retailer Farfetch UK.

The firm expects revenue for the third quarter to be 81.8 billion to 84.2 billion yuan, a rise of 36 to 40 percent from the same quarter in 2016.

JD also said it has completed the spin-off of subsidiary JD Finance, which analysts expect will have long-term benefits for its operating margin.

JD Finance is now a fully Chinese-owned entity, giving it greater regulatory freedom.

How e-commerce giant uses drones to deliver to far-out areas in China also completed the internal separation of its logistics unit, which will look to serve more third-party clients outside of the group.

The total value of merchandise transactions on JD's platforms was 234.8 billion yuan during the quarter, up 46 percent.

JD booked a net loss of 0.35 yuan per American Depository Share, compared with a loss of 0.18 yuan a year earlier.

Richard Liu, founder and CEO of, told CNBC on Monday that he expects JD will be profitable on a non-GAAP basis for the full year, driven by better logistical efficiency.

"You can have your logistics (be) more efficient. You save some money. With your growth of a large base, you have more negotiation power, so you can get better items and terms from the suppliers," Liu said. "You can improve your gross margin, so you can help us to be profitable."

He added that JD currently has more than 335 warehouses in China, with plans to build more in order to cut down on delivery costs.

"In the next three years, we will build over 500 (warehouses), so our goods will be closer and closer to our customers, to save more delivery costs," Liu said.

— CNBC's Christine Tan contributed to this report.