Q1 2020 Earnings Call
[music].
Thank you for standing by for JT Dot Coms first quarter Twentytwenty earnings Conference call.
I'm also disciplined and listen only mode. After managements prepared remarks, there will be question and answer session. Today's conference is being recorded.
If you have any objections you may disconnect at this time I.
I would not like the meeting or what's your host for today's conference you Lee. Thank you. Please go ahead.
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HM.
[noise]. Thank you ladies Hello, everyone.
Thank you for joining us today.
2017 has been unprecedented yeah for all of us.
As we mentioned on our last earnings call JB Dotcom and if the heroic 200000 strong frontline employees have been a unique for us he supporting the likelihood of hundreds of millions of consumers, helping them to adapt to a new normal under the social distancing matter.
And making notable contributions.
Two productive and sustainable Society.
Rather cobot 19 crisis.
In that process, we also navigated through all the operational difficulties and the disruption resulted from the code at 19 outbreak and delivered a solid set off financials flush shareholders in the first quarter of 2020.
We accomplished many impossible emissions by leveraging our unparalleled supply chain and logistics capabilities.
What invested over the past the 15 years, that's well as a strong corporate culture.
That cares deeply about our phone line employees, who in turn take great care of our valued customers.
Our net revenues grew by 1.7% in the first quarter ahead of our internal expectations.
That's the way you should the supply and fulfillment of essential products to our consumers amid this pumping vitamins.
The strong topline growth was accompanied by even stronger user engagement.
Our active customers in the past the 12 month reached a total of 387 million.
25% from a year ago, the highest the growth rate in eight quarters.
25 million net additional customers on top of an already strong peak season that attrition in the December quarter.
Similar to Q4 last year over 70% of new customers into one came from lower tier cities.
The lower tier city Conns customers contributed almost 50% above fulfill the GMB in Q1, which is set a new record.
In the meantime, our mobile Yeah, you grew 46% in Q1, the fastest nine quarters.
The level of user activities on our platform, notably accelerated.
As we earned a greater consumer mindshare by being the only fully functioning commas problem with diverse product offerings and superior logistic services immediately after the outbreak.
This is further evidence by all the number one internal <unk> the net promoter scores.
Which reached all time highs across all of our core businesses.
Category wise revenue growth of general merchandise accelerated to 38%.
The highest growth rate for the past the six quarters.
Given by all the newly integrated Omnichannel supermarket business group.
Well I'm, 47% into first quarter.
As well as a strong performance some health care cosmetics and household products categories.
Oh Omnichannel supermarket group basically combines our FMCG fresh produce seven fresh and convenient store business units.
Most of which will launch and developed from zero in the past six years.
By 2019, the revenues of this group reached over 115 billion on B.
Roughly 20% higher.
And the revenues of the largest offline supermarket chain in China.
Making us the largest the leap halo for this category in the country.
If you consider the fact that most often supermarkets also sell home products and appliances.
Our leadership gap would be even wider.
In addition, RGB health business unit.
Also.
He's also gaining consumer mine Kim.
With quarterly active customers for Madison categories increased my triple digits.
Net revenues from TD house increased to 65% young here in the first quarter, surpassing the revenues of the largest offline pharmacy in China.
As I had communicated with many of you probably every time, we spoke in the past.
Ooh secure market leadership across most of our core categories one by one.
And these are just two notable examples.
Well a few others are hidden champions.
I'm thrilled that we have achieved quite a few of these milestones before my retirement.
It's just a matter of time and the snowball will continue to grow.
For now our general merchandise sales in Q1 contributing more than 40% of our product revenues for the first time.
And further strengthened our brand recognition and consumer perception as an everything store with increasing the broader selections.
On the other hence the electronics and home appliance categories also performed extraordinarily well on a relative basis, well nearly 10% as compared to a nationwide a decline of 21% into first quarter. According to the government data.
As we discuss the many times in the past, our electronics and home appliance categories can always outperform because our cost structure is 50% lower than our peers.
Which allows us to provide the best value and best service to the consumers.
Another remarkably resilient Mexico is off a food gross margin.
If you stood at 8.3% in Q1.
Comparable to the same quarter last year.
These are still moving they all a few moving pieces in this metric.
But essentially.
The lower fuel gross margin of the omni channel supermarket business was substantially offset by incremental gains from procurement economies of scale across all categories, particularly those with the market leadership positions.
To a lesser extent it also benefited from that subsidies used for topic generation to cultivate consumer habit for online grocery shopping.
Which has probably leap frog for one to two years in the past the three months.
That's a result were approaching the inflection points of the supermarket business ahead of our original schedule.
Another positive contribution to the for feel the gross margin was from JV logistics.
Where the productivity gains from higher than expected orders more than offset the additional costs from the operational disruptions higher wages and stop protective measures.
If you look around today.
Can probably identify a clear path and those who treat their employees well in the normal times are the most resilient in the time of turbulence.
Besides the fulfillment expenses.
Or other expense ratios declined due to our more disciplined spending amid uncertainties in Q1.
Our marketing R&D engine expense ratios in the first quarter improved 2038, and 13 basis points, respectively compared to the same quarter last year.
As a result, our non-GAAP operating income increased to 65% to seek once we get an on b.
And the non-GAAP operating margin was 2.2% up 60 basis points on the same quarter last year.
On the settlement basis, non-GAAP operating income of TD retail group increased by 39%.
To 4.5 billion on B in Q1, with the operating margin improving to 3.2%.
Up 44 basis points from the same quarter last year.
While the margin improvement may surprise. Some it is because we have been investing for the newer categories and the never tried to optimize our margin.
As I mentioned to many appeared in the past.
The relatively decent margin business.
Had already in there for quite sometime.
In this quarter, we just have now old lost margin ahead of schedule for certain categories that are under the investment phase.
Moving to the bottom line.
Our non-GAAP net income attributable to ordinary shareholders. In Q1 was 3 billion R&D compared to 3.3 billion.
R&D in the same period last year. The decrease was primarily due to certain one off gains in Q1 last year.
Our free cash flow for the first quarter was negative 3 billion on be partly due to our early payments for prepayment to certain suppliers.
To support their operation and secure certain sought after merchandise.
Capex was prudent in Q1 and the spending for the development properties was for existing project.
As disclosed we established a second costs on the CIO in Q1 to dispose another 4.6 billion R&D of logistics assets.
Which remained the most resilient real estate asset class, regardless of the code in 19 situation.
On the financial outlook.
We expect net revenue growth in the second quarter to be between 20, and 30% on a year over year basis.
Based on accelerating growth in the first half of Q2.
And assuming the corporate mentioned situation does not create significant unexpected disruption in the remainder of this quarter.
We're not in a position to provide any full year guidance on the bottom line.
Due to the uncertainties of the pandemic.
However, the margin dynamics in our Q1 results.
They provide some basis for your own assessments under various development scenarios of the corporate 19.
In summary, where privileged to be in a unique position to leverage on the best of our capabilities to help the society. During the course at 19 outbreak.
Including our broad product selection in consumer staple categories, and our superior logistics infrastructure.
We are confident that will emerge stronger on the other end.
This experiment user growth strengthen the brand image and extended consumer mindshare all of these validate our long term approach to running our business with that customer centric focus.
I'm more confident than ever about our market position and our mid to long term growth prospects.
This concludes my prepared remarks, and that we can now move to the training session.
Operator.
Secondly.
The question answer session, but this conference call will stops in the moment in order to be fair.
Oh callers, who wish to ask questions. They wouldn't take one questions at the time from each caller. If we have more more than one question <unk> request to join the question that you again. After your first question is being addressed if you wish to Oscar Gruss team. She's just start wondering your telephone and they see a name to be announced.
We have the first question from the line of.
Robert Jones from Goldman Sachs. Please go ahead.
Thank you. Thank you Richard Chalet Guangdong Sydney.
So ray USDA data, it's very strong result, and congratulations on the first quarter performance and with the first quarter, we've seen how JD logistic supply chain and logistics has proved to be certainly resilient over Toby and we've seen that over if there is over 50% revenue growth for the logistics and others revenue line in the first quarter, so we'd like to.
Here can management, just outlined some of the growth drivers and margin outlook for the logistics business in particular.
And beyond fulfilling so first party lumpy retail orders are there any plans to fulfill more up the youre BP marketplace, and even CMC orders and what do we see as other opportunities beyond serving just within the JD retail group. Thank you.
Yes.
Okay. Thank you Renault so I'll start and then maybe some way can add on.
So the logistics business enjoyed Glenn put great brand recognition amid the Colgate 19 situation we were.
Widely recognized.
By the consumers, but also by by the government we were awarded a multiple actually awards.
Across the region, so very very strong.
There were some performance and along with that we absolutely attracted.
Some new customers during the pandemic because of because of the the resilience of our operations.
But you know as I'm happy to be business, Steve the impact of the brand enhancement will not come immediately so if there will be lasting effects.
Of that positive impacts, but in Q1, we did see pretty strong demand from existing clients and also it's new client new customers.
Outside of the JD ecosystem.
And as I mentioned earlier, you know to the performance the productivity of our logistics team.
With exceptional in fact, the the cost per order reach the all time low during the first quarter, because the order volumes spiked unexpectedly and our.
Our team a phone line workers as I highlighted earlier.
You know really I used to come heroic you know because not only.
Highly productive, but they are also very brave to fulfill the orders for consumers amid a lot of uncertainties.
We are of course also provided all the necessary safety measures to protect our employees.
Following the end I really didn't get Hum.
Throughout the pandemic situation, but that additional productivity helped I'll Oh.
Overall margin in Q1 on the year over year basis.
No. This is a business that build on scale size, we continue to grow in scale, our marketing world and actually trend setter and note that business has being positioned to attract external customers I didn't mention earlier I mean in Q1, we know how external revenue actually can.
To be more than 40% this year at this quarter. So it's another.
And then the milestone for for the group.
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Hey, destinations experienced actually including other stuff the fear and it's always had acquiring other business.
During this very special time, the 60, and how our frontline logistic stuff. They atmospheric honestly I want to operate entering this time he provided over 10 million smart and to 70000 gloves and all kinds of to Texas theory to our logistics not to be sure.
Working in a relatively safe environment.
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HM.
One moment please.
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Hi, named in addition to that we have bought over 70000 simulators and the over 10000 said disinfectants et cetera, and all these are in place to show it operations state that affect the site.
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And they've done a academic situation getting better.
It takes place another person actually in some areas just only.
Look at the company I'd like to be quite weird can deliver our product the door to other customers and this has definitely manifested the trust we have been built among other customers other communities and the government. It's also very helpful for US again more external order increase other revenue services so over time.
Okay.
Thank you.
Hi, guys here 70 bundle.
[noise]. Thank you we have our next question.
The line.
At least.
Citigroup. Please go ahead.
Hi, I'm good evening management congratulation on the strong results and guidance.
My questions is crew management elaborate a bit how we should reconcile the strong guidance your profile versus the current macro situation in the consumption sentiment how much also outperformed our driven by the consumption stimulus and the consumer why not to buy more things.
Coming out from the call Vic or was that the benefit that we are seeing from offline to online shift how sustainable is still strong momentum into the back half the year do you anticipate that demand to be more normalized.
Thank you.
Okay. So how it's a sidney I will give a first shot and then maybe she they can add.
Yes. So we have observed is that when when the 10 dynamic situation was highly uncertain and social distancing was.
That's the most district time.
There will be a huge spike in.
Orders.
For fresh products and other daily necessities.
And as I mentioned earlier, we are now the largest omnichannel supermarket chain you know in China. So so we are.
Here to benefit from increasing demand.
From this category essentially people will be cooking at home.
And so that will increase the overall demand for fresh and supermarket.
Sales.
Both online and offline.
And so that has will benefit but it will be somewhat offset by slower growth from the discretionary categories. As we have seen now that the country's gradually opening up and everyone's resumed to work we do start to see pent up demand on the three.
Our categories, starting in March and particularly in April and May I as I mentioned, we were actually seeing accelerating growth over the past three months.
So that is.
In a relatively good scenario, our strong categories will start to recover.
And at the same time because of the cautious measures still being undertaken.
By the majority of the the consumers for example, you still don't see many people in restaurant.
So most people are still World Cup. Some home. So so that will continue to create some higher than normal demand.
For the supermarket product categories.
So it really depending on the.
The the development of the corporate 90 situation, but in either direction our business.
Because we have food category retailer and we have.
No we cover all the major categories.
Particularly the consumer Staples stores. So we are in a position to grow regardless, so that would be my magic.
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And then when you go from here in North Korea handled through either partner.
She said to both so Tony little operate on this one of my notes you sure woman badly because of other low or tertiary a bunch of your work where do you don't see don't hear me.
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He wanted to groceries, very healthy and especially if we didn't turn those statistics no different customers and as we activated customers tell me more active this quarter.
No I wouldn't go you.
So what do you like kind of problem with another handful tempting been told solution Jemima joint venture will Uh huh.
And just to see by the Easter Easter I, just didnt address over 60% of other users are coming from Brett to secure so deep and if I T. N D Air account to account for over 50% and overtones Dnbi now.
Let alone, but your couponing better when they're in the.
Usually they are the TV device or take off.
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Hello, Murphy informed and we'll make a go forward into those also negotiate for GE fillers Sumit leaders in February we versus the two times the easier for sort of as I mentioned in his optimism going forwards.
And we will adopt a number of let's strategies to develop a user base in the future in principle to target or lower tiers in the market end users and we what we call. It a blowout driver system given by our teacher platform and also I have a nice nice those don't cover more precise.
Our customer algorithm.
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It's a border avoiding show the there.
Can you go and do the Crusher woman the Green Goldberger engine jockey vehicle defending stack emotional from their daughter together.
And in terms of there I'm, just kind of China's economic landscape and Oh lines 18, the characteristics of I Didnt users are featured I'm, a lump them, our middle and high end users and a lot of them our household.
A woman to offered by our with argued was going to give you who.
So you're right you Javier.
Jamie you hopefully you get into it got their syphilis Levered engine fruitful.
Jason challenging physically.
And it could well that by end of a this quarter with early next quarter will provide a specialized the programs to our I'll provide some more tailor made it services to our media on high end users and provided and make more selected products play some take time services no matter, what I'm sorry to cut Allison.
Our investment in India for American valuable things are women Tony alone you girls are really really deep in the answer for you too.
Looking back to the human human Jeremy This is really cool the switch have shown governor Trivago can you put in basis.
For Q2, but for sure.
It seems you take that into the golf.
So Jim you missed an easy to the table teams with that I just wasn't before.
And that are introduced earlier that earlier on we have established a new outfit stickier.
Heartlands entergy retail focusing USIS growth in operation and believe that department.
They focus on optimizing also uses algorithm and their database and assets to do more precise operation and conversion of the new users and the results in Q1, it's pretty.
Yes.
Component.
Telecom and therefore, the woman equal you maybe to me very interesting injection less so.
Definitely daily circulation Union agreement incremental though please.
You see those fishing vessels, all I can see window with us. So when he comes out he gave him a great Kenosha juggling option exercise that option led by region gondola cubicin with them.
And in terms of the category actually on reflect what we some of the categories I think benefited from the I'm proud of our situation and some have been back many facets to supply chain veteran to slower than expected. However, I'm looking at the time performance during the name on holiday, we do see a rapid growth in.
Home appliances, and especially in a parallel five segments. So those are the but it always starts in the RGB woman to going all the info for their little.
And we'll also evident for few words about so our.
Most important marketing activity.
Just wondering in this quarter it doesn't get into his religion here a little about Cheshire.
Thanks in part I sounded or some gathered here I said earlier from Adobe If you pay her face on gold nicer.
Switching annualized net.
So I was referring to the carbon flat rolled off.
And due to their academic earlier this year, we can see back the enthusiasm to participate into over 6008, something festivals from other brands a partner merchants and older. They kill US online offline I'm very high I think it's the highest seems and in the past the 70 years there.
Engaged.
The only allowed us the with US as you know Trimble is kind of true helium filled with a lot out of trading the effect on the golf and we can also expects to that some or all the major players who the competitors on this market and I'll come back very actively preparing for this event.
You know about revisiting the.
Million dollar solar system that you should see a woman she appeared on the user for silver totalitarian messenger or this election promotions other political season.
And as all of you know that explanation was created by 3700 to go. This is the 76 nights event.
And by nature will take more center stage in this activity and so far or we have received very positive attention from our customer and also a lot of things I'd just be my patients fund investment from merchants and abandoned occurs to a coming out.
Right.
So what each of the who just on sort of problems and none of the about pushing the federal home consumption habits from that people don't go.
You.
In showed.
You do each embrace some good I got into buildings on the fear horses.
If there is another major outbreak of the corner virus again, we do think when asked this year will be a go to opportunity for for all the merchants and then let her to recover and affect their lives into one toxicity.
Thank you.
Yes.
Thank you.
We have the next question from the line.
You know long from credit Suisse. Please go ahead.
Hi, Thank you management congratulations on the very strong results I wanted to follow up on the lowest your penetration because now at summit to choose your he's on I just mentioned that we have seen.
The recently I also noticed that we have don't usually about working JD light a and also we do have probably over 10000, Oh shot JB.
No that notion so those subs.
Stuart in lower tier cities, so and also we sort of give yeah first level actually access point, though we catch <unk> since the late last year I want to know first of all summer each apps, we just talked about and also including those offline shops, what kind of cloud offerings are we tend to acquire those.
No. It's your city users and also.
The contribution from the newly sort of upgrade it on access point, how much of our use a contribution actually come from the we capture what sort of give access truckings instead of J.D.
Yes. Thank you.
Oh, no profit and we saw a.
Aegion when the teacher industry, but he didn't do that covers your philosophy.
Just a share some of our operations and other provisions on the merger market.
So, yes or no.
Hi, Oh, the bottom yet.
You know you tend to be Utah from has already been $2 a woman who will go ahead or just because of some moves into a decent.
To garner a few people who will survive puncture effects on the familiar to you got.
The first of all aimed at building different shopping scenarios in places where we're not.
A bigger rely on any single shutting in Iran.
Besides the PC platform, which is targeted to the lower tier customers.
Also you saw the same site to algorithms to play a role in extending over shopping center.
I try to go do you do duties on our five year for use with our teams.
Yes, so simply do so.
She sees her or do you wouldn't be cheaper.
It's just too because the Frank I'm speaking well Q1's, a TV platform in February and March.
With a affected by both the spring festival and the epidemic situation.
Double here could handle well look at the father, who really bad to deal with your held over this quarter can be a cohort journey to try to be.
Yes, I did you actually have no interference free from aluminum Extrusions little comfort.
Yes.
But as you can see earnings calls with that.
I'm just a platform on the percentage of our users and Allergan. They are all going into rate is also going by the houses. So we are also with absolute difference measures to go down into the limit your market.
So let me change, though but India juice utilizing visit all of you will get their commitments in trying to give us with him personally teaching linear kind aligned with the Julia.
How about you handle them all the can conquer Michelle berrey surges desire to hear control or take a trade average accordingly.
Hi, this is where the kinda bullish on other products new gene when comes here.
So you get to me he history zone images.
They will follow.
Several fixable.
Since you don't love to sort of how material internal gets delayed.
Yeah, let me share message.
Total system sales here.
And with a a situation of that has ended up getting better now the accretion of teaching has come back to normal level the levels of working festival and the in the meantime also identified several opportunities for Tctwo first of all I just would epidemic HM.
Actually a lot of Refractorys originally producer on commodities for exports now is that I'm looking at domestic sales opportunities and he can find a good way to collaborate with them for how because two factories to transform their business and the same time I think it has done a lot.
After supports the farmers are just now there are agricultural products and services and through our licensing and getting right. These are the same time. It's also to suffer responsibility, we aren't performing to help the bombers et cetera.
You might as home dose or from the sends out how youre thinking the giardia.
So my Dear folklore are going up from Oakland idea to make any debt under a bit here, Tom She's a top tradeoff soccer tournament anymore.
Digital.
And another shopping center that we had this other alkaline stores, we have those franchise type the source of some home appliances, consumer electronics and convenient stores et cetera, and all this a physical appliance doors are playing a very important the topic for us to go down to the know what's your market.
The simple answer that's what's going to tell me that will more high or core shops as well.
A woman tires pick one phone yeah, sorry, if I don't think performance you broken homes for more boots in the Catherine should have yet to though she shows three.
Quarter over quarter.
Dug into a long.
And that you mentioned some photos from the outlets you're going to let him know for a tougher quarter vehicle would remain poor them 2000 building from an eventual Sheila.
And the size over our various ways.
For eight shocking scenarios there also a thing over products them to the lower tier cities.
I see two I thought S and the self owned brands and a wasn't that difference and actually about.
To leverage all kinds of resources and to collect racism elections, and the makers et cetera to me and even tailored to meet up the local markets only loves to being different troubling scenarios things are making until then they go to a with a combined effort we can achieve they'll come in accomplishments.
Sure.
Thank you bye bye.
Thank you.
We have our next question.
On the line Jerry News.
Yes. Please go ahead.
Hi, Thank you and management of my question, it's about a margins if we look at.
The first quarter on margins for net margins for were quite strong actually reaching a level, we so far throughout 2019.
Despite told it a and earlier we talked about some of the investment areas are actually maybe a improving ahead of schedule.
So as we look forward do we see opportunities, where we want to step up reinvestments of some of these profits into other areas or do we want to let margins continue to rise a little bit higher I know management has talked about this long term targeting a patch of maybe.
Even high high single digit margins so.
Just wanted to get a sense of the appetite for for reinvestment or letting the margin come up a little bit. Thank you.
Yeah sure. Terry This is sent me yes. The plan no first of all Theres still a lot of uncertainty.
No due to the corporate 19 situation.
But clearly we will.
Act on increasing customer base.
Enhanced user engagement.
We'll definitely continue to invest as we have always done to keep the opportunity you know two to two.
Seized opportunities.
Sure I mentioned earlier about June 18 festival, which will be a great opportunity for us to work with clients.
Work with suppliers and to really make up for the loss.
Sales for everyone.
In in Q1 due to the pandemic. So we will putting our share for sure I'm not to not only to drive growth, but also to support the recoveries of overall.
From a society point of view clearly is also great opportunity for us to retain the new customers we acquired.
And also to to be would continue to do.
Consumer behavior for multiple categories that we have gained so much in the past the three months. So I guess the short answer is we will as always continue to being best.
We will continue to keep an eye on the margin.
As you can see what we did in Q1.
You know because it is in uncertain time, we will remain very very disciplined but on the other on the other hand will never stop investing in our customers a will never stop investing in improving the user experience and to that.
And you know the investment will always continue.
Got it thank you.
Thank you. The next question comes from the line.
Tom much Chang from Jefferies. Please go ahead.
Hi offense management Baltic in my question and congratulations on a very strong coffee. So a question about Oh, yes.
For lots of Fiat.
I'm still possible to try to James situations, Oh can management comment about Ah Ah moment.
That's a fire in China, I'm seeing how long do you think our suppliers.
We will see Fraxel, almost and that's what measures that people wise with them.
Reset.
Hello.
Situation or should we expect.
David because.
So a very small relating to the other free cash flow sites or should we expect to see festival.
ER positive in coming quarters. Thank you.
Okay I'll first give a shot you know just on the support to supply as it happens mostly.
Never raised and maybe already you know it in early March one when depend dynamic was in the most the severe situation when whole country was that was locked down but nothing Fortunately you know to control was quite effective.
So you know bye bye.
By March there are you know that the there was very few new cases.
So many factories.
And producers had already started solutions work.
Especially for the essential categories. So from our overall assessment I'm not surprised because we work with leading brands across country. So most of them hop back to work their cash flow has resumed.
No somewhat back to normal so towards the later part of the quarter up there were more prepayments rather than.
Basically to secure sought after merchandise.
And as to a less expense.
As to pay payable earlier, so I think overall the financial health of.
The supply so we work with their mostly net two large supplies and brand owners.
Financially they are quite strong.
That there may be for for a small medium enterprises, there might be issues.
So that's why we are flocking. She business for example, Sheila mentioned that there were some slowdown. So we're also seeing activity is picking up.
So so overall, we are we're cautiously optimistic now on own on free cash flow.
We do expect it gradually return to normal but on the other hand, you know.
Yes, just stay alert about potential no feature that will shape for example, scenarios and so cash flow he will remain to be a focus for us as well.
Free cash flow you know should be a function of our overall bottom line, but we do expect free cash flow to perform.
Better.
And our net profit actually did Austria.
Thank you will see what did you know.
The nation's again.
Thank you.
Thank you. Your next question comes from the line of but I didn't know from Bank of America. Please go ahead.
Hey, good evening guys congratulations on a quick Florida.
A difficult time off level.
It does take a picture question Tiffany strategy and not a crash of tactics.
Some of our competitors. So do you see a race to predict industries, our long term margins.
If not why not thanks.
Yeah, I know I think we have a as I mentioned in my earlier remarks, we have been as aggressive.
Actually could you not own right, we have been investing heavily.
In.
All of the categories, you know weve always strive to provide the best value on top of the best service. So.
That's why I mentioned also earlier in response to out to Gary's question that we will clearly I'm also step up on investments.
Given the strong relatively strong performance.
And investing back basically giving back to our consumers as as we always do.
And when we do that will also work with Brian.
And you know in a joint effort.
And in those promotional activities.
And on top of five at the low price. So the fundamental driver for our marketing I can't speak for others. The fundamental driver for our business is from the economies of scale.
Because as we continue to grow we can't gain more and more procurement.
Benefits you know some as they forward as a rebate volume based rebates others could be in the form of.
Customized models and private label product.
So a lot of those pools will become available once you are the largest retailer in the category. So we will not be affected.
By others in the industry, you know, which is a trend that you have been seen over the past few years and you know because every year. If you recall every yet is the reason.
He believes the competition is stronger heavy it is the reason the competition become more fierce.
So, but we continue to perform.
Pretty well and no with growth now accelerating and margin extended.
Thanks very much.
Thank you we have our next question from the line Gregory yourself from Barclays. Please go ahead.
Oh, Hi, imagine my sense for taking my question on congratulation to stop altered.
I really quick one so we know large majority off the products myself a produced by the local manufacturers. So but you still have a portion of the products Oh, you project from the oversea market.
So as the president and dynamic is still ongoing right into the rest of the world How shall we think about the impact Petro imports and the cross border dismissed Suntrust.
Yeah.
Oh with pneumococcus raise enough without it.
Your life.
Do you want to know.
Women, but you should have tremendous shortened somebody who is the since its founder so the business.
Oh for JV over a very fundamental and or the highly well know when I kind of crazy Albert electronics and PC segment.
It is really in a JV and you guys. It seems to have we sort of neutral.
Which is Uh huh.
And that number.
And she said election later fibrosis as usual that there are numerous times out yes vocal 4800 units over the up over there they are coming to an angle. So he can you got to their business.
And so this home appliances category and the supplies are the supply chain, let's not heavily impacts that reflects inside these are calling them either but the flat.
Driver, it's more somebody might sites because these products will be delivered an indoor and outdoor.
So he was going to keep yourself.
I told you can go hosted a physician limits and human resources or even here in Tito specialty, though you have due to the fabiano convinced with the arguably we currently a condo he see who listen to the HIFU device because the other way shift and stood up a mobile phone category.
It's developments will not be to sales will not be I'm heavily impacted effective in the later on as well. It's a major impacts on these category is the five key new you I'll products will be where plants will be launched in the first quarter has now been put the problem to be launching this quarter for.
We'll see more fearful that doesn't like T phone really in April and May.
She doesn't lane, though are going to go acquire showed our trends within your means they need a mucosa since with it sounds like something closer to that sometimes some good I know you wouldn't that ordinary shares yeah.
Turning to put their losses will I'm going to ensure the option.
Well millercoors using grassroots the harder.
Causing pressure utilities.
It's important not all else you parse out as soon as integral Florida.
And for this I just had a great. This will be have a may have a more impact affirmed the global supply chain, especially you can do come from Salix pieces.
This applies to the prices are going up however, I think to over marketshare align apply on the Chinese market. We looked at another collaboration is with our I'm glad Thomas globally, and just your other leading position and against all odds after kind of either.
Then principal highlights include or something.
Oh sure vocal in Colombia, using all the hard on Chisholm quotes including Cheers.
Oh sure shopping or something so cleavenger for ours is a bullish on the liver himself an offensive and answers are missing can you give contributing she'll come forward thinking.
Something that's kind of shooter.
Which uh huh.
As for some I'm kind of great a return on many of them are some overseas and it's important.
I don't know maybe that's cosmetics.
And all of these there aren't any time in the first I missed this important it's not a 39000 acres and secondly, I'm just this quarter and this will be many depending on the epidemic situation manufacturer region.
Yes.
Thank you.
Thank you.
We have our next question from the line.
And do you want.
Okay. Stan Lee. Please go ahead.
Thank you management for taking my question and their Congress congratulations on the great results. So far I have a question regarding the tightening in the marketplace revenue or we understand out in the first quarter over the course of vehicle. One night you have an active impact on the part of the revenues from solid revenue growth. So.
Have you witnessed a you know just a strong recovery, especially some solved the pricing around your bond.
So much.
Second quarter Sofa. Thank you.
Oh.
But really wants you to look at others I like to Chile.
Some good some gokul water losses on clay was probably the bell.
She young supporters, who doesn't go sensitive about long haul feminism too.
So the goal.
Hey, the steep.
In 2019 in the advertising market, it's only achieved a single digit growth, but the internet advertising for speaking on Hubert Chen.
When another can go to use the some good he was just on the phone golf within.
Dive a whole lot incidentally I see no phone call yesterday truthful window.
And in this Q1 and the overall I'm trying to market. The advertising revenues, it's an additive growth engine for the brand advertising also in Mexico.
Give me a bit other proposals that you want Oh, he says soups impacting social though go to deal for.
You know woman to your goal by the new juices teaching them.
Please turn.
We'll go to listen to go there how are you looking back yard young woman, which are not hold on all the cooler source. It goes out yes.
Vehicle doesn't play if you did see ourselves from here, how should we buy cigarettes.
And what's nice about TV advertising this is different than for circle well other advertising services. This highly integrated waived branding advertising and the sales because we we're very close to the customer shopping positions and secondly, I'm over advertisers.
There's a lot of our from SMB. However, if you see the after this values. There's a lot of there's a very heavy investment from the larger Needham <unk> company.
I think im Daiichi gonna have.
It appears not to put it in a woman's arts and crafts or commercial reality and that's very helpful. Bottomed out from an Oh I'm sure that you summed up where you saw that come all the other parameters that to some of the Cleveland documentary that since easier to lessen the comparative though.
Although who are selling out of the playoffs, Oklahoma.
And thanks to all these factors are we have seen the ice for our advertisers and then the merchants are actually going up and is there a this in turn has given them a much higher value and they're doing this epidemic special period of time Didnt has become a very important a place for those.
Let me, Jim Antal Big sized enterprises, especially those brands brand partners every place to place to advertisements.
And then come back through the addition of baseball fees are you able to reform garden Delta that burden that she so, especially here in 2003, they're coming to our to go to Quicken goal 13, do that stuff World Theres only look at looking at our whitening, various or say from although some of it diminishes, our so called up okay.
Dr reality.
And with a Oh accruable session I'm getting better we have seen that doesn't happen are being waxes and advertising transaction and the difference that's actually to happen if they haven't even higher requirement under our eyes and among all the Chinese economy platforms and baby accessories.
Oh, great job in providing our eyes sentence relatively speaking I believe for some.
He kind of platforms that it's not delivering a good all right now we'll see I will have a very safe pressure this year, but don't get Olympic who either from go yes.
So sequentially somebody either city. So overall, we are satisfied with the performance I'm at from a advertising into them from a performance for Q1. Thank you.
Yes.
Thank you we have our next question it sounds a line.
James Lee.
Yes. Please go ahead.
Great. Thanks for taking my questions on did you give us an update on the stay on the regulations for online pharmacy here.
And that help us understand a little bit how you're working with the government and hospitals to try to adoption here.
And also maybe you know doing your experience a coping 19, what gives you confidence that the user behavior that you're seeing real remain and how are you uniquely positioned to take advantage of this category. Thanks.
Well.
Yeah.
Well I didn't get order garden homebuilder.
You do became available in the part.
Hi, Sheila I would like to give you a brief introduction and allocating how development.
Does it need to know copano tissue on that I didn't hold the good news is that correct.
Because that's the I can academic outspread it gives us opportunity for foster growth of Robert Kt House.
He told me that something Oh, no mention of under them into a deal that just pretty similar to $2 a board so to your sort of real Cotwo Quinn.
The bottle Oh, we would be though.
Over to Colombia Fado Linda.
The war.
We don't usually don't don't know Nationalisation Sheila.
Yes.
And this is especially young team many young business and they do have contributed a lot I'm going to society to fight against the current a virus, we have been providing and two shoring up the supplies of all kinds of medical other materials and to provide free online Penn medicine, I kind of patients into the.
Turning to especially knowledge about the virus tetra. So they have really done a lot of great job a meal coming to you guys will flow although the accident.
Yeah, Okay bye.
You know.
Theodore cohort one more for them on I've been done that and since you guys have bottomed out.
Hi, my previous subordination fast food shelter.
Does that seem to work with and that's where the redemption and value of Columbia lots of the so further to book with all of which.
Well for how to suit.
And if that's like the normal business for providing management contracts.
We have also don't allow us to provide health services, we have experienced a explosive growth and online medical concentration and also we are the first telematics.
Platform to provide economizes the nucleic acid testing services, which is now that we needed for a lot of workers, who are waiting to looking for coming back to work from good color, it's always or one of our young children friction or go to put them ensenada them.
This will give a little bit on go whose you know so without losing the lingering it's over 12% or you know they're going to know.
We'll be Joel.
Thomas April 20 World.
And in terms of other customers for the young customers and the total medicine is not very easy thing to do to get used to and would you start Oh, probably situation. It's very helpful for us to Nolan and used to buy the senior people [noise].
50, 60 or so.
Well look at kind of what happens with on their says on evolving truthfully, we feel okay. Some good number three don't go because I want you know the for that.
And on the government policy size it seemed opening up the online payment of the medical insurance and this will quickly promotes the development telematics and then online health services.
And how you go to the history.
Hi, this is even though.
Robert assisting those hospitals into and pharmacy and all these other lasik I players there also actively embracing the internet.
George and vendor, there's optimism, whom the telling us with you on you know they pushes you know pool Russell and liquidity is a phone true to treat it wasn't the only real cool work in Congo Wendy.
And develop additional now from the city house is to leverage our ocwen capacities on supply chain bench for nine other health services with the other technologies to provide a whole life.
Research services.
Customer locally and only who you know what are the only saw that they know they all she's capsule collections.
And for the next but that will continue to strengthen our supply chain and a medicine, we got a neutral.
On how services okay. Thank you.
And if I could ask a follow up question, maybe to Sydney, a about the long term margin. So they don't want pharmacy business, how should we think about bad relative to your other categories. Thanks.
Sure Yeah. So if you look at no one we.
Look the into this space and if you look at.
Offline pharmacy.
Financials, what's interesting is that you know the sector has.
I'm Lucky, 40% gross margin, but with very high expense ratio of over 30% and here, we actually saw very similar pattern as our electronics home appliance business. The way I mentioned earlier that our expense ratio is 50% five zero per se.
And lower than the leading offline players and here for health care our expense ratio was also.
Secondly, lower I'm, I'm, probably 10% point advantage.
Since the offline pharmacies. So so this also give us.
The ability.
To provide the best value and that service.
Throughout consumers. So that is why our pharmacy business has been quietly growing tremendously over over the past few years and it leverages, our unless you didn't mention here lately.
We have the existing customer base, we have the consumer recognition.
No.
Katy as a trusted platform, which is quite essential health care services. So so that trust elements the fulfillment reliability the speed.
And our value proposition, meaning you know we can provide lowest price.
You know or that combined.
This is a great great company combination and because of our cost structure.
Isn't about technology, you know contract is lower so we can also.
Half a decent margin.
For this business. So this is where we are already and were seeing decision making tremendous growth.
You know with this fundamental.
Economics basically on the line our business model here.
Thanks, so much.
Sure.
Thank you.
We didn't know reaching the end of the conference call I will now turn the call over to JD Dot Coms relief for closing remarks.
[noise] said before that.
Yeah.
Right.
Uh huh.
Oh.
Wow.
Thank you for your question Jason during today's call change. This can teach the presentation you may now disconnect Goodbye.
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