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Investing.com -- The credit profile of JD.com Inc., the China-based online retailer, is seeing a positive shift due to healthy retail sales growth and an increasing profit contribution from its majority-owned subsidiary, JD Logistics Inc. S&P Global Ratings revised its outlook on JD.com to positive from stable on April 14, 2025, while affirming its long-term issuer credit rating and its long-term issue rating on its senior unsecured notes at ’A-’.
This positive outlook reflects the expectation of steady EBITDA growth over the next 12-24 months, driven by JD.com’s strengthening sales of non-electronics and home appliance products and the increasing contribution from JD Logistics. The retail business has seen healthy growth from both its mainstay electronics and home appliances segment as well as general merchandise.
JD.com has been focusing on introducing more third-party offerings to increase its product variety and to lower the average price point of its products. This strategy appears to be working well. JD Logistics has been a significant EBITDA contributor to JD.com, accounting for about 25% of JD.com’s EBITDA in 2024, an increase from 19% in 2023. This contribution is expected to accelerate further.
JD Logistics has been attracting more external customers through its package express and freight offerings, while also benefiting from the parent’s retail growth. The logistics subsidiary is aiming to cross-sell its warehousing and inventory management services to package express and freight customers, which could increase customer loyalty. External customers contributed 88% of JD Logistics’ revenue growth over the past three years.
JD.com’s EBITDA increased by approximately 20% with EBITDA margin increasing by 0.6 percentage point to 5.4% in 2024. Margins have improved from about 3.5% or less prior to 2022, and this trend is expected to continue, driven by improvements in supply chain capabilities and continued operational efficiency improvement at JD Logistics.
JD.com is expected to see healthy growth in 2025, driven by three key factors. First, the growth in general merchandise categories, which grew by 9.2% in 2024, due to solid growth from supermarket and apparel products. This growth rate is faster than the 4.9% growth in electronics and home appliances. Second, the rising third-party marketplace revenue, which grew by 6.4% in 2024. JD.com’s strategy of keeping commissions low to attract more merchants on its platform for third parties appears to be successful. Third, government subsidies are expected to stimulate consumer spending, from which JD.com could benefit disproportionally.
JD.com plans to invest more to gain user traffic and enhance service quality. The company is investing in food delivery to create traffic for its platform, on-demand retail to support growth in the supermarket segment, and in logistics to enhance the timeliness of its retail deliveries. The company is investing in these areas to try and broaden its platform offering and strengthen customer loyalty.
Despite the increased investments, JD.com is expected to generate strong cash flow and maintain a sizable net cash balance. The group’s growing retail and logistics businesses should support strong free cash flow generation, at Chinese renminbi (RMB) 44 billion per year in 2025 and 2026, compared with about RMB48 billion in 2024. The drop is mainly due to higher capital expenditures for expansion.
JD.com’s net cash balance should remain sizable at more than RMB100 billion over the next three years. More importantly, the company has a track record of being flexible with the pace of its investments and it can slow down quickly if the market proves to be more challenging.
S&P Global Ratings may revise the outlook to stable if JD.com’s retail or logistics businesses weaken significantly, or if JD.com’s debt leverage increases close to 1.5x. This could be associated with the company adopting a more aggressive financial policy such as sizable debt-financed acquisitions or debt-financed shareholder returns. On the other hand, the ratings could be raised if JD.com demonstrates steady growth despite weakening consumer sentiment due to rising trade tensions.
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