(Yicai Global) March 12 -- JD.Com’s net revenue surged 31 percent to CNY224.3 billion (USD34.5 billion) in the fourth quarter of last year, largely thanks to increased revenue from its logistics business, the e-commerce giant said in its earnings report released yesterday.

But operating income grew more moderately than expected, rising to CNY594.9 million from CNY510 million (USD78.6 million) a year earlier, due to reasons that included surging marketing costs for the Singles’ Day shopping carnival.

On the Nasdaq Stock Market, JD.Com’s shares [NASDAQ:JD] rose 6 percent in pre-market trading after the news yesterday, before closing up almost 0.8 percent at USD90.01 each. Its Hong Kong-listed shares [HKG:9618] fell 4.8 percent today to HKD343.40 (USD44.23).

The relatively weak gain in operating income was not a surprise for investors as JD.Com had said several times that it had entered a new period of investment and would increase the reinvestment of profits to prepare for its long-term growth. Based on JD.Com's share price, the market appeared ready to tolerate the somewhat disappointing results, partly because revenue growth remained strong.

In the period, JD.Com's net service revenues surged 53 percent to CNY32.1 billion, with revenue from marketing and advertising up by nearly 30 percent on the year to CNY17.5 billion, while revenue from logistics and other services reached CNY14.6 billion, an annual jump of 95 percent.

The better-than-expected logistics revenues, however, did not contribute much to the firm's operating profit. JD.Com blamed this on several factors.

First, it posted a ratio of expenses to sales of 4.6 percent over the period, slightly higher than a year earlier, as marketing expenses rose almost 27 percent to CNY10.4 billion from CNY8.2 billion. Second, it spent a lot on fulfillment expenses, include procurement, warehousing, delivery, customer service and payment processing expenses. Such expenses grew more than operating revenue in the fourth quarter, rising over 34 percent to CNY14.8 billion from CNY11 billion a year earlier.

Also, JD Logistics continued to expand its staff recruitment to strengthen the coverage in lower-tier cities and investment increased in the consumer-end package collection business, JD Retail's Chief Executive Xu Lei said on the earnings conference call.

On the other hand, expanding into lower-tier cities boosted the company’s active buyers by 30.3 percent over the last 12 months to 471.9 million as of Dec. 31, representing growth of 30 million from Nov. 31.

JD.Com said it will continue to target lower-tier cities in 2021, following its recent USD700 million investment in neighborhood group-buying firm Xingsheng Preference Electronic Business, also known as Xingsheng Youxuan. 

Editor: Tom Litting