Shares of JD.com (JD -2.33%) retreated on Monday after economic data out of China heightened investors' concerns that COVID-19 is taking a toll on the country's retail industry. By the close of trading, JD.com's stock price was down more than 4%.
China's retail sales grew by 8.5% year over year in July. Although that would be an impressive pace of expansion for most economies, it was below the 11.5% growth analysts had expected.
Even more worrisome for JD.com's shareholders was the news that China's online sales increased by only 4.4%. That's sharply below the roughly 21% annualized growth the country's e-commerce industry has enjoyed over the past half decade.
As China's largest online retailer, JD.com is well positioned to benefit from the growth of the country's enormous e-commerce market. However, if that growth is slowing, then it's a safe bet that JD.com's pace of expansion is also decelerating.
Analysts had previously believed that if COVID-19 outbreaks forced Chinese officials to reinstitute broadscale lockdowns, retail sales would flow to e-commerce companies that could continue to serve their customers. However, the sharp downturn in China's e-commerce growth rate suggests that might not be the case.
If Chinese consumers instead cut back on spending altogether, investors may need to reset their near-term growth expectations for JD.com.