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Why JD.com Stock Fell Today

By Joe Tenebruso – Aug 16, 2021 at 4:42PM

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China's growth is slowing.

What happened

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%. 

So what

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. 

A person is holding a credit card while sitting in front of a computer.

Image source: Getty Images.

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. 

Now what

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.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends JD.com. The Motley Fool has a disclosure policy.

Stocks Mentioned

JD.com Stock Quote
JD.com
JD
$55.85 (-2.33%) $-1.33

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