Hello, and thank you for standing by for JD.com's Second Quarter and Interim 2025 Earnings Conference Call. [Operator Instructions]. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Sean Zhang, Director of Investor Relations. Please go ahead.

Thank you, operator. Good day, everyone. Welcome to JD.com's Second Quarter and Interim 2025 Earnings Conference Call. With us today are CEO of JD.com, Ms. Sandy Xu; and our CFO, Ms. Ian Shan. Sandy will kick off the call with her opening remarks, and Ian will discuss the financial results. After that, we'll open the call to questions from analysts. Before turning the call over to Sandy, let me quickly cover the safe harbor. Please be reminded that during this call, our comments and responses to your questions reflect management's view as of today's only and will include forward-looking statements. Please refer to our latest safe harbor statement in the earnings press release on IR website, which applies to this call. We will discuss certain non-GAAP financial measures. Please also refer to the reconciliation of non-GAAP measures to the comparable GAAP measures in the earnings press release. Please also note, all figures mentioned today in this call are in RMB, unless otherwise stated. With that, let me turn the call over to our CEO, Sandy.

Thank you, Sean. Hello, everyone. Thank you for joining our second quarter 2025 earnings conference call. In the second quarter, we stayed focused on providing the best user experience, lowering costs and improving efficiency to drive healthy, sustainable growth. At the same time, we took some early exciting steps to further advance our long-term development. Looking at the overall performance we are pleased to report a solid top line growth of 22% year-on-year in the second quarter, with total revenues reaching RMB 357 billion in the quarter. This strong momentum was driven by encouraging acceleration across most of our business lines, including electronics and home appliances, general merchandise categories as well as service revenues. Our non-GAAP net income attributable to ordinary shareholders in the quarter was RMB 7.4 billion compared to RMB 14.5 billion in the same period last year as a result of the investment and rapid growth in our new businesses including our food delivery business. That said, our core business, JD Retail, continued to see healthy profitability improvement. JD Retail's non-GAAP operating profit increased by 38% year-on-year to RMB 13.9 billion in the second quarter, with an operating margin of 4.5% up from 3.9% in the same period last year. Overall, we are confident in our core retail business. While our new businesses, including JD Food Delivery, are progressing well as planned, aligning seamlessly with our strategic road map to drive long-term sustainable growth. Behind these results, I'm particularly encouraged by the high morale and collaborative spirit across all the business teams at JD. Their collective efforts forms a solid foundation that will continue to propel our upward momentum and the effective execution of our strategic goals. I want to highlight 3 key progress we achieved that underpinned our strong performance in the quarter and will sustain…

Thank you, Sandy, and hello, everyone. In Q2, we delivered strong top line growth and robust margin improvement in core retail business. Our total revenue growth for the second quarter was 22%, further accelerating from last quarter and significantly outpacing the growth of China's total retail sales. We saw double-digit growth across our major business lines, including electronics and home appliances, general merchandise and service revenues, all showing a solid momentum compared to previous quarters. Regarding profitability, our gross margin reached 15.9% in Q2, marking the 13th consecutive quarter of gross margin expansion on a year-on-year basis, primarily driven by our core retail business. Our non-GAAP net profit margin was down to 2.1%, mainly due to our investments in food delivery. Although near-term profitability is impacted by strategic investments, we remain confident that those efforts will position the company for sustained growth and long-term value creation. Now let's go through our financial results in Q2. Our top line growth maintained a strong momentum in the quarter. Total net revenues increased by 22% year-on-year to RMB 357 billion in Q2. Breaking down the mix. Product revenues were up 21%, with electronics and home appliances revenue up 23% year-on-year and general merchandise revenues increasing by 16% year-on-year in the second quarter, both showing further acceleration compared to previous quarters. For electronics and home appliances, with government's ongoing stimulus policy and the revitalization of domestic consumption, JD is well positioned to fulfill the demands of consumers and provide best-in-class user experience. As JD has cost competitive advantages in those categories, including strong user mindshare, robust product supply capabilities as well as superior execution capabilities to effectively support local government's trading programs. For general merchandise, major categories such as supermarkets, fashion, home goods and health, all achieved double-digit revenue growth in Q2. We continue…

Thank you, Ian. For the Q&A session, you're welcome to ask questions in Chinese or English and your -- and our management will answer your questions in the language you ask. We'll provide English translation for convenience purpose only. In the case of any discrepancy, please refer to the management statement in the original language. Operator, we can open the call for a Q&A session.

[Operator Instructions]. Your first question today comes from Ronald Keung with Goldman Sachs.

[Interpreted] First is on trade-in program that we've seen some temporary suspension of trade-in program during June 18 and given some uncertainty about the magnitude or kind of extension of the program next year and some increased competition with other platforms as well, I just want to hear what is our electronics and appliance strategy for the second half given the very strong first half growth and next year's strategy of growth and market share targets? And second is on food delivery. This is intense competition of 3 players or more. Always these contests -- there's a contest between kind of persistence, execution and differentiation. So how should we think about JD's long-term commitment on this and particularly competing with, number one, which has the larger scale; and number two, with very deep pockets. Being a third player at this point could mean some foreseeable loss for foreseeable period, so how do we assess the customer acquisition, cross-sell and the eventual path to improve unit economics?

[Foreign Language].

[Interpreted] Thank you for your question, Ronald. For your first question, during the implementation period of the trade-in program, JD has demonstrated a consistently solid performance and responsiveness. During this period -- during the trade-in program period, the program itself has made significant progress in boosting consumption and driving industry upgrade this year. The government has also reiterated that the trade-in subsidy will be continued and with central funding being distributed in batches. During this period, JD has consistently taken a proactive approach to the national policies actively supporting the trade-in program and contributing to the effective implementation. Our capabilities that enable to achieve this include, number one, our robust supply chain capability, which ensure a stable supplies of products along with reliable fulfillment and delivery services. Number two, our system and offline operational capabilities which enable us to quickly coordinate with the local government and facilitate the rapid implementation of the trade-in initiative across regions. Meanwhile, we have observed robust consumer demand on JD platform. In Q2, the revenue growth of our electronic home appliance categories surpassed 20% year-on-year.

[Foreign Language].

[Interpreted] Secondly, I want to highlight that the trade-in policy itself is an opportunity, not a competitive advantage of JD, but we have a clear strategy to strengthen our market share. We focus on product, price and service and leverage our supply chain capabilities, scale and omnichannel expertise. We have sustained market share expansion throughout Q2 and Q3 to date. First, in terms of product structure optimization, leveraging the national subsidy JD partners up with brands to accelerate product development, innovation to launch new products such as smart home appliances and customized products. These efforts have helped better satisfy users demand and quality replacement and advances industry upgrade. In terms of price advantage, we continue to expand our price advantage by leveraging our expertise in bulk purchasing, product customization and we always strive to reduce procurement cost and lower the price for our users. In terms of service capability enhancement we continue to advance our integrated delivery and installation services, offering the industry's best trade-in experience.

[Foreign Language].

[Interpreted] So lastly, in the long-term, JD will leverage its supply chain advantages in electronics and home appliances to actively drive industry upgrade and strengthen our user mindshare. We are confident in sustaining growth up that is outpacing the industry, thereby solidifying and expanding our market share.

[Foreign Language]

[Interpreted] On your second question regarding food delivery, which is a heated topic that attracts a lot of attention lately, and we have shared recently some of our thoughts. Here, I just want to highlight -- share some of the highlights. So again, food delivery and on-demand retail is a key long-term strategic direction for JD with our commitment to improve on user experience, cost and efficiency. We continue to establish and enhance the operational and system capability related to the on-demand retail business and optimize user experience. As I shared before, we have identified unmet needs across the industry among merchants, riders and users, and we are effectively addressing these needs through our quality food delivery model.

[Foreign Language].

[Interpreted] Looking at some of the specific progress we made in Q2 on the rider side, at the end of Q2, the number of full-time food delivery riders on JD have exceeded 150,000. JD full-time employment system ensures that rider can work with dignity and security, which in turn also enhances our delivery experience. Both our order punctuality and service quality are steadily improving. On the supply side, we focus on quality food delivery, which is an important differentiation of JD Food Delivery. We onboarded over 1.5 million high-quality restaurant in the second quarter. Moreover, the proportion of orders from meals continue to rise. And we are helping quality restaurant achieve higher sales. We are also constantly innovating at a source of supply chain, launching a new innovative business model called 7Fresh Kitchen model to help consumers enjoy quality and affordable meals. In terms of system capabilities, our food delivery R&D and operation teams are rapidly iterating to enhance system functionality, including order dispatching efficiency, algorithm improvement, subsidy efficiency and the advertising system to improve -- to provide a better experience for user, merchants and riders.

[Foreign Language]

[Interpreted] Okay. In terms of synergy, I want to emphasize that JD Food Delivery is deeply integrated into JD overall ecosystem. After more than a quarter of operation, JD Food Delivery start to generate synergies value -- synergistic value with our core business. This is within our initial expectation. First, JD Food Delivery is driving notable traffic and user growth in Q2. DAU of JD App and QAC as well as user engagement all have improved significantly with -- as well as shopping frequency. The conversion rate of food delivery user purchasing B2C e-commerce product is steadily increasing. These include new food delivery user cross-buying e-commerce products and the improvement in shopping frequency among existing users. So we have observed strong cross-selling that is taking place. We aim to enhance the synergy as we develop several capacity in Q2, which will be launched in the third quarter. Furthermore, there is also synergy potential between food delivery and the retail business in terms of marketing spending. Our team will evaluate the ROI across different marketing channels and boost overall marketing efficiencies.

[Foreign Language]

[Interpreted] Regarding the long-term unit economic improvement, we have noticed the competition start to intensify since July. But we are focusing -- we're currently focusing on improving the platform system and enhancing experience of users, merchants and riders. The UE of food delivery -- of JD Food Delivery is gradually improving. Moving forward, we don't believe the low-quality competition create any value to the industry. So we're focusing on more refined subsidy strategy tailored to different regions and user group and -- to improve the fulfillment efficiency fueled by economic scale, enhanced system capability collectively to improve the profitability of our food delivery business. In the long-term, we don't -- we view this business as a long-term business initiative on JD. This is a 5-, 10-, even 20-year initiative. This is not a 1-month -- 1 quarter or 2 quarter kind of business model. So the food delivery business will gradually leverage economic of scale to boost efficiency, and we will continue to unlock the huge synergistic potential between food delivery and core retail business to support the company's long-term healthy growth. Thank you, Roland.

Your next question comes from Kenneth Fong with UBS.

[Foreign Language] [Interpreted] My first question is about the investment in new business. Management mentioned that we have a series of new business initiatives to invest in. Can management share about the direction and strategy for this new business investment? From a financial perspective, how would this affect the revenue growth and our profit targets? And how should we think about the impact, if any, to the shareholder return policy, including dividends and then share repurchase? And my second question is about the strong growth behind the general merchandise categories. We noticed that these categories have shown a few consecutive quarters of very robust growth. Can management share the drivers behind? And is the sustainability going forward?

[Foreign Language]

[Interpreted] Thank you for your question. Kenny, let me first address your question regarding the JD strategy of -- for New Business initiatives. So within JD, we look at New Business in terms of innovation of business model, adoption of new technology. So as you have observed, JD continues to explore and innovate in new directions with synergistic potential with our current core business. So in terms of new business model, I can name JD Food Delivery, JD International and -- International business and Jingxi business are the innovation of business model. At the same time, we are boosting innovation by new technology and increasing -- in various business scenarios such as, for example, the adoption of AI across various business scenarios. The example is unmanned logistic equipment and warehouse automation. We believe we are in a great area of technology called development. So JD must fully embrace innovation. We have numerous internal innovation projects, and we are encouraging every team of JD to embody a spirit of innovation. JD's internal innovation are also centered around supply chain, leveraging our unique supply chain advantage and capability to enhance user experience is always our core focus. This exploration are a natural extension of JD's core business. Both domestically and internationally, we are committed to deepen our presence in the retail market by continuously enhance our existing business capability while exploring on-demand retail and expanding into low-tier markets. At the same time, as China's largest retailer, international expansion has always been a key strategy for JD, and we aim to build a more efficient global retail network to provide an exceptional shopping experience for consumers worldwide and become a leading global retailer. This is a long-term goal. We believe that this new business exploration and investment will further strengthen JD supply chain advantage and enhance user experience, driving continued growth in our user base and user engagement. This give us the confidence in achieving a sustainable positive cycle of scale, growth, efficiency improvement and profit increase, steadily progressing towards our long-term profitability goals. JD track record has repeatedly demonstrated that our commitment to invest in efficiency -- to investment efficiencies, and this will remain unchanged. We always adopt a small step, quick progress kind of approach to explore and drive development of innovative business.

[Foreign Language]

[Interpreted] While we actively explore new business opportunities, we will continue to create value and return to our shareholders. First, in the first half of this year, our total share repurchase valued at about USD 1.5 billion and our current USD 5 billion share repurchase program, the remaining amount was USD 3.5 billion as of the date of this announcement. Secondly, we have paid out cash dividends to our shareholders for 4 consecutive years. This April, we completed the payment of about USD 1.44 billion annual cash dividend for the year of 2024, and we will continue to do so going forward. We will return to our shareholders through growth, dividends and share buybacks going forward. Lastly, we will also strengthen our execution on core businesses and proactively take on new growth opportunities. We aim to build a business model for the long-term driving steady, sustainable growth in revenues and profits along the way and sharing our business success with our shareholders.

[Foreign Language]

[Interpreted] Regarding your second question about our general merchandise category, as you have noted, in Q2, the general merchandise revenue growth has recorded 4 consecutive quarter of steady acceleration. The major category, supermarket category, which is the largest contributor to the GM revenue, has maintained a double-digit growth for 6 consecutive quarters. This is primarily due to our team's continuous effort to enhance operational capability over the past 2 years. We believe this will continue to drive the steady growth of our supermarket business.

[Foreign Language]

[Interpreted] So moving forward JD supermarket will continue to enhance in the following areas: The first one is the 1P model, which represents our unique business model and distinctive capability. We can further reduce procurement costs, improve supply chain efficiency and offer better product at a lower price to our user. Second, we aim to improve user conversion. We have observed initial cross-sell by food delivery user in supermarket category. To embrace the massive traffic generated by food delivery, JD supermarket team will implement refined operational strategy, including optimized product recommendation and marketing campaign to better meet these user needs. I also want to share some view in term -- to address the on-demand retail opportunity. We maintain strong confidence in JD supermarket operational strength, and we will also aim to seize the opportunity of on-demand retail. We recognize on-demand retail serve as a complementary channel addressing specific urgent needs. It currently has limitation in product variety and cost effectiveness compared to the traditional B2C e-commerce. In the broader retail market, instant retail remains a relatively small segment. JD supermarket will strategically expand into on-demand retail to fulfill diverse consumption use case, particularly for the time-sensitive categories, but we'll always focus on building the core e-commerce operational capabilities. We remain confident in the sustained robust growth of our general merchandise category. This year, the growth of this category has been achieved without the impact of trade-in subsidy and is primarily driven by the enhanced capability of our team, positioning this category as a key growth driver for our business going forward.

Your next question comes from Joyce Ju with Bank of America.

[Foreign Language] [Interpreted] I will translate my questions. My first question is on user and traffic trends. Company saw substantial user and traffic growth in the second quarter. Could management share more colors on user profiles, behaviors and retentions and also user growth strategies and targets down to the road? My second question is on bottom line outlook. How does management budget investment for growth opportunities? And how should we expect margin and profit for the next couple of years and even like in the company's probability trend over the longer term?

[Foreign Language]

[Interpreted] For your first question, in Q2, we saw strong user growth with quarterly active customers and user shopping frequency, both up over 40% year-on-year. This marks the most robust user momentum we have seen in recent years. On one hand, our core retail business has seen improvement in user acquisition and retention, primarily driven by our low price strategy and the platform [ system ] development over the past 2 years. These efforts have enriched our product supplies and enhance the user experience. Moreover, improvements in user conversion efficiency, coupled with our efforts to create more engaging content and other operational refinements have further supported user attraction and retention on our platform. On the other hand, JD Food Delivery has achieved a rapid growth within less than 6 months of its launch, providing new growth momentum for user traffic, active users and user shopping frequency on JD's platform. Food delivery business has brought in an increasing number of young users and significantly boosted JD Plus member's shopping frequency by over 50% year-on-year in Q2. We will continue to accelerate cross-selling from food delivery to on-demand retail and B2C e-commerce, including efforts to enhance engagement with existing users and convert new users to our e-commerce offerings, thereby driving rapid growth in JD's overall user base and user shopping frequency.

[Foreign Language]

[Interpreted] Looking at the long-term, JD's goal is to serve the 1 billion e-commerce users in China, as we continue to focus on enhancing user experience, lowering costs and driving greater efficiency. We see great potential for improvement in areas such as user scale, diversified service scenarios, a wider range of products and service offerings and our ability to offer higher-quality services to our users. We have been making strategic investments in these areas to deliver long-term sustainable growth in our user base and user value.

[Foreign Language]

[Interpreted] For your question about profitability, JD's profit margin may fluctuate with industry dynamics and our investment pace in the short-term. However, our long-term goal to achieve high single-digit profit margin remains unchanged, especially the profit margin of our core retail business has been on a very healthy trend.

[Foreign Language]

[Interpreted] The drivers of our core retail profit expansion include: First, increased supply chain efficiency, which has been reducing costs and improving efficiency for both upstream and downstream players along the supply chain and at the same time, driving improvements in our own profits including higher gross margin of product sales as well as logistics cost reductions and efficiency gains. Second, better profitability across categories. For example, our supermarket category still has a lot of room to improve its margin performance and our well-established categories, such as electronics and home appliances also have a potential for margin improvement. Third, development of our 3P ecosystem. As the proportion of our 3P business goes up over time, marketplace and marketing revenue will also have rapid growth, which will benefit our margin performance.

[Foreign Language]

[Interpreted] Regarding our thoughts on new business investment, we aim to unlock greater growth potential with the new opportunities. We are confident this will drive long-term growth in users, GMV and profits. The early stage investment will impact JD Group's margin in the short-term. But in the long-term, the New Businesses will gradually evolve into new growth drivers creating greater synergies with our core business and ultimately enhancing our profitability. In the process, we will also focus on our strategies, invest with discipline and focus on ROI. We will maintain flexibility to balance our efforts and inputs based on actual results.

Thank you, Joyce. Let's take the last question, please.

Your last question comes from Thomas Chong with Jefferies.

[Foreign Language] [Interpreted] My question is about our overseas expansion. Can management share about -- thoughts about the next few years' strategies as well as the recent deal with CECONOMY, what's the logic behind?

[Foreign Language]

[Interpreted] Thank you, Thomas, for your question. Yes, I have -- as I have mentioned, as the largest retailer in China, international expansion has always been a key strategy for JD. But our international expansion strategy differ notably from other cross-border e- commerce model. Our international business focus on supply chain capability. So on one hand, we aim to seize the opportunity of a Chinese premium brand going global, helping them efficiently expand into international markets while providing overseas consumers with cost- effective products. On the other hand, JD is also committed to localization, meaning developing local retail and e-commerce business, establishing local teams and workforce, conduct local procurement and local fulfillment, so to build a long-term mutual beneficial relationship with participants in local market. Moreover, JD will emphasize on selling branded high-quality product. JD has been operating in Europe for 3 years, steadily building our retail e-commerce Property and Logistic warehouse infrastructure, while accumulating extensive experience. So since 2022, we have been piloting innovative retail model in Europe, and we plan to officially launch our retail e-commerce platform called Joybuy later this year, and we will share more updates later on. Regarding the proposed acquisition of CECONOMY, we believe the European market as well as CECONOMY's brand strength, supply chain capabilities and market position in European market holds significant value for JD and both party can achieve synergetic results. And JD can -- on the other hand, JD can provide online operation expertise and technology know-how. So the transaction is subject to regulatory approval currently, and we will provide a further update as appropriate. Thank you. So that's the last question.

We are now approaching the end of the conference call. I will now turn the call over to Sean Zhang for closing remarks.

Thank you. Thank you all for joining the call today. If you have further questions, please contact me and IR team. We appreciate your interest in JD.com and look forward to talking with you again next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]