Temu owner PDD misses revenue and profit estimates as consumers struggle

DISCOUNT e-commerce player PDD Holdings fell short of market estimates for third-quarter revenue and profit on Thursday (Nov 21), as its low prices did not persuade cost-conscious consumers to spend as much as expected on its platforms.

US-listed shares of PDD, which runs the Pinduoduo online shopping site in China and Temu internationally, were down more than 10 per cent in pre-market trading.

Higher unemployment among Chinese youth and a property sector crisis have taken a toll on consumer confidence, holding back sales at Pinduoduo.

Competitors in China, Alibaba and JD.com, also reported tepid sales growth for their September quarters.

While Pinduoduo has benefited from its low-cost focus, competitive pressure has been increasing with rivals ramping up promotions and discounts, sparking a price war.

“Our topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges,” said Jun Liu, VP of Finance at PDD.

PDD’s revenue jumped 44 per cent to 99.35 billion yuan (S$18.4 billion) for the three months ended Sep 30. That compared with the 102.65 billion yuan average of 17 analyst estimates compiled by LSEG.

Net income rose to 24.98 billion yuan from 15.54 billion yuan in the same period a year earlier, but the firm reported an adjusted profit of 18.59 yuan per American Depository Share, missing estimates of 19.79 yuan.

On a call with analysts, executives said PDD had implemented a number of fee reduction and merchant support policies, which had been welcomed by merchants and suppliers.

In July, hundreds of Chinese sellers on Temu protested against what they called the company’s high fees.

Co-CEO Zhao Jiazhen also told analysts that economic stimulus measures announced by Beijing in recent months had worked to fuel consumer demand, bringing both opportunities and challenges to Pinduoduo.

“Our team was unable to fully leverage this macroeconomic shift due to the limitations of our operations as a third-party platform,” Zhao said. “Consequently, to stay competitive we had to incur much higher costs than peers, which inevitably impacts our profitability now and into the future.”

In August, after a second-quarter earnings miss and downbeat commentary from executives about the firm’s outlook, PDD shares saw their biggest one-day fall since its 2018 listing, wiping out nearly US$55 billion in market capitalisation. REUTERS