CHINA’S PDD Holdings missed market estimates for quarterly revenue on Monday (Aug 26), as reduced consumer spending dented business at its domestic e-commerce platform Pinduoduo, sending the company’s shares down 15 per cent in pre-market trading.
A fragile economy, persistent weakness in the property sector and high unemployment rates, have led Chinese consumers to cut back, damaging the country’s retail and e-commerce sectors.
“While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead,” chairman and Co-Chief executive officer Chen Lei, said.
“We will invest heavily in the platform’s trust and safety, support high-quality merchants, and relentlessly improve the merchant ecosystem. We are prepared to accept short-term sacrifices and potential decline in profitability.”
While Pinduoduo’s low prices and steep discounts on anything from groceries to earphones have attracted cost-conscious shoppers, the company has been under pressure as major rivals have offered shopping deals on their own platforms.
“Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges… Profitability will also likely be impacted as we continue to invest resolutely,” said Jun Liu, vice-president of finance at PDD.
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Chinese e-commerce giant Alibaba missed market estimates for revenue earlier this month, pinched by weakness in domestic e-commerce sales, while JD.com’s quarterly revenue grew only 1.2 per cent.
PDD reported revenue of 97.06 billion yuan (S$17.8 billion) in the second quarter, compared with analysts’ average estimate of 100 billion yuan, according to LSEG data.
Operating expenses rose by 48 per cent in the three months ended June 30, as the company invested in marketing and advertising and increased promotions to attract shoppers.
General and administrative costs more than tripled in the quarter to 1.84 billion yuan, because of staff-related expenses. REUTERS
