[BEIJING] PDD Holdings’ revenue grew at a slower-than-expected pace of 24 per cent after intensifying domestic competition and US tariffs crimped its expansion.
The e-commerce company reported revenue of 110.6 billion yuan (S$20.4 billion) for the December quarter, it said on Thursday (Mar 20). Net income was up 18 per cent to 27.4 billion yuan. PDD’s American depositary receipts initially fell as much as 5.5 per cent after markets opened in New York but later recovered to little changed as the broader market rallied.
Executives acknowledged challenges from growing global uncertainties and said intense competitions also affected short-term growth. They reiterated their increasing support for merchants and efforts to boost consumer experience.
“As mentioned in previous quarters, our significant ecosystem investment coupled with fast-changing external environment and intensified competition landscape will impact short-term financials,” chairman and co-chief executive officer Chen Lei told analysts on a call on Thursday.
In contrast, rivals JD.com and Alibaba Group Holding reported better-than-projected sales for the December quarter, when Beijing ramped up policies such as subsidies and trade-in incentives to boost spending. Beijing has prioritised expanding domestic demand as the country seeks to offset the impact of US President Donald Trump’s tariffs and achieve a growth target of around 5 per cent.
PDD has warned about domestic competition since August and predicted that its profitability will trend downward over time. It is also facing increasing uncertainties abroad as its fast-expanding global e-commerce platform Temu encounters an economic and regulatory backlash around the world.
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Thursday’s report “lacks any major bright spot”, wrote JP Morgan analysts Andre Chang and Alex Yao in a note, which cited misses on both transaction service revenue and online marketing service revenue growth.
Temu, the world’s largest discount online retailer, is grappling with elevated US tariffs on Chinese products and the potential closure of a tax loophole for small-value parcels.
That last would remove a key advantage that Temu and Shein have used to expand in the US at the expense of Amazon.com. The Chinese retailers may also be forced eventually to subsidise merchants on their platforms, given the increased shipping expense. In response, PDD and Shein have begun diversifying their logistics chains, expanding networks in the US and moving to bigger bulk orders.
Temu had already been shipping more inventory in bulk to the US and paying tariffs to have it stored in warehouses near big cities to narrow delivery times. That shift should help blunt the effects of any de minimis change, but will still apply pressure on its discount model.
Last year, companies including Shein and Temu shipped some US$46 billion of small parcels to the US that had a declared value of less than US$800, according to estimates from Nomura Holdings. That represented about 11 per cent of all US-reported imports from China.
Elsewhere, the European Union late last year has launched an investigation into whether Temu is selling illegal products or has an “additive design of the service,” while Vietnam suspended the platform after it failed to meet a government re-registration deadline. BLOOMBERG
