The slowdown in China’s technology sector continues. This time the victim is PDD Holdings, which owns discount e-commerce Pinduoduo and Temu. 🛒
The company’s fourth-quarter revenue of 39.82 billion yuan billion was up 46% YoY but fell short of the 41.01 billion yuan expected by analysts. That’s also down from the 65% revenue growth it reported in the third quarter. However, it’s still above the single-digit revenue growth reported by Alibaba, JD.com, and other competitors during the same period. 📉
While this quarter included only the first couple weeks of China’s reopening, management reported China’s consumption market remains resilient. Given the uptick in inflation, sales of daily essentials showed steady growth. Meanwhile, demand for high-quality merchandise like mobile phones, beauty and cosmetics, and others showed a slight uptick.
With that said, the discount retailer is facing significant pricing competition. Competitors sitting on excess inventory are bringing goods to market at often unsustainably low prices. However, executives say they won’t play that game and instead are focused on longer-term growth opportunities. 📦
Like its peers, it’s looking overseas for its next growth phase. That’s where its Temu platform comes into play. Third-party reports indicate the platform’s gross merchandise value was $192 million in January, up from just $3 million in September. It plans to roll out Temu in Canada, Australia, New Zealand, and the U.K. in 2023.
Despite the progress, investors remained focused on the slowing growth story. Although its revenue growth remains well above some of its larger competitors, it is still slowing. And in this environment, the market continues rewarding companies that focus on profitability rather than revenue growth at any cost. 👎
$PDD shares were down about 14% on the day. 🔻