Temu-owner PDD Holdings fell short of quarterly revenue and profit estimates on Wednesday and warned that increasing competition at home, combined with global uncertainty, would continue to impact its business.
While Temu maintained strong overseas growth, its low-cost model of sending cheap goods — including apparel, electronics and homewares — directly from China faces mounting regulatory pressure in key markets.
“Trade policies, taxation, data regulations, product compliance requirements and other regulatory frameworks are undergoing significant changes across different countries and regions, inevitably bringing greater challenges and uncertainty,” PDD’s co-CEO Chen Lei told analysts in a post-earnings call.
“To meet the evolving needs of consumers, we must continually explore and make investments,” said PDD Holdings Vice President of Finance Liu Jun.
U.S.-listed shares of the company rose more than 7% after Chinese regulators and state media signalled an end to the price war.
“From our perspective, the quarter reinforces a view of PDD as a company undergoing a structural evolution rather than simply navigating a cyclical slowdown,” said Bo Pei, analyst at Tiger Securities.
If executed well, this could strengthen long-term monetization and global scalability. But it reduces near-term earnings visibility, as the payoff from these investments is uncertain and likely to take several years, Pei added.
PDD’s quarterly net income fell about 11% to 24.5 billion yuan compared with a year earlier, and its adjusted profit of 17.69 yuan per American Depositary Share missed estimates of 20.76 yuan as operating expenses also increased.
The company reported revenue of 123.9 billion yuan ($17.96 billion) for the fourth quarter, compared with analysts’ average estimate of 124.4 billion yuan, according to LSEG-compiled data.
RAIDS AND INVESTIGATIONS
The Chinese Pinduoduo platform saw growth cool as consumers reined in discretionary purchases amid broader economic uncertainty as China’s faltering recovery and fragile household confidence eroded spending even on discount-focused sites.
Temu’s model relies on duty waivers on low-value parcels in many jurisdictions, which has sparked a backlash from retailers from Germany to Argentina, who say firms such as Temu, Shein and Alibaba-owned AliExpress have an unfair price advantage.
Temu has been subject to raids and investigations in several countries, including Ireland, Turkey and Nigeria, in recent months. The company has repeatedly said it adhered to applicable laws and regulations in the markets where it operates.
The U.S. scrapped the duty-free exemption on parcels worth less than $800 last year and the EU has agreed to end its duty-free allowance on parcels under 150 euros ($176) from July this year.
($1 = 6.8988 Chinese yuan renminbi)
Reuters
