Temu owner PDD misses sales estimates amid China slowdown

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Shares in PDD Holdings fell on Thursday after it missed revenue estimates and warned about “intensified competition”, as it became the latest Chinese tech giant to be hit by the country’s economic slowdown.

The owner of ecommerce apps Pinduoduo and Temu reported sales of Rmb99.4bn ($13.7bn) in the third quarter, a 44 per cent increase from the previous year, but below the Rmb102.8bn estimated by analysts.

Net income rose 61 per cent to Rmb25bn in the same period, but it reported an adjusted profit of Rmb18.6 per American depositary share, missing analysts’ estimates. Shares fell nearly 9 per cent in morning trading on Thursday.

PDD’s results come after rival platforms JD.com and Alibaba also reported underwhelming quarterly results last week, revealing the impact of China’s weak consumer spending on the country’s largest tech groups.

Chen Lei, chair and co-chief executive at PDD, said in a call with analysts on Thursday that “profits trended lower in the third quarter with intensified competition in the ecommerce sector”.

Soaring unemployment, especially among the young, coupled with a property crisis has knocked consumer confidence, forcing China’s ecommerce players to increase promotions and discounts to court cost-conscious shoppers.

On Thursday, Alibaba announced an overhaul to its ecommerce operation, merging its domestic and international businesses into one unit in a bid to bolster profitability and help its merchants break into new markets.

Meanwhile, PDD executives said it was “committed to high-quality development”, echoing Beijing’s current policy priority on bolstering the economy.

It comes after PDD faced a public relations crisis in July when the Temu office in Guangzhou was swarmed by hundreds of angry merchants, protesting against “unjust” fines levied by the company or withheld payments on goods that had already been sold.

PDD said it had “invested billions” to support merchants, including cutting transaction fees and bolstering aftersales support for sellers.

In 2022, PDD launched Temu, an overseas marketplace that has taken on Amazon in the US and Europe with its bargain prices, which it has achieved by pitching merchants against each other to drive down costs. Amazon has responded to Temu’s rise by launching its own discount platform, Amazon Haul, earlier this month.

Temu has bombarded online marketing channels, including Meta’s Facebook and Instagram and Google with adverts to grow its nascent platform, displacing Amazon as Google’s largest single advertising contributor, the Financial Times has reported.

The online marketplace’s model of shipping goods directly from Chinese warehouses to shoppers in the west has attracted scrutiny in the US and Europe, with politicians promising to crack down on a loophole that allows its packages to arrive duty-free in key markets.

Last month, Brussels said it was investigating Temu amid concerns that the ecommerce platform was failing to crack down on sales of illegal products.