PDD Holdings (PDD), owner of giant e-retailer Temu, released its unaudited second-quarter financial report for 2024, and the results did not meet analysts’ expectations.
According to the Q2 financial report for 2024, PDD Holdings’ total revenue was $13.35 billion, an increase of 86% compared to a year ago, though it showed slower growth than the 131% revenue increase reported for Q1.
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Analysts estimated an average revenue of $14.04 billion, nearly 5% more than Temu attained, which is reflected in Q2’s slow growth.
Net income attributed to ordinary shareholders increased by 144% compared to a year ago, also showing slower growth compared to this year’s Q1 results of 202% growth in the same category.
Although PDD Holdings maintained positive numbers overall, growth has slowed down compared to the previous quarters, underperforming analysts’ expectations in almost all aspects.
However, analysts predicted an earnings per share estimate of $2.73, and the company exceeded expectations with a reported $3.20.
After publishing their Q2 earnings and holding their earnings conference call, the company’s stock dropped to approximately 30%.
This dramatic drop was expected since the company has decreased nearly 22% in the last six months.
The company’s current price is 99.83, nearly 51% lower than analysts’ average price target predictions of 202.26.
In the conference call, PDD Holdings attributed this loss to increased competition between companies in similar markets and the constant change in consumer behavior regarding demand.
“In the past quarter, our revenue growth rate slowed quarter-on-quarter. Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” said Ms. Jun Liu, VP of Finance of PDD Holdings, in the Q2 earnings report.
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Temu’s strategic plummet
According to the company, consumers seem to be more thoughtful about their purchases, choosing experience over material items and looking for a balance between quality and value.
In response, Chairman and Co-Chief Executive Officer of PDD Holdings Lein Chen said that to address these issues, the company partnered with higher-quality brands and manufacturers to develop products that better align with their customers’ needs.
“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,” said Lei Chen.
The company’s claims were backed up by the total operating expenses reported. PDD Holdings’ total operating expenses increased by 48% in this year’s Q2, compared to 44% in Q1 for the same year.
PDD Holdings said the increase in operating expenses aims to improve its supply chain, specifically in terms of efficiency. It will do so by removing unlawful vectors, investing in building a more sustainable ecosystem, and improving technology to champion product quality and a transparent business environment.
NEW YORK, NEW YORK – Traders work on the floor of the New York Stock Exchange.
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Shein’s lawsuit against Temu
During the earnings call, the company failed to mention the recent ongoing lawsuit made by Shein against Temu.
Shein is one of Temu’s biggest rival companies. The two have a long and tumultuous relationship, with a history involving multiple lawsuits and harsh accusations against each other’s business practices.
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However, the company mentioned the increased competition multiple times and partially blamed the decline in Q2 revenue growth on that.
“Our operations has also become increasingly affected by non-business factors. And meanwhile, the competition we face is growing stronger. Competition is here to stay and is expected to intensify in our industry,” said Lei Chen.
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