Chinese e-commerce company Pinduoduo reported revenue of RMB 31.44 billion ($4.69 billion) in second quarter resultsa 36% growth over last year, and far exceeded the expected average of $4.1 billion, compiled by Yahoo Finance.
The Nasdaq-listed company also posted an impressive 268% growth in quarterly net profit, reporting RMB 8.9 billion.
Why is this important: The company attributed its strong performance to the “recovery in consumption” in recent months as China refrained from prolonged and widespread lockdowns. On the earnings call, Pinduoduo said the revenue growth came from the increase in online marketing and transaction services and the growth in profitability was due to a few “short-term” external factors. and “one-offs” that may not be repeated in the future. .
- Known for offering bargain prices, Pinduoduo managed to report better-than-expected earnings this quarter compared to its rivals, reflecting more cautious consumer sentiment in the current economic environment.
Details: Pinduoduo’s nearly three-fold increase in net profit in the second quarter is mainly due to improved gross margin and some short-term factors. “Thus, for the last quarter alone, our profitability was mainly attributable to several external factors, mainly short-term or one-time,” Vice Chairman Liu Jun said.
- Meanwhile, Pinduoduo’s total operating expenses as a percentage of revenue decreased to 47% this quarter from 57% in the same period last year. Liu Jun pointed out that many short-term factors, such as project delays and lower business activities, caused such a drop. “So it’s unlikely to continue,” he said.
- It was previously reported that Pinduoduo plans to launch a cross-border e-commerce platform in September, which will first target the United States. “Overseas business is one of the opportunities we see, we believe it is a direction worth trying for us,” said Lei Chen, Chairman and CEO of Pinduoduo, during of the earnings call, adding that the company won’t just repeat what others have done in this area.
- The company’s merchandise sales continued to contract, declining 97% from RMB 1.96 billion to RMB 50.7 million. The contraction of the goods activity, which forces the company to bear the bulk of the costs, improved its gross margin.
- Shares of Pinduoduo surged after the company posted strong results, rising nearly 15% at the close of the stock.
The context: Compared to China’s two major e-commerce giants, Pinduoduo has handled the resurgence of the pandemic relatively well. Alibaba and JD reported flat revenue and 5.4% year-on-year growth, respectively, in the second quarter, and both posted their lowest growth rates in history.
- Shanghai-based Pinduoduo was one of the few e-commerce companies that managed to continue offering its services during Shanghai’s Covid lockdown from March to June. Its community-based group buying service Kuaituantuan has played a vital role for Shanghai residents in solving lockdown-related food shortages.