PDD Holdings: Temu owner lists massive profit declines

PDD Holdings: Temu owner lists massive profit declines

The Chinese e-commerce company PDD Holdings recorded a decline in net profit by 47 % to 14.74 billion yuan ($ 2.05 billion) in the first quarter. This happened because the domestic platform suffered from strong local competition and the international business was affected by global trade uncertainty.

Current market development

The company's stocks listed on US exchanges fell by more than 17 %. The analyst Vinci Zhang from Mscience said: “The massive decline in the net result of PDD is due to a significantly weaker than expected company return that was probably influenced by the US tariffs.”

consumption expenditure and competitive pressure

Despite significant price reductions by retailers and state incentives to increase the expenditure, the consumer mood in China, the second largest economy in the world, remains burdened by a long -lasting real estate crisis. This has an impact on PDD’s Pinduoduo, which has exceeded the competition due to its low price concept. "Slow domestic consumption expenditure, increased competition and global trade conflicts put a strain on growth," says analyst Bo Pei from Us Tiger Securities.

strategic advertising expenditure

“High costs are the result of strategic doctoral and advertising spending to support the sales of dealers. This aims to promote the long-term health of the platform's ecosystem, but sacrifices short-term profitability,” added PEI.

struggle of e-commerce giants

China's largest online e-commerce platforms, including Alibaba, Pinduoduo and JD.com, strive for a larger proportion of the domestic market and have sparked a long-lasting price war to cause consumers to open their wallets. Alibaba's quarterly sales also missed the expectations, while JD.com exceeded the estimates, supported by a state funding program that focuses on its strongest categories such as household appliances and electronics.

global trade uncertainty

In the meantime, a mutual increase in tariffs between the United States and China, followed by a temporary, 90-day de-escalation, has produced far-reaching uncertainty for the global business of Temu. "Radical changes in the external political framework, such as tariffs, have exerted considerable pressure on our dealers," said Chen Lei, Chairman and Mit-CEO of PDD, in an analysis conference after the results were announced.

tariff reductions and market adjustments

The United States reduced the customs tariffs for goods from China, which have a value of less than $ 800, as part of the "de Minimis" clause. This trade exposure is used by Temu to avoid tariffs and keep prices low. "Our global business works with dealers in various regions to ensure stable prices and sufficient care to strengthen our activities in the markets that we serve," explained Chen and emphasized Temu's wish not to increase the prices in view of tariffs and to rely on local dealers strategically.

results and outlook

PDD reported a turnover of 95.67 billion yuan ($ 13.30 billion) for the quarter, which is compatible with the data compiled by LSEG compared to the average estimate of the analysts of 102.51 billion.