Key information
- PDD Holdings reported disappointing sales and profits for the quarter ending in September.
- The company's revenue fell short of analyst forecasts, marking the second consecutive quarter the company failed to meet expectations.
- PDD's international e-commerce platform, Temu, is facing difficulties overseas due to concerns over potential tariff changes and increasing pressure from various countries.
PDD Holdings, the parent company of Temu and Pinduoduo, reported disappointing sales and profits for the quarter that ended in September. The announcement caused PDD's U.S.-traded shares to fall nearly 11 percent on Thursday.
The results reflect a broader trend in China's e-commerce sector. Alibaba and JD.com, PDD's main competitors in the Chinese market, also reported weaker-than-expected results during the same period. Chinese consumer confidence has been dented by problems in the real estate sector and high youth unemployment rates.
Challenges for growth
PDD's revenue reached 99.35 billion yuan (12.92 billion euros) during the quarter, below analysts' forecasts of around 102.8 billion yuan. This is the second consecutive quarter in which PDD has failed to meet analysts' expectations after years of rapid growth.
The company attributed its slowing revenue growth to increased competition and ongoing external challenges. Pinduoduo, China's leading POS platform, has gained popularity with its focus on low-priced and heavily discounted products. However, many competitors have adopted similar strategies, resulting in a price war that impacts profitability.
International challenges
China's retail sector faces headwinds from the general economic slowdown and consumer confidence remains fragile, experts say. Despite these challenges, e-commerce growth in China is expected to continue, albeit at a more moderate pace.
PDD's international e-commerce platform, Temu, is also facing difficulties abroad. Concerns over possible tariff changes and increasing pressure from various countries over its low prices pose challenges for Temu's global expansion.
Government surveillance
Vietnam has demanded that Temu and Shein register with the government by the end of the month or face a ban. Indonesia recently ordered Google and Apple to remove Temu from their app stores to protect domestic retailers. The European Union is investigating whether Temu facilitated the sale of illegal products, which could result in significant fines for the company. Additionally, US President-elect Donald Trump has promised to increase tariffs on Chinese goods, which could erode Temu's competitive advantage by raising prices of its cheap products.
If you want access to all articles, subscribe here!
