Temu owner PDD Holdings has missed quarterly revenue and profit estimates, warning that fierce competition in China and growing global uncertainty will continue to put pressure on its business.
The ecommerce giant said that while Temu continued to deliver strong international growth, the low-cost model that has helped fuel its expansion is facing increasing scrutiny in key overseas markets.
Speaking on a post-earnings call, PDD co-CEO Chen Lei said shifting trade rules and regulatory requirements were creating new challenges for the business.
“Trade policies, taxation, data regulations, product compliance requirements and other regulatory frameworks are undergoing significant changes across different countries and regions, inevitably bringing greater challenges and uncertainty,” he said.
PDD Holdings vice president of finance Liu Jun added that the group would need to keep investing to keep pace with changing shopper expectations.
“To meet the evolving needs of consumers, we must continually explore and make investments,” he said.
For the fourth quarter, PDD reported revenue of 123.9bn yuan (£13.9bn), just below analyst expectations of 124.4bn yuan. Net income fell around 11 per cent year on year to 24.5bn yuan, while adjusted profit came in at 17.69 yuan per American Depositary Share, missing forecasts of 20.76 yuan.
The weaker-than-expected performance came as growth on Pinduoduo, PDD’s domestic marketplace, slowed amid softer consumer spending in China. Shoppers have been cutting back on discretionary purchases as the country’s economic recovery remains fragile and household confidence subdued.
Despite the miss, U.S.-listed shares in the company rose more than 7 per cent after Chinese regulators and state media signalled that an intense price war in the country could be nearing an end.
Temu’s rapid international rise has been built in part on shipping low-cost goods directly from China, including clothing, electronics and homewares. However, that model is increasingly under pressure as governments clamp down on tax and customs loopholes used by low-value parcels.
Retailers in markets ranging from Germany to Argentina have argued that Temu, Shein and Alibaba-owned AliExpress benefit from an unfair advantage through duty waivers on low-value imports.
Temu has also faced raids and investigations in countries including Ireland, Turkey and Nigeria in recent months, although the company has repeatedly said it complies with all relevant laws and regulations in the markets where it operates.
The regulatory outlook is becoming tougher still. The U.S. removed its duty-free exemption on parcels worth less than $800 last year, while the EU has agreed to end its duty-free allowance on parcels under €150 from July.
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