Pinduoduo shares drop 15% as sales growth disappoints – archyde

Pinduoduo’s shares fell 15 percent in early trading as the fast-growing Chinese e-commerce group reported disappointing sales growth in the third quarter.

The Shanghai-based company said sales rose 51 percent to Rmb 21.5 billion ($ 3.3 billion) for the quarter ended September 30, but total sales were below those reported in the first and second quarters Level.

Pinduoduos “Top-Line Growth Missed” [expectations] by a significant margin, ”said Bernstein’s Robin Zhu, noting that the company had also spent a lot less than before to attract users.

In addition, Pinduoduo’s annual number of buyers rose only 19 percent year-over-year to 867 million, the slowest user growth since it was listed in 2018.

“Given our current size, our user growth will inevitably be more moderate going forward,” warned Tony Ma, vice president of finance.

Pinduoduo’s slowing growth comes after the ecommerce leader Alibaba warned earlier this month a slowdown in Chinese consumer spending as ongoing regulatory tightening forces changes at the country’s largest tech companies.

Before the fall on Friday, New York-listed shares of Pinduoduo were already 62 percent below their February high. Chief Executive Chen Lei and two other executives moved to sell some companies participated in what appeared to be the first sales on September 27th. Pinduoduo did not previously respond to questions about the sales.

Chen said Pinduoduo was shifting “from the previous focus on sales and marketing in our first five years,” where the company gave billions in subsidies to attract users, to a new phase that focused on research and development.

Chen added that within a year, Pinduoduo would be promoting a new generation of young executives to critical positions in the company. It comes after founder Colin Zheng Huang left his formal Management positions this spring.

Pinduoduo reported its second quarterly profit since listing, but Chen said the company is putting the Rmb 1.6 billion profit into its nonprofit farming initiative announced in August when Chinese corporations rushed to meet Chinese President Xi Jinping’s demands for “shared prosperity.”

“Looking ahead, we plan to do more for society,” added Chen.

The e-commerce group has poured resources into growing its agricultural goods business and is competing with other tech companies to supply fruits and vegetables to Chinese consumers.

But these efforts have worried Chinese authorities, who fear tech companies will crowd out jobs. Pinduoduo and other tech companies were fined by the market regulator earlier this year for their use of subsidies.

Earlier this month, the market regulator said the tech companies’ food initiatives are destroying the development of the existing supply chain, disrupting normal prices and putting pressure on small traders to employ, “undermining social stability.”

The regulator promised to further strengthen the regulation of technology platforms.

Bernstein’s Zhu said that while the regulatory overhang has become more compliant in recent months, “the regulatory overhang is not going away completely”.

Chen said the company has always “fully embraced and supported” each other. [government’s] Regulatory Measures “.

Meanwhile, food delivery giant Meituan reported that its quarterly net loss widened to Rmb 10.1 billion in the third quarter as the company continued to invest heavily in its own food and retail efforts.

The loss included a Rmb 3.4 billion fine from the Chinese antitrust authorities last month for abuse of its market position.

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