China’s PDD Holdings PDD.O missed market estimates for quarterly revenue on Monday as weaker consumer spending hit business at its domestic e-commerce platform Pinduoduo, sending the company’s shares down 15 percent in premarket trading.
A fragile economy, persistent weakness in the property sector and high unemployment rates have led Chinese consumers to cut spending, hurting the country’s retail and e-commerce sectors.
“While we are encouraged by the solid progress we have made in recent quarters, we see many challenges ahead,” said Chairman and Co-CEO Chen Lei.
“We will invest heavily in platform trust and security, support high-quality traders, and tirelessly improve the trading ecosystem. We are prepared to accept short-term sacrifices and a potential decline in profitability.”
While Pinduoduo’s low prices and deep discounts on everything from groceries to headphones have attracted cost-conscious shoppers, the company has come under pressure as its main rivals have offered shopping deals on their own platforms.
“Looking ahead, revenue growth will inevitably face pressure due to intensifying competition and external challenges… Profitability will also likely be impacted as we continue to invest resolutely,” said Jun Liu, vice president of finance at PDD.
Chinese e-commerce giant Alibaba 9988.HK missed market estimates on revenue earlier this month, hurt by weakness in domestic e-commerce sales, while JD.com 9618.HK’s quarterly revenue grew just 1.2 percent.
PDD reported revenue of 97.06 billion yuan ($13.64 billion) in the second quarter, compared with analysts’ average estimate of 100 billion yuan, according to LSEG data.
Operating expenses rose 48 percent in the three months ended June 30 as the company invested in marketing and advertising and stepped up promotions to attract shoppers.
General and administrative costs tripled in the quarter to 1.84 billion yuan, due to personnel-related expenses.
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