PDD Holdings more than doubled revenue after deepening inroads into countries including South Africa to escape a volatile Chinese market.
The Chinese-owned retailer’s shares rose 6% after it reported better-than-projected sales of C¥86.8-billion (US$12-billion) in the March quarter, its second straight period of triple-digit growth. Net income more than tripled to about C¥28-billion.
PDD’s earnings may help buoy Hong Kong’s market rally as one of the key barometers of consumption in the post-Covid Chinese economy, which has been dogged by a property meltdown and persistent youth unemployment. But it’s contending with heightened expectations, after outpacing far larger rivals Alibaba Group and Tencent Holdings in topline growth over the past two years. On Wednesday, executives noted an improving domestic environment.
“This year is a year for consumption promotion. The consumer market in the first quarter has made a good start, online consumption remains strong,” said Jiazhen Zhao, the company’s executive director and co-CEO. “We are confident in the consumer market in China.”
Rivals including JD.com reported single-digit revenue growth in the March quarter, when China’s economic recovery remained uneven. In April, growth in consumer spending cooled unexpectedly to 2.3%, its slowest pace since 2022.
In PDD’s case, it’s been spending big on e-commerce business Temu, which quickly became one of the most downloaded US apps after a splashy debut in 2022. Executives have kept a lid on sales figures for the unit, even as its aggressive advertising positions it as a disruptive rival to fast-fashion giant Shein and Amazon.com.
Growing profile
Temu has expanded to more than 60 countries, but its growing profile has raised the risk of regulatory scrutiny in key markets like the US, which has barred ByteDance’s ownership of TikTok over data security concerns. European consumer groups filed a complaint last week with the European Commission that accused Temu of failing to protect consumers and employing manipulative practices on its platform.
PDD has relied on a cut-rate pricing strategy both at home, with its domestic online outlet Pinduoduo, and abroad.
In China, it gained ground in recent years against traditional retailers like Alibaba and JD.com, while seeking to use subsidies and incentives to fend off upstarts such as ByteDance’s Douyin and Kuaishou Technology. — Sarah Zheng, with Catherine Lim and Trini Tan, (c) 2024 Bloomberg LP
