Chinese e-commerce platform Pinduoudo posted on Wednesday weaker-than-expected revenue for the fourth quarter of 2019, sending the company’s shares 7.0% lower on Wednesday.

Why it matters: This is the second consecutive quarter that the Chinese e-commerce upstart has fallen short of expectations, and fallout from the Covid-19 outbreak is expected to further weigh on first quarter results.

“The disruption caused by the outbreak will have negative impact on our results for the first quarter of 2020, but our expectations for the long run remain unchanged and even more positive.”

Pinduoduo founder and CEO Colin Huang during the Q4 earnings call

Details: The company’s total revenues nearly doubled to RMB 10.79 billion ($1 billion) in Q4 last year from RMB 5.65 billion the same quarter a year earlier. However, it fell short of average consensus estimates of RMB 10.93 billion compiled by Yahoo Finance.

  • The company’s annual gross merchandise volume for the first time exceeded the one trillion RMB mark in 2019, an annual increase of 113%.
  • Total cost of revenues for 2019 more than doubled from a year ago to RMB 6.34 billion, which the company attributed to higher costs for cloud services, call center, and merchant support services.
  • Net loss narrowed 38% to RMB 1.75 billion in Q4 compared with RMB 2.42 billion in the same quarter of 2018.
  • Buyer growth is still robust. Monthly active users (MAU) jumped 76.6% year on year to 481.5 million in Q4, though it falls well short of Alibaba’s 824 million total MAU as of the end of the quarter. 
  • The company attributed growth to a better understanding of user needs based on its interactive business model, which constantly adapts to user preferences.
  • The platform’s merchant operation and logistics have resumed and are gradually returning to normal.
  • CEO Colin Huang was upbeat about the company’s prospects, citing broader adoption of digital services by consumers during the outbreak, which bodes well for the future of e-commerce in China. 

Context: Pinduoduo added a new social shopping feature in February to combat counterfeit protective products such as face masks during the coronavirus outbreak.

  • Along with local peers, Pinduoduo rolled out support plans to help merchants get through the economically challenging time.

Emma Lee is Shanghai-based tech writer, covering startups and tech happenings in China and Asia in general. We are looking for stories related to tech and China. Reach her at lixin@technode.com.

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