Meituan Dianping reported smaller than expected losses in the first quarter as a result of the Covid-19 outbreak, sending its share prices up more than 8% in Tuesday trading.
Why it matters: Earnings season offers a closer look at how Chinese tech majors and potentially the country’s wider economy are weathering the aftermath of the pandemic.
- Earnings from the first quarter, the period worst hit by the outbreak, are likely an important gauge to evaluate the scale and degree of the pandemic’s impact on various industries.
- Different sectors have seen varying degrees of exposure. Meituan was more widely exposed due to the heavily offline nature of most of its businesses, while gaming giant Tencent saw a boost in gaming revenue as people turned to online entertainment while stuck at home.
Details: The company’s total Q1 revenues declined 12.6% year on year to RMB 16.8 billion ($2.4 billion) from RMB 19.2 billion in the same period of 2019, according to the company’s earnings report released on Monday.
- Meituan’s revenue beat the average analyst estimate of RMB 16.11 billion in revenue according to Refinitiv IBES data cited by Reuters.
- Q1 losses totaled RMB 1.58 billion, compared with an RMB 1.43 billion loss for the same year-ago period. Prior to Q1, the company had recorded profits for the past three consecutive quarters.
- The food delivery industry was recovering rapidly, company founder Xing Wang said during the earnings call held Monday night, with daily order volume returning to around 75% of the pre-pandemic level by the end of the quarter. Meituan’s core food delivery revenue decreased 11.4% year on year to RMB 9.5 billion in Q1.
- Revenue from the company’s in-store, hotel, and travel segment plummeted 31.1% year on year as consumers limited dining, travel, and other consumption.
- Short-term profitability “is never our priority,” Wang said during the call, adding that the company will allocate resources toward helping merchants resume business, improve their efficiencies, and digitize their operations.
- Meituan said that effects from Covid-19 would continue to weigh on the company’s performance for the rest of 2020. “Factors including the ongoing pandemic precautions, consumers’ insufficient confidence in offline consumption activities and the risk of merchants’ closure would continue to have a potential impact on our business performance,” the company said in a separate statement on Monday.
Context: Meituan faces a renewed challenge from Alibaba in the local lifestyle services segment from Alipay, which has redoubled efforts to attract users.
- During the coronavirus outbreak, Meituan faced mounting complaints from merchants which accused the platform of implementing excessive commission fees and exclusive partnership clauses.