Sea Profit Tops Estimates as Online Shoppers Keep Spending
(Bloomberg) -- Sea Ltd. reported profit that topped analysts' estimates, a sign that the Southeast Asian e-commerce leader is holding up well against fierce rivals TikTok and Lazada.
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The company's American depositary receipts jumped as much as 8.4% in New York after Sea reported net income of $410.8 million for the first quarter through March, compared with a year-earlier loss. Analysts predicted $353.4 million on average. Sales climbed 30% to $4.84 billion, roughly in line with estimates.
The results suggest online retail arm Shopee is having success fending off ByteDance Ltd.'s TikTok and Alibaba Group Holding Ltd.'s Lazada across Southeast Asia. Newer contenders like Shein and PDD Holdings Inc.'s Temu are also targeting the region of more than 675 million people, where more shoppers are moving online. In a display of its strength, Shopee has been steadily raising the commissions it charges merchants in many core markets by about a third since the start of last year.
The hikes, which bring Shopee's fees far above its rivals, show that Sea is confident it can attract and retain merchants, helped by a broad user base and well-established delivery services. Shopee's first-quarter revenue rose 28% to $3.5 billion.
Meanwhile, Sea's aggressive cost-cutting drive, including thousands of job cuts, has helped the company pad its bottom line. Shopee's sales and marketing expenses as a percentage of its gross merchandise volume contracted, reflecting the cost reductions.
Besides the tough competition, Sea's challenges include US-imposed tariffs that could hit the fragile economies of the emerging markets where it operates, souring consumer sentiment. While the company has curtailed its international expansion, it's grown in markets such as Brazil to diversify its customer base.
Sea is also betting on new initiatives in areas from digital finance to logistics to convince investors of its long-term earnings potential. Its finance arm — now known as Monee — has overtaken its gaming arm in terms of revenue.
What Bloomberg Intelligence Says
Sea's high-margin advertising services and logistics strength should further improve earnings at its e-commerce segment. Its use of generative AI to improve product discovery should convert more platform visitors into buyers. That would raise the appeal of its ecosystem to merchants looking to place ads. Its well integrated, first-party logistics enable it to deliver orders in two days or less in its home market of Southeast Asia, an edge that could extend to Brazil. That would help Sea defend against TikTok's plan to expand e-commerce in Brazil.
-Nathan Naidu, analyst
Click here for research
(Updates with stock reaction in the second paragraph.)
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