Temu-owner PDD Holdings profit falls 47% as it faces challenges at home and abroad
U.S.-listed shares of the company fell more than 19 per cent in premarket trading.
'[PDD's] massive bottom line miss is due to much weaker than expected operating margin, likely impacted by U.S. tariffs,' said Mscience analyst Vinci Zhang.
Despite deep price cuts by retailers and government stimulus measures to boost spending, a prolonged property crisis in the world's second-largest economy has cast a shadow over consumer spending in China, even on PDD's Pinduoduo, which has out-performed peers with its low-price focus.
'Slower domestic consumption, intensified competition, and global trade frictions are weighing on growth,' said U.S. Tiger Securities analyst Bo Pei.
'Elevated costs reflect strategic promotional activities and advertising spend to support merchant sales, it's aimed at supporting the platform's long-term ecosystem health but sacrifices near-term profitability.'
The Decibel: How Canadian businesses are getting caught up in U.S. tariffs on China
Online marketplace Temu allowing Canadian businesses to sell through platform
China's largest online e-commerce platforms - Alibaba BABA-N, Pinduoduo and JD.com - have been scrambling for a greater share of the domestic market, sparking a long-running price war to entice consumers to open their wallets.
Alibaba's quarterly revenue also missed estimates, although JD.com notched a beat, buoyed by a government trade-in scheme focused on its strongest categories, including home appliances and electronics.
Meanwhile, a tit-for-tat tariff escalation between the U.S. and China, followed by a temporary 90-day de-escalation, has generated widespread uncertainty for global business Temu.
'Radical change in external policy environments such as tariffs has created significant pressure for our merchants,' PDD chairman and co-ceo Chen Lei told analysts in a post-earnings call.
The U.S. earlier this month slashed tariff rates for goods from China valued at under $800 entering the country under the 'de minimis' provision, a trade exemption leveraged by Temu to avoid tariffs and keep prices low.
'Our global business is working with merchants across regions to bring stable prices and abundant supply to strengthen our operations in the markets we serve,' Chen said, reiterating Temu's desire not to raise prices in the face of tariffs and its strategic shift to seeing more orders fulfilled by local merchants.
PDD reported revenue of 95.67 billion yuan (US$13.3-billion) for the quarter ended March 31, compared with analysts' average estimate of 102.51 billion yuan, according to data compiled by LSEG.
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