Investors worry as PDD Holdings’ performance falls short

By LIU Weiqi

PDD Holdings, the parent company of bargain-hunter e-commerce platforms Pingduoduo and Temu, posted revenue of 39.8 billion yuan (US$5.8 billion) in Q4 last year, up 46 percent year on year but short of the 42-billion-yuan market expectation. Over the full year, the revenue of 130 billion yuan was up 39 percent compared with 2021.

PDD’s profit in Q4 was up 32 percent year on year to 9.1 billion yuan, but still less than the 10.4 billion yuan made in Q3.

Same old answers

Answering worried investors, CEO CHEN Lei said in a conference call that short-term profit is not the company’s priority.

“Before we spend any money, we always consider whether the decision will bring PDD high-quality long-term development or not,” he said.

PDD spent 17.7 billion yuan on advertising and marketing in Q4, a 56 percent rise from the same period a year ago.

LIU Jun, vice president of the company in charge of finance, said “we saw consumption was recovering, so we advertised more big sales.”

Apart from PDD’s own numbers, investors are concerned about the 10-billion-yuan discounts JD.com launched earlier in early March.

Competition is our friend

“Fiercer competition is only normal,” said Chen. “And as long as the competition does not turn hostile, it is good for both the business and consumers.”

When asked how to respond to JD.com, Chen repeated PDD’s plan to invest in agriculture, R&D and manufacturing. Two years ago, PDD shifted focus from marketing to R&D, spending more than 10 million yuan on R&D last year. More than half of PDD employees are computer engineers.

PDD launched Temu last year in the US, a carbon-copy of Pingduoduo with a few tweaks for the North American market. It quickly topped of charts in that Apple and Google stores. Since opening up, Temu has sent out more packages than SHEIN, the cheap clothing platform.

Bigger bargain basement

Temu will open its UK site on March 25 and cover the entire EU by the end of this year. But while expanding rapidly, the 90-percent-off deals worry investors. Unchecked losses seem set to accrue.

Swerving the issue of actually making any money for investors, Chen made some mumblings about the supply chain and long-term value, a sure sign of bigger losses to come.

Temu has been operating to enormous fanfare for six months. The app's download figures are regularly trotted out when any questions are asked. Liu said as it has only been six months since Temu was launched, it has had little or no impact on the PDD's financial status.