Temu owner PDD misses revenue and profit estimates as consumers struggle
Q3 revenue up 44% to 99.35 bln yuan vs forecast 102.65 bln
Q3 adjusted profit per ADS 18.59 yuan vs forecast 19.79
China stimulus measures have helped to lift consumer demand
Updates share reaction in paragraph 2; adds merchant support policies and Chinese stimulus impact in 9-12.
By Deborah Mary Sophia and Casey Hall
Nov 21 (Reuters) -Discount e-commerce player PDD Holdings PDD.O fell short of market estimates for third-quarter revenue and profit on Thursday, as its low prices did not persuade cost-conscious consumers to spend as much as expected on its platforms.
U.S.-listed shares of PDD, which runs the Pinduoduo online shopping site in China and Temu internationally,were down more than 10% in pre-market trading.
Higher unemployment among Chinese youth and a property sector crisis have taken a toll on consumer confidence, holding back sales at Pinduoduo.
Competitors in China, Alibaba 9988.HK and JD.com 9618.HK, also reported tepid sales growth for their September quarters.
While Pinduoduo has benefited from its low-cost focus, competitive pressure has been increasing with rivals ramping up promotions and discounts, sparkinga price war.
“Our topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges,” said Jun Liu, VP of Finance at PDD.
PDD's revenue jumped 44% to 99.35 billion yuan ($13.72 billion) for the three months ended Sept. 30. That compared with the 102.65 billion yuan average of 17 analyst estimates compiled by LSEG.
Net income rose to 24.98 billion yuan from 15.54 billion yuan in the same period a year earlier, but the firm reported an adjusted profit of 18.59 yuan per American Depository Share, missing estimates of 19.79 yuan.
On a call with analysts,executives said PDD had implemented a number of fee reduction and merchant support policies, whichhad been welcomed by merchants and suppliers.
In July, hundreds of Chinese sellers on Temu protested against what they called the company'shigh fees.
Co-CEO Zhao Jiazhen also told analysts that economic stimulus measuresannounced by Beijing in recent months hadworked to fuel consumer demand, bringing both opportunities and challenges to Pinduoduo.
"Our team was unable to fully leverage this macroeconomic shift due to the limitations of our operations as a third-party platform," Zhao said. "Consequently,to stay competitive we had to incur much higher costs than peers, which inevitably impacts our profitability now and into the future."
In August, aftera second-quarter earnings miss and downbeat commentary from executives about the firm's outlook, PDD shares saw their biggest one-day fall since its 2018 listing, wiping out nearly $55 billion in market capitalisation.
($1 = 7.2409 Chinese yuan renminbi)
Reporting by Deborah Sophia in Bengaluru and Casey Hall in Shanghai; Editing by Anil D'Silva and Mark Potter
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