Temu’s owner, PDD Holdings, has warned of an “inevitable” reduction in profitability as the group reports slow growth and rising competition.
In its results for the second quarter ending June 30, the Shanghai-based company reported ¥97bn (£10bn) in revenue, up 86% year on year. However, this missed analysts’ expectations.
Sales and marketing expenses totalled ¥26m (£2.7m), up 48% year on year, which the group said was mainly due to an “increased spending in promotion and advertising activities”.
It did report a 144% rise in quarterly net profit to ¥32bn (£3.4bn). However, co-chief executive Jiazhen Zhao said “the decline in our profitability is inevitable” in the long run while on a call to analysts.
This declaration and top-line growth missing expectations led shares to fall by 29% in New York, with the share price drop wiping $55bn (£42bn) off PDD’s market value.
The group also warned of growing global competition from the likes of Alibaba and Amazon.
In a statement following the results, PDD vice-president of finance Jun Liu said: “In the past quarter, our revenue growth rate slowed quarter on quarter. Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges.”
PDD chair and co-chief executive officer Lei Chen added: “While encouraged by the solid progress we made in the past few quarters, we see many challenges ahead.
“We are committed to transitioning toward high-quality development and fostering a sustainable ecosystem. We will invest heavily in the platform’s trust and safety, support high-quality merchants and relentlessly improve the merchant ecosystem.”
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