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DUN Miss The Boat ​

PDD’s $55 Billion Stock Crash Sends Warning on China Economy​

• PDD’s stock plunges 29% after a disappointing sales outlook
• Beijing has been struggling with slowing economic growth

By Bloomberg News
August 27, 2024 at 12:12 PM GMT+8
Updated on
August 27, 2024 at 7:49 PM GMT+8
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One of the last remaining bright spots for Chinese consumption is rapidly fading, as the nation’s economic malaise takes a toll on demand for even the most accessible of goods.

In the latest warning to global markets on the health of the Chinese economy, Temu-owner PDD Holdings Inc. on Monday surprised investors with an unusually gloomy outlook.

The e-commerce firm, which became a market darling with low-priced goods that helped propel business during China’s economic downturn, also reported revenue that missed estimates.

During a post-earnings briefing, CEO Chen Lei mentioned at least eight times that revenue and profits must “inevitably” decline as economic growth slows.

 

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China fast-fashion retailer Temu soared like a rocket for two years—in just a few hours, its parent company lost more than $50 billion in market value​

BYJason Del Rey
August 27, 2024 at 2:49 AM GMT+8

Growing competition and regulatory scrutiny is threatening to disrupt online retailer Temu’s rocket ride.
CFOTO/Future Publishing/Getty Images
The stock of PDD Holdings, parent company of the fast-growing Temu shopping app, sank more than 30% on Monday, losing more than $50 billion in market value, after the e-commerce giant posted disappointing revenue results and executives warned of rapid competition and nonbusiness challenges that may dampen growth and profits going forward.

The Nasdaq-listed company, which is technically headquartered in Ireland but employs most of its workers in China, runs the Chinese online shopping giant Pinduoduo as well as Temu, the discount shopping app that has taken the U.S. and other Western markets by storm since it launched in 2022. But Temu has also faced intense scrutiny by governments, including that of the U.S., over issues ranging from its use of import trade loopholes, to the quality and origins of the products its sellers hawk through its online stores. And those pressures seem to be affecting the company’s outlook.

 

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“Looking ahead, revenue growth will inevitably face pressure due to intensified competition and external challenges,” Jun Liu, PDD’s financial chief, said in a press release. “Profitability will also likely … be impacted as we continue to invest resolutely.”

Amazon officials in China recently told merchants there that the U.S. e-commerce giant would soon launch its own low-price storefront.

Temu also competes with other e-commerce giants with deep China ties, including fast-fashion titan Shein and TikTok’s rapidly growing Shop marketplace.

Though PDD Holdings does not break out Temu’s financial results, executives warned on a call with analysts of “significantly greater uncertainty” in the company’s global business unit, which houses Temu.