PDD Holdings Announces Inevitable Profit Decline, Shares Plunge $55bn
PDD Holdings Issues Profit Warning
PDD Holdings, the owner of ecommerce apps Pinduoduo and Temu, has issued a grave warning regarding its declining profitability. In a recent investor call, executives cited inherent challenges in maintaining profits amidst rising competition and changing market conditions both in China and globally.
Impact of Increased Competition
- PDD shares fell 29%, wiping out $55 billion in market value.
- Alibaba's renewed push in the market exacerbates the competitive landscape.
- Internationally, competitors like Amazon are launching new discount programs, adding pressure.
Management's Response
- Executives announced a commitment of Rmb10bn ($1.4bn) to support high-quality merchants.
- Management acknowledged short-term profit fluctuations but stressed a focus on sustainable growth.
- Despite a quarterly net profit surge of 144%, revenue expectations fell short.
Shifts in Strategy
While co-CEO Zhao Jiazhen expressed concerns about profit declines being inevitable, co-CEO Chen Lei stated that paying dividends is not an immediate priority. The company prioritizes creating a sustainable platform ecosystem. Amidst these challenges, Huang's philanthropy has led to increased scrutiny of his position in China's economy.
This article was prepared using information from open sources in accordance with the principles of Ethical Policy. The editorial team is not responsible for absolute accuracy, as it relies on data from the sources referenced.