Meituan’s quarterly sales beat estimates as China’s appetite for meal take outs remained intact throughout Covid-19 lockdowns
- Sales rose to 50.9 billion yuan (US$7.4 billion) during the three months ended June, versus an average projection for 48.6 billion yuan
- It logged a net loss of 1.12 billion yuan, the seventh consecutive quarter in the red, but better than estimated as cost cuts kicked in
Chinese food delivery titan Meituan reported a better-than-expected 16 per cent increase in quarterly revenue, after appetite for meal takeaway remained largely intact despite an economic downturn and Covid-related disruptions.
Sales rose to 50.9 billion yuan (US$7.4 billion) during the three months ended June, versus an average projection for 48.6 billion yuan. It logged a net loss of 1.12 billion yuan, the seventh consecutive quarter in the red, but better than estimated as cost cuts kicked in.
Meituan could have lifted second-quarter food delivery operating margin from a year earlier even as the growth rate of transactions narrows to a historical low of less than 3 per cent vs. gains of 16-17 per cent in the prior six months.
The company probably cut spending on promotions and user incentives, which make up more than 55 per cent of total selling plus marketing expenses, during Covid-19 flare-ups and lockdowns in mainland China.
Such savings would have offset the impact of merchant fee cuts and Covid-related cost hikes on the segment’s second-quarter margin vs. the prior year. An uptick in food-delivery transactions may spur stronger margin gains through 2H if Meituan maintains a lean cost structure.
Tencent later called that “inaccurate,” but it nevertheless served as a reminder of the uncertainties plaguing Chinese internet giants as Beijing resets its approach toward the once freewheeling tech industry.
Meituan also faces a deepening downturn in the world’s second-largest economy that is hammering consumer sentiment and investor confidence. The Beijing-based company recently hired Kuaishou Technology’s former international business chief, Tony Qiu, fuelling speculation about ambitions to branch out to overseas markets.
Meituan also folded its food delivery, hotels and other commerce businesses into a new division it dubbed “core local commerce,” which grew 9.2 per cent in the quarter. It kept newer initiatives such as its ride-hailing services separate.