Chinese food-delivery giant Meituan warns on uncertain impact from pandemic in 2020
- Although there has been a recovery in late March, active merchants at Meituan’s in-store service category remain at a very low level
Meituan Dianping warned of negative growth in the first quarter of 2020 because of uncertainty generated by the coronavirus pandemic, after China’s online services delivery giant posted better than expected earnings in 2019 on strength in its core food delivery business.
The pandemic has resulted in tremendous near-term shocks to many industries in China, said Hong Kong-listed Meituan in its earnings statement on Monday, with local services affected by the lockdown of cities across China, which has disrupted daily operations at merchants and hurt consumer sentiment.
“We expect our business performance will be significantly affected in the first quarter and probably the whole of 2020,” said Wang Xing, co-founder and chief executive of Meituan in a conference call with analysts, after the release of the firm’s financial results for the quarter ended December 31.
Although there has been a gradual recovery, active merchants in its in-store service category remained at a very low level as of late March, according to Meituan’s chief financial officer Chen Shaohui.
“We are forecasting negative year-over-year revenue growth and an operating loss for the first quarter of 2020 on a consolidated basis,” Chen said. “If it takes longer for user demand and merchant operations to recover, the results of our operations for the following quarters could also be adversely impacted.”
However, Wang remains hopeful of a positive turnaround as the health crisis that is gripping China and the world, gradually subsides.
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“Besides the short-term setback, we have strong confidence in our long term goals. The pandemic has made society more aware of the urgency and importance of digitising the service industry on both the demand and supply sides,” Wang said.
The company said 2019 revenue increased by 49.5 per cent to 97.5 billion yuan (US$13.7 billion) from 65.2 billion yuan a year ago, beating consensus estimates, as the company continued to solidify its advantages in delivery services, improved its travel businesses and embarked on new initiatives like bike-sharing.
Meituan’s fourth quarter revenue for the three months to December 31 was 28 billion yuan, up 42 per cent from a year ago.
Revenue at Meituan’s core food delivery business for the year ended December 2019 was up 43.8 per cent to 54 billion yuan from a year ago, with an increase in gross transaction volume at its food delivery business.
Shares of the Beijing-based company have climbed 28 per cent since its initial public offering in Hong Kong in September 2018, and closed down 1.46 per cent at HK$88 on Monday before the results were announced.
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