PDD delivers triple digit growth

The discount e-commerce giant attributed its strong growth to recovering consumption from increasingly cost-conscious consumers in China

By Teri Yu 

Discount Chinese e-commerce company PDD Holdings Inc. (PDD.US) on Wednesday delivered triple-digit quarterly revenue growth that beat market expectations, banking on recovering demand at home and steady gains in its movement abroad.

PDD operates e-commerce site Pinduoduo in China, which mostly provides affordable and bargain products directly from manufacturers to price-sensitive consumers in smaller cities. The company has risen to global fame on strong performance for its Temu e-commerce site since its U.S. launch in late 2022, also selling items at ultra-low prices that have made it a hit with young consumers. 

The company reported its revenue rose 123% year-on-year in the fourth quarter to 88.9 billion yuan ($12.52 billion) while net income rose by an even bigger 146% to 23.3 billion yuan. 

Revenue from its online performance-based marketing services grew 57%, while its transaction services revenue, mostly fees from merchants selling on its platform, more than quadrupled to 40 billion yuan. Those numbers hinted at a rebound in consumer spending on its sites, especially during big promotions in November and December, as China’s increasingly budget-conscious consumers flocked to its big discounts.

PDD’s strong performance contrasted sharply with weaker results for older Chinese e-commerce giants like Alibaba(BABA.US; 9988.HK) and JD.com (JD.US; 9618.HK), which both delivered single-digit revenue growth in the last quarter of 2023. The strong results seem to validate PDD’s strategy of offering hugely discounted sales and bulk purchases, which are finding a wider audience in China’s current sluggish economic environment.

PDD raised eyebrows when it splashed out millions of dollars on advertisements during the U.S. Super Bowl to promote Temu, boosting its status as a household name among American shoppers. The marketing blitz partly explains a 50% jump in its marketing expenses during the quarter. 

The fourth-quarter results brought PDD’s annual revenue to 247.6 billion yuan, up 90% year-on-year. “We played a part in releasing consumption potential. We achieved decent growth in 2023, which we believe is the combined result of our effective promotional activities and the overall recovery of consumption,” said Co-CEO Zhao Jiazhen on the company’s earnings call. 

PDD’s stock rose as much as 16.1% in Wednesday trade after its latest report, though it later gave back much of those gains but still closed up 3.5% at $132.17. The stock surged almost 80% last year, in sharp contrast with other U.S.-listed Chinese stocks that have wilted over that time. 

Since its launch two years ago, Temu has expanded to the Middle East, Japan, Korea and Europe. But following some political pushback in the U.S., PDD is now planning to cut its reliance on the market, which accounted for 60% of Temu’s sales last year, according to a report in The Information. It now aims to reduce the site’s U.S. contribution to about 30% of its total revenue, the report said. 

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