Chinese Meituan lowers outlook for food delivery business

A delivery man from Meituan wearing a face mask, following the coronavirus disease (COVID-19) outbreak, has his temperature checked as he enters a shopping complex in Beijing, China on July 15 2020. REUTERS / Tingshu Wang / File Photo

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SHANGHAI, Nov. 26 (Reuters) – Chinese company Meituan (3690.HK) on Friday forecast weaker prospects for its core food delivery business next year, after a fine of 3.4 billion yuan ( $ 532.24 million) prompted him to report his biggest quarterly loss on record. in three years.

Meituan, backed by Tencent (0700.HK), said last month that it was fined by China’s market regulator an amount equivalent to 3% of its domestic sales in 2020 for abusing its dominant position in the market, marking the end of an investigation that began in April. .

Meituan, whose services include restaurant reviews and self-service bicycles, has further faced economic headwinds as consumption in the world’s second-largest economy slows.

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Its core food delivery business saw gross transaction volume growth slow to 29.5% in the July-September period compared to previous quarters, Meituan CEO Wang Xing told analysts. was due to COVID-19 lockdowns, flooding in central China as well as slower growth in the country. the restaurant industry.

“As a result, we expect to see a significant negative impact on order volumes in the fourth quarter (fourth quarter) and potentially during the first quarters of next year,” he said.

The company reported a loss of 10 billion yuan ($ 1.57 billion) during the July-September period, compared to a profit of 6.3 billion yuan a year earlier. This is its worst quarterly performance since the third quarter of 2018.

Revenue increased 37.9% in the period from the previous year to 48.8 billion yuan. That compares to an average of 48.6 billion yuan from 13 analyst estimates polled by Refinitiv.

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Meituan has aggressively expanded into hotel reservations and community group buying, taking on Alibaba (9988.HK) and Pinduoduo (PDD.O), and also revamped its strategy to move from food to retail, forming a dedicated senior team to focus on a merchandise distribution strategy.

Revenue from new initiatives, including its community group shopping service, Meituan Select, increased 66.7 percent year-on-year to 13.7 billion yuan.

Meituan has also been criticized by the government and the public for her treatment of delivery men, most of whom are not covered by basic social and medical insurance. The company has since announced the launch of a pilot workplace injury protection program and is planning further social protection initiatives.

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Reporting by Brenda Goh; Editing by Edmund Blair, Kim Coghill and Louise Heavens

Our Standards: The Thomson Reuters Trust Principles.

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