Temu and Pinduoduo parent company PDD Holdings misses analysts’ estimates as economic slowdown in China takes toll on domestic sales
PDD Holdings, the Shanghai-based company that owns e-commerce firms Pinduoduo and international sales platform Temu, reported sales that missed analysts’ estimates, an indication that China’s economic slowdown may be having more of an impact on its tech giants than expected.
The firm reported revenues of 99.4 billion yuan ($13.7bn, £11bn) for the quarter ended September, lower than analysts’ estimates of about 102bn yuan.
Net income was 25bn yuan, compared to an expected 26.6bn yuan.
“Our topline growth further moderated quarter-on-quarter amid intensified competition and ongoing external challenges,” said PDD vice president of finance Jun Liu.
The company’s US-listed shares dropped sharply after the results were published.
Domestic slowdown
The figures follow a warning in the previous quarter in which PDD warned of the effects of the economic slowdown in the world’s second-largest economy as well as international challenges.
The firm has seen strong international growth with Temu in recent quarters, helping to push its overall growth far ahead of competitors such as Alibaba Group and JD.com.
The Temu app became one of the most downloaded worldwide after its launch in 2022, and along with rival Shein has challenged US retail giants such as Walmart and Amazon.
The growth in popularity of low-cost goods shipped direct from China prompted Amazon to launch a similar “experience” for US mobile customers earlier this month, a storefront called Amazon Haul where prices are capped at $20.
But Temu is facing challenges as well, including growing regulatory scrutiny worldwide and potential trade barriers.
Headwinds
Earlier this month Vietnam said Temu and Shein must register with the government before the end of the month or face a ban, while Indonesia in October ordered Google and Apple to remove Temu from their app stores to protect domestic retailers.
The European Union opened an investigation under the new Digital Services Act into whether Temu is effective enough in its measures to block the sale of illegal products, an action that could lead to stiff fines.
The EU is additionally considering tariffs on the likes of Temu and Shein, while such measures have also been promised by the upcoming Trump administration.
“While still growing robustly, Temu is also facing multiple headwinds,” said Citigroup analyst Alicia Yap in a research note. “There’s uncertainty on potential tariff change and increasing pushback from more countries related to its ‘cheap’ prices.”
