PDD’s US depositary stock fell by more than 13% on Nasdaq.
PDD Holdings Inc., the parent company of Shanghai-based retail and shopping platform Temu, has seen a significant drop in first quarter profits and sales as the US is stepping up trade talks with Beijing while China’s e-commerce industry faces an increasing number of domestic and international challenges.
In a first-quarter report released ahead of pre-market transactions in New York and London, PDD said its net profit had sank 47%, sinking to 14.74 billion yuan ($2 billion) from 27.9 billion yuan ($3.8 billion) the previous year. Revenue rose 10% to 95.67 billion yuan ($13.2 billion) from 86.8 billion yuan ($12 billion) in the first quarter of 2024.
PDD, on an adjusted basis, fell far below revenue of 5.19 yuan per share, or $0.72 per share, at $2.63 per share ($14.3 billion), according to Factset. The amount of each bottle is equivalent to $0.14.
These disappointing results sent a tumbling of the American Deposit Receipt (ADR) for PDD. The ADR closed at $102.98 on the NASDAQ Stock Exchange, down 13.64%. In London, the company’s shares were held at $118.15 ahead of the opening bell. Chinese multinationals began trading in London and New York after moving corporate offices from Ireland in early 2023, just months after launching an online US market and expanding their operations in Europe.
During a company’s conference call with analysts translated from the Chinese, PDD Chairman and Co-CEO Ray Chen denounced the first quarter’s gloomy results on a multi-billion dollar investment in the company’s online platform to support e-commerce and consumers buying and selling Temu’s low-cost products. He said these investments weighed heavily on short-term profitability.
“Since the beginning of this year, we have invested heavily in the platform ecosystem and have made rapid changes to the external environment,” Chen said. “On the other hand, the program is designed to further reduce merchant fees and improve the platform’s business environment.”
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“On the other hand, we will invest more to promote merchants’ sales and help them better adapt to new challenges. In the first quarter, we saw a noticeable slowdown amid a rapid change in the external environment due to discrepancies between business investment and return cycles.”
The external factors that Chen mentioned include minimal US policies and mutual tariffs on China. President Donald Trump temporarily suspended for 90 days in early April, allowing trade talks between the two countries to move forward. Based on the latest agreement, the US has reduced the tariff rate on Chinese imports from a peak of 145% to 30%. In return, the Chinese government reduced US import taxes from 125% to 10%.
PDD’s profits rose rapidly after launching the TEMU online app in the US in late 2022, rising 93% in 2023 and 85% in 2024, and after low-cost Chinese people benefited from the ability to send produced goods directly to American consumers without paying tariffs.
However, the top financial officer at PDD Holdings warned during the conference call that Temu’s parents expected to continue to slow sales growth.
“As we have previously reported, we expect a slower growth rate as our business scale and challenges arise. This trend was further accelerated by changes in the external environment in the first quarter.”
