Meituan sales weaken, profit plummets amid ‘irrational’ delivery price war
Meituan’s second-quarter net profit plunged 96.8 per cent to 365.3 million yuan from 11.4 billion yuan a year earlier
Meituan’s management, however, said on Wednesday’s earnings call that the company would not be “greatly affected by a short-term price war”, highlighting its operational efficiency.
Still, the management said the company would continue to prioritise growth over profitability in instant commerce. They also projected an incurring loss in the third quarter, owing to strategic investments including higher incentives and marketing.
Net profit for the period plunged 96.8 per cent to 365.3 million yuan from 11.4 billion yuan a year earlier. The firm’s adjusted net profit fell 89 per cent to 1.5 billion yuan from 13.6 billion yuan.
“Due to the irrational competition which started this quarter”, Meituan said the operating profit of its local commerce segment fell 75.6 per cent year on year to 3.7 billion yuan, while its operating margin decreased by 19.4 percentage points to 5.7 per cent, according to the company’s filing on Wednesday. Total operating profit dropped 98 per cent to 226.4 million yuan.