On August 26th, Pinduoduo released its Q2 2024 financial report, which is far ahead in the e-commerce industry where revenue is generally only in single digits this year, with revenue growth approaching 100 billion yuan and net profit growth maintaining triple digits. However, even so, Pinduoduo's performance still cooled down compared to the first quarter, which did not meet expectations.
Chen Lei, Chairman and Co CEO of Pinduoduo Group, also stated that "the management has reached a consensus and is prepared to sacrifice short-term profits for long-term investment." In the coming years, Pinduoduo will have a strategic arrangement of no dividends or repurchases, which also means that its "expansion" may not have ended.
Despite double-digit growth, Pinduoduo's performance still falls short of expectations
According to the second quarter financial report of Pinduoduo, the company achieved a revenue of 97.06 billion yuan in the second quarter of this year, an increase of 86% compared to the same period last year's 52.28 billion yuan; Adjusted operating profit of 34.99 billion yuan, up 139%; Realize a net profit attributable to the common shareholders of the company of 32.01 billion yuan, a year-on-year increase of 144%; The net profit attributable to the common shareholders of the company was 34.43 billion yuan, a year-on-year increase of 125%.
In terms of sub projects, in the second quarter of this year, Pinduoduo's revenue from online marketing services and other services was 49.12 billion yuan, an increase of 29% compared to 37.93 billion yuan in the same period last year; The revenue from trading services in the second quarter was 47.94 billion yuan, an increase of 234% compared to 14.35 billion yuan in the same period of 2023.
Institutional analysts believe that online marketing services and other services represent Pinduoduo's domestic services, with a year-on-year growth rate of only 29%. However, Pinduoduo's total revenue growth rate in the second quarter was 86%, which means that the company's cross-border e-commerce business still has significant growth and has become the main source of driving Pinduoduo's revenue growth.
Compared to other e-commerce platforms that have already announced their performance, Pinduoduo's performance is considered leading.
Alibaba, which previously released its financial report, only saw a 4% year-on-year increase in revenue for the first quarter of fiscal year 2025 (second quarter of 2024), while JD Group's revenue for the second quarter also only increased by 1.2%. Vipshop's second quarter GMV remained unchanged from the same period last year, with revenue even slightly declining year-on-year. Only Kwai e-commerce GMV in the first half of this year increased by 21% year on year. However, the average monthly number of buyers in the second quarter of Kwai was only 131 million, which was a big gap compared with Pinduoduo.
According to data released by the National Bureau of Statistics, the growth rate of total retail sales of consumer goods in January and February this year was around 5.5%, while it dropped from 3.1% to 2% from March to June.
Continuous investment, difficult to say dividends in the next few years
After the performance announcement, Pinduoduo's stock price fell. As of the close, Pinduoduo closed at $100.00, down 28.51%. However, the decline in stock price is not only due to the underperformance of this quarter's performance, but also an important reason for Pinduoduo's management's expectations for the future.
During the post earnings conference call, Chen Lei stated, "We have emphasized multiple times in the past that the growth of profits in the past few quarters was the result of a short-term investment cycle that was not synchronized with the earnings cycle, and cannot be used as a long-term guide. Currently, our business is facing fierce competition and some external environmental factors, which will inevitably bring fluctuations to our business development and slow down revenue growth
At the same time as the release of its financial report, Pinduoduo also announced its direction of increasing investment in the coming period, including reducing transaction fees for new quality merchants with product and technological innovation capabilities, new quality industry belts, and high-quality merchants, which are expected to reach 10 billion yuan.
Pinduoduo is also resolutely cracking down on illegal cheating merchants through a new round of investment in operations and technology, enhancing the overall compliance capability of the supply chain, and creating a better ecological environment for high-quality merchants. In the second quarter, Pinduoduo's R&D investment reached 2.9 billion yuan, a year-on-year increase of 6%, mainly due to a new round of investment in operations and R&D.
In terms of cross-border business, Chen Lei revealed that Pinduoduo's global business has entered more than 70 markets. In the past few quarters, Pinduoduo has invested significant resources to create a safe shopping environment. However, intense market competition coupled with external factors has significantly increased global business uncertainty.
Zhao Jiazhen, Executive Director and Co CEO of Pinduoduo Group, also stated that sacrificing short-term profits is necessary in this process. The management has reached a consensus and is willing to pay a huge current price for long-term health. The profits in the coming quarters may fluctuate and rebound, but the trend of long-term profit decline is inevitable.
When talking about shareholder returns, Chen Lei directly stated that the company is still in the investment stage, facing fierce competition in all aspects and uncertainty from external factors. Therefore, the management team of Pinduoduo unanimously believes that "now is not the appropriate time to repurchase stocks or distribute dividends, and we have not seen such a need in the foreseeable future years
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