Yahoo Finance Meituan Sales Beat as Chinese Appetite for Meal Takeout Intact
(Bloomberg) -- Chinese food delivery titan Meituan reported a better-than-expected 16% increase in quarterly revenue, after appetite for meal takeout remained largely intact despite an economic downturn and Covid-related disruptions.
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Sales rose to 50.9 billion yuan ($7.4 billion) during the three months ended June, versus an average projection for 48.6 billion yuan. It logged a net loss of 1.12 billion yuan, the seventh consecutive quarter in the red, but better than estimated as cost cuts kicked in.
Meituan is one of the few Chinese internet companies that managed to expand at a double-digit pace despite macroeconomic headwinds. The economic fallout from Covid-induced lockdowns in cities like Shanghai dealt a serious blow to larger firms including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., both of which reported their first-ever sales contractions since going public nearly a decade ago.
What Bloomberg Intelligence Says
Meituan could have lifted 2Q food delivery operating margin from a year earlier even as the growth rate of transactions narrows to a historical low of less than 3% vs. gains of 16-17% in the prior six months. The company probably cut spending on promotions and user incentives, which make up more than 55% of total selling plus marketing expenses, during Covid-19 flare-ups and lockdowns in mainland China. Such savings would have offset the impact of merchant fee cuts and Covid-related cost hikes on the segment’s 2Q margin vs. the prior year. An uptick in food-delivery transactions may spur stronger margin gains through 2H if Meituan maintains a lean cost structure.
- Catherine Lim and Tiffany Tam, analysts
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Billionaire Wang Xing’s empire isn’t entirely immune to challenges. Shares of Meituan plunged more than 9% following a Reuters report that Tencent -- its long-time backer -- was considering selling all or much of its $24 billion stake in Meituan to appease Chinese leaders. Tencent later called that “inaccurate,” but it nevertheless served as a reminder of the uncertainties plaguing Chinese internet giants as Beijing resets its approach toward the once free-wheeling tech industry.
Meituan also faces a deepening downturn in the world’s second-largest economy that is hammering consumer sentiment and investor confidence. The Beijing-based company recently hired Kuaishou Technology’s former international business chief, Tony Qiu, fueling speculation about ambitions to branch out to overseas markets.
Meituan also folded its food delivery, hotels and other commerce businesses into a new division it dubbed “core local commerce,” which grew 9.2% in the quarter. It kept newer initiatives such as its ride-hailing services separate.
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