PDD Holdings, the Chinese e-commerce company, reported a stronger-than-anticipated doubling in revenue, driven by the success of its Temu app. Temu, which is focused on offering cut-rate prices, has been gaining popularity in the United States and other countries, posing a challenge to rival Shein.
During the September quarter, PDD’s net income increased by 47% to 68.8 billion yuan ($12.9 billion) on sales of 68.8 billion yuan ($12.9 billion). This surpassed analysts’ expectations by 25%. PDD’s stock rose the most since May as a result of the strong results.
“Temu has made meaningful progress in business expansion, helping thousands of manufacturers to reach overseas customers in 40-plus countries and regions,” said Goldman Sachs analyst Ronald Keung in a research note. “The company plans to further collaborate with manufacturers to connect them directly with overseas customers based upon a more flexible supply chain.”
Temu’s success has come at the expense of its rival Shein, which is also known for its low prices and fast fashion. In May, Temu surpassed Shein in sales in the United States for the first time, and it has continued to extend its lead ever since. In September, Temu’s sales in the US were more than double those of Shein.
Also Read: U.S. Retail Sales Surge in September: A Strong Indicator of Economic Resilience
PDD’s growth has also outpaced its Chinese rivals, Alibaba and JD.com. During the recent Singles’ Day shopping festival, PDD is estimated to have achieved 20% growth in transactions, while its rivals saw only single-digit growth.
Some analysts, however, are concerned that PDD’s aggressive pricing strategy could hurt its profitability in the long run. The company’s spending on marketing and promotions is already putting pressure on margins, and a price war with Shein could further erode profits.
Despite these concerns, PDD is optimistic about its future. The company is confident that Temu will continue to grow rapidly, and it is also investing in other areas such as logistics and cross-border e-commerce.
Overall, PDD’s results were a positive surprise for investors, and the company is well-positioned for continued growth in the years to come.
