China’s leading food delivery group, Meituan, reported its first quarterly loss on Friday since 2022 and warned that it would likely remain in the red next quarter due to a delivery war between the country’s top e-commerce firms.
The company reported an adjusted net loss of 16 billion yuan ($2.26 billion) for the quarter ended September 30, compared with an adjusted net profit of 12.8 billion yuan in the same period a year ago.
It was the first quarterly loss since December 2022, according to LSEG data.
“Market competition has remained overheated recently,” Meituan said in its earnings statement. “Accordingly we expect the operating loss trend to persist in the fourth quarter for both the core local commerce segment and the company as a whole.”
Meituan has invested heavily to defend the nearly 70% market share that it controlled at the beginning of this year as rivals Alibaba and JD.com spend massively to subsidise customer acquisition.
The firm has consistently said defence of its customer base will prove expensive, pressuring its profit margin in the near term.
Competition has been particularly intense in instant retail, focusing on food delivery where Meituan dominates.
Earlier this year, Meituan‘s aggressive expansion beyond meals and into JD.com’s core electronics and smartphone sales business met with a response from the online retailer as it opened its own food delivery platform, prompting e-commerce market leader Alibaba Group to also aggressively target instant retail, where goods are delivered within an hour.
In an earnings call on Tuesday, Alibaba executives said its instant retail business was now moving beyond its initial grab for market share into a phase more focused on unit economics.
Market dynamics could shift after regulators flagged new rules for pricing to protect small retailers. Meituan, Alibaba and JD.com have all pledged to curb price wars.
As competition intensifies, Meituan has accelerated overseas expansion for its Keeta app in Hong Kong, the Middle East and Brazil, where it launched operations on October 31.
Meituan shares have dropped more than 30% so far this year.
The company also offers other services, such as bike-sharing, ticket-booking and maps.
Meituan reported a 2% rise in third-quarter revenue, beating analyst estimates.
Reuters
