Shopee surprises with first-ever quarterly profit

Photo credit: Shopee

Shopee has finally delivered its first-ever profitable quarter after making some painful exits from loss-making markets in 2022.

In the fourth quarter of 2022, the ecommerce major logged US$196.1 million in adjusted EBITDA. That’s a massive turnaround from the US$877.7 million in losses it posted in the same quarter a year prior.

This helped Sea Group deliver better-than-expected Q4 results overall, sending Sea stocks flying roughly 22% yesterday. It ended the day at US$80.06.

Forrest Li, Sea Group chair and CEO, said Shopee’s results were due to improvements in marketplace revenue and operating costs, especially logistics. For the quarter, the ecommerce firm hit profitability while cost of goods sold decreased by 23.8% to US$229.6 million even if the number of gross orders slid 15% to 1.7 billion.

In January 2023, Shopee exited Poland after setting up shop there in September 2021. That was the latest in the company’s efforts to slim down operations after shutting down its office in Argentina and closing local units in Chile, Colombia, and Mexico.

In 2022, Sea Group cut about 7,000 jobs, which significantly hit Shopee.

When asked on the ecommerce firm’s quick turnaround, Sea Group COO Yanjun Wang pointed to Shopee sustaining its gross merchandise value while logging a 50% year-on-year drop in sales and marketing expenses.

“We exited markets. We downsized operations. We walked through all these initiatives to decide which is core, which is less core, what we need to prioritize, and what we need to deprioritize,” added Wang.

Shopee still remains one of the most popular shopping apps even with fewer promos, especially for Southeast Asian consumers. However, the region is witnessing the rise of TikTok Shop as a worthy opponent to disrupt its major marketplaces.

See also: Shopee rights the ship – for now