Meituan posts Q1 loss amid Covid-19 pandemic

Meituan Dianping generated 16.8 billion yuan (US$2.4 billion) in revenue in the first quarter of 2020, a 12.6% decline year on year as the Covid-19 pandemic ravaged the firm’s business, causing disruptions to both supply and demand. However, the company still exceeded market expectations of 15.6 billion yuan (US$2.2 billion), sending its shares up to 6.16% at market close.

On Monday, the company posted a loss of 1.6 billion yuan (US$221.3 million) for the first quarter ended March 31, following three consecutive profitable quarters.

A Meituan delivery rider on an e-scooter / Photo credit: Meituan

Beijing-based Meituan is China’s largest food delivery platform, which also offers travel and hotel bookings. These core businesses were devastated during the pandemic as many restaurants and merchants suspended their businesses and travel restrictions resulted in empty hotels across China during the March quarter.

Specifically, revenue from Meituan’s food delivery business fell by 11.4% year on year compared to an 8% year-on-year decline for Alibaba-backed rival Ele.me. The average daily number of food delivery transactions also decreased by 18.2% year on year to 15.1 million.

However, Meituan chief financial officer Sharon Cui revealed that daily food delivery order volume has returned to roughly 90% of pre-pandemic levels as of the week of May 11. Although the Covid-19 presented near-term obstacles for the food delivery business, Meituan believes that the health crisis will provoke a broader adoption of food delivery services in the long term, as the average order value increased by 14.4% year on year during the March quarter, the company mentioned on the earnings call.

Meanwhile, revenue from the in-store, hotel, and travel segment declined by 31.1% year on year. The segment is likely to take the longest to recover, as consumers are still hesitant to return to offline outlets or book travel arrangements.

Meituan warned of continued headwinds in its earnings release: “Moving on to the remaining of 2020, we expect that factors including the ongoing pandemic precautions, consumers’ insufficient confidence in offline consumption activities and the risk of merchants’ closure would continue to have a potential impact on our business performance.”

Despite the challenges that may persist for Meituan, CEO Wang Xing told investors on the earnings call that “there are challenges, but Covid-19 is not going to be the end of the world. We’ll keep investing and we’ll keep building.”

This report was first published on KrAsia.