Date
16 July 2019
Meituan's fast revenue growth was offset by sharply rising labor costs as the company had to hire more staff amid a surge in order volumes. Photo: AFP/Bloomberg
Meituan's fast revenue growth was offset by sharply rising labor costs as the company had to hire more staff amid a surge in order volumes. Photo: AFP/Bloomberg

Meituan Dianping sees losses widen despite strong revenue growth

Meituan Dianping (03690.HK), an online food delivery-to-ticketing firm, said its fourth-quarter operating loss more than doubled as fast revenue growth was offset by sharply rising labor costs, Reuters reports.

The company, which is backed by tech giant Tencent Holdings Ltd. (00700.HK) and listed on the stock market last September, said its revenue grew 89 percent in October-December to 19.8 billion yuan (US$2.9 billion).

Food orders made up the majority of sales in the quarter as they did in the third quarter, and the company reported a growing user base and increasing gross merchandise volume for its delivery service. However, these gains were offset by having to pay higher labor costs as order volumes jumped and the company had to hire more staff.

As a result, Meituan reported a net loss of 3.4 billion yuan for the quarter ended Dec. 31, increasing from a 2.2 billion yuan loss in the year-earlier period.

The company, which raised US$4.2 billion in its initial public offering, faces stiff competition from rivals such as Alibaba Group Holding Ltd.’s delivery platform Ele.me and also ride-hailing firm Didi Chuxing, backed by Japan’s SoftBank Group Corp.

Meituan said its overall transaction volume grew 32.5 percent in the fourth quarter from a year earlier.

Meituan is a so-called super app, offering many services and is a sort of cross between US discounting platform Groupon Inc. and online review firm Yelp Inc.

Revenues from “New Initiatives and others”, including Meituan’s bike-sharing division Mobike and its new ride-hailing service, made up 21.2 percent of total sales.

Meituan’s September IPO was seen by some as a gauge of China’s tech sector, which seemed poised for a slowdown after years of rising stock prices and free-flowing venture capital funding. But its stock has since lost nearly a fifth of its value.

Tencent, which is due to report fourth-quarter results later this month, has seen slowing revenue growth over the last four quarters while companies such as JD.com and Didi Chuxing have announced layoffs in recent months.

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CG

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