March 11, 2020 / 10:07 AM / 23 days ago

UPDATE 2-Pinduoduo falls short amid signs of China readying for return to work

(Adds order numbers, user growth, per user spending)

March 11 (Reuters) - China’s Pinduoduo, which competes with Alibaba and JD.com, fell short of analysts’ estimates for quarterly revenue on Wednesday, sending the e-commerce company’s shares 5.3% lower.

Founded in 2015, Pinduoduo offers discounts on products ranging from electronics to groceries but is under pressure as established players including Alibaba’s Taobao and JD look to muscle in on its rural stronghold.

“Since the coronavirus outbreak, we have directed the resources of our ecosystem to support frontline relief efforts, stabilize prices of necessities, and help with the recovery of our merchants and business partners,” Chief Executive Officer Zheng Huang said in a statement.

Chinese companies are grappling with the coronavirus outbreak that has crippled the world’s second largest economy.

The company launched a three-day 10 Billion Subsidy Festival last month during the coronavirus outbreak.

“On the theme of getting ready to head back to work, we saw sales of over 50,000 iPhones and 20,000 MAC lipsticks in just the first 12 hours,” David Liu, VP of Strategy, said on an earnings call.

Huang added on the call that Pinduoduo provided 600 million yuan in discounts to more than 80 million orders as of February 1 to stabilize prices of critical supplies.

While disruption caused by the coronavirus outbreak will have a negative impact on the company’s results for the first quarter, expectations for the long run remain unchanged.

Pinduoduo’s active buyers reached 585.2 million in 2019, a year-on-year increase of 40% as it gained middle-class users by offering discounts on brands like Apple, Dyson and La Mer.

Boosted by urban users with bigger disposable income, the annual spending per active buyer increased by 53% in 2019 to 1,720.1 yuan.

Consumers are also shopping more often with Pinduoduo. Huang said orders rose by 77% to 19.7 billion in 2019.

While sales of big ticket items in China have been hard hit, e-commerce companies saw a surge in activity as hundreds of millions of Chinese forced to stay at home by government curbs shopped online, Reuters reported.

Pinduoduo said its total revenue nearly doubled to 10.79 billion yuan ($1.55 billion) in the three months ended Dec. 31, but fell short of the average analyst estimate of 10.93 billion yuan, IBES data from Refinitiv showed.

Sales from Pinduoduo’s online marketing services, which includes ad placements, rose 91% to 9.69 billion yuan. ($1 = 6.9494 Chinese yuan renminbi) (Reporting by Akanksha Rana in Bengaluru and Sophie Yu in Beijing; Editing by Sriraj Kalluvila and Alexander Smith)

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