Meituan Projects 1st Quarter Loss and Revenue Drop Amid 2020 Uncertainty
(Bloomberg) ― Meituan Dianping projected losses and a revenue drop this quarter but warned of uncertainty over the course of 2020, joining fellow tech giants around the world now struggling to come to grips with the economic and logistical shocks from Covid-19.
Backed by Tencent Holdings Ltd., the food delivery and internet services giant is one of the most exposed of China’s major tech companies to the spread of Covid-19. Many restaurants in its home country either shut or reduced operating hours during the outbreak, while widespread travel restrictions crippled its hotel-booking and ride-sharing businesses. The company’s outlook is further clouded by China’s worsening economy, which may contract this quarter for the first time since 1989, denting consumer spending.
Meituan joins sector bellwethers from Sony Corp. to Apple Inc. to Twitter Inc. that have emphasized the difficulty of parsing such an unprecedented event as the coronavirus pandemic. The Chinese company projected that revenue will decline year-over-year in the March quarter but said it couldn’t fully determine the extent to which the coronavirus pandemic will hurt its operations in 2020.
“The pandemic has already caused severe disruptions to the daily operations of our merchants, including restaurants, local services merchants and hotels, which in turn resulted in downward pressure on our own operations for the first quarter of 2020,” Meituan said in its filing. “Due to the high uncertainty of the evolving situation, we are unable to fully ascertain the expected impact on full year 2020 at this stage.”
That’s after the internet services giant posted a solid set of numbers for the December quarter. Meituan reported a better-than-expected 42% jump in revenue to 28.2 billion yuan ($4 billion) in the three months ended December, compared with the 26.5 billion yuan average of analysts’ estimates. It booked a profit for the quarter of almost 1.5 billion yuan, beating expectations of a loss.
Meituan’s food delivery and in-store dining businesses most likely came to a standstill as restaurants shut in February, while widespread travel restrictions probably hurt its hotel and ride-sharing businesses. The company’s fee waiver for restaurants and local services nationwide in February is further dampening March-quarter sales.
The coronavirus is dealing an as-yet unquantifiable blow to a company that, before the outbreak erupted in January, was on track to take its place among China’s most influential technology enterprises.
Meituan was diversifying from its core takeout delivery business and investing in other online services including travel, competing directly against Alibaba Group Holding Ltd. But others are elbowing their way into Meituan’s turf. Ride-hailing giant Didi recently launched a delivery service similar to Uber Eats across major Chinese cities.
Shares of Meituan slid 1.5% in Hong Kong before earnings were announced. While they’ve dropped since mid-January when Covid-19 spread across China, Meituan’s stock rally last year helped secure its place as China’s largest publicly traded internet company after Alibaba and Tencent.
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