Meituan Dianping reported a smaller-than-expected 13% slide in revenue during China’s nationwide Covid-19 lockdown and warned that the fallout from the pandemic will continue to affect the world’s largest meal delivery business over the rest of 2020.
Sales fell 12.6% to 16.8 billion yuan ($2.4 billion) in the three months ended in March, beating the 15.6 billion yuan average of analysts’ estimates. It also reported a lower-than-projected net loss of 1.58 billion yuan. Meituan shares rose 6% in Hong Kong before earnings were announced. It’s gained roughly $40 billion in market value since China began to return to normal in mid-March.
Backed by Tencent Holdings Ltd., Meituan’s sprawling services from food delivery to in-store dining and hotel booking were among the most vulnerable during China’s Covid-19 shutdowns.
“Our food delivery business was facing significant challenges on both the supply side and demand side for the first quarter of 2020,” the company said in its exchange filing. “Moving on to the remainder 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.”
Before the outbreak, the internet services giant made an aggressive push into arenas from online travel to ride-hailing. While the business that encompass hotels and travel posted a 31% plunge in March-quarter revenue, Meituan’s much smaller new initiatives segment — which includes bike- and car-hailing — actually grew sales 4.9%, aided by the launch of a new grocery delivery service.
While Meituan is expanding offerings to sell things like handsets and farm produce, rivals including Ant Financial and SF Express, both backed by Alibaba Group Holding Ltd., are elbowing their way into Meituan’s core takeout business. Alibaba’s food-delivery arm Ele.me is also engaging in a subsidy battle for market leadership.
Longer term, Meituan will also have to grapple with China’s worsening economy, which may further dent consumer spending.
Meituan may signal some business recovery in the second quarter as China reopens its economy, but it could take some time for consumer confidence to fully recover, especially for its travel business, wrote Bloomberg Intelligence analysts Ver-Sern Ling and Tiffany Tam in a research note.