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Temu operator PDD Holdings tops revenue predictions as year-end discounts increase sales

The logo of Temu, an e-commerce platform owned by PDD Holdings, is shown on a mobile phone displayed in front of its website, in this illustration image taken April 26, 2023

SHANGHAI, March 20 (mod1s) - Low-cost e-commerce giant PDD Holdings (PDD.O), opens new tab exceeded Wall Street projections for fourth-quarter revenue on Wednesday, powered by the steady development of its worldwide platform Temu and end-of-year sales festivals in China, notably Singles Day.
U.S.-listed shares of the business, which is also parent to Chinese online bargain retailer Pinduoduo, soared more than 9% in early trade.
PDD's revenue for the three months ended Dec. 31 was 88.88 billion yuan ($12.35 billion), beating the 79.23 billion projected by analysts, LSEG data showed.

The quarter's year-on-year sales gain of 123% follows a 94% third-quarter surge. Both comparable quarters in 2022 were hit by COVID restrictions in China, which were only lifted in December of that year.
Temu, which debuted in September 2022, is presently functioning in 51 worldwide markets. Its development has been expensive however, with PDD's sales and marketing costs jumping 50% on the year to 26.64 billion yuan.

PDD has gained market share with very competitive pricing in China and worldwide as buyers choose inexpensive or discounted items in uncertain economic times.
Temu, which offers $4 home décor products and $10 T-shirts in the United States and key European, Middle Eastern and Asian countries, has been drawing consumers from competitors such as Dollar Tree (DLTR.O), opens new tab and other brick-and-mortar stores.

Brokerage Bernstein stated in January that political debate in the U.S. might be the greatest danger to Temu's continuing success there as tensions with China escalate.
On an earnings conference with investors, PDD chairman and co-CEO Chen Lei recognized that the worldwide company is in its early stages. "There are many uncertainties and challenges ahead," he remarked.
“Investors will want to see how (PDD) navigates scrutiny and how it romances other markets on the off chance the U.S. pulls the plug in the same way politicians are seeking to do with TikTok," said Danni Hewson, head of financial analysis at AJ Bell, who added that supply chain scrutiny is also likely to be a future challenge.

Speaking about China, executive director and co-CEO Zhao Jiazhen said Pinduoduo was looking forward to continued improvement in consumer mood, aided by the government's macro measures.
PDD surpassed Alibaba Group Holdings (9988.HK), opens new tab, on Dec. 1 to become the most valuable Chinese e-commerce business by market capitalization after Morgan Stanley downgraded Alibaba.
($1 = 7.1987 Chinese yuan renminbi)


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